Frequently Asked Questions

1. How does this program work?
2. Will this strategy work for me?
3. What happens to my credit?
4. What are the fees?
5. What are the tax consequences?
6. What about creditor calls?
7. What about lawsuits?
8. Can my wages be garnished?
9. Will I still be able to use my credit cards?
10. What are the differences between Debt Settlement and Credit Counseling?
11. What kind of debt can be negotiated?
12. What if a creditor won't negotiate?
13. Are there debts that can't be entered into the program?
14. Can I do this myself?
15. How do I know New Era is a legitimate company?

How does this program work?

Debt Settlement works by negotiating a payment for less than the balance owed (principal) on your unsecured personal debt accounts. This is different from simply reducing the interest rate as with Debt Consolidation and Credit Counseling, which do not affect the total debt balance. By negotiating the balance itself, Debt Settlement provides a much faster means of handling your debt. Most creditors are willing to accept payments of much less than the balance owed in order to close out an account rather than lose the entire amount in a bankruptcy proceeding. From a business perspective, it is a matter of the creditor receiving something rather than nothing, as would be the case in most bankruptcies. Of course, different creditors have different policies, but as a rule, discounts of 50% or greater are routine in the industry. As a consequence of this approach, money that was previously wasted on endless minimum payments (most of which went toward interest charges) goes toward satisfying the actual debt balance. That's why Debt Settlement through negotiation is the fastest debt method to handle your debt short of Chapter 7 bankruptcy.

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Will this strategy work for me?

While the Debt Settlement approach is not suitable for everyone, its flexible nature makes it applicable to a wide range of financial circumstances. For individuals and families seeking an alternative to bankruptcy, there is simply no better option to get out of debt. Here are a few guidelines to help you determine whether or not Debt Settlement is something you should consider:

Most debt problems are caused by loss of income, medical issues, or divorce/separation. These are legitimate financial hardships that can happen to anyone through no fault of their own, and any one of these situations can wreak havoc on a household budget. The important point here is that the Debt Settlement system is not a "free lunch" for people who don't feel like paying their bills. If you are over your head due to a hardship circumstance, and you'd prefer to work things out with your creditors rather than declare bankruptcy, then Debt Settlement can provide a honest and ethical debt relief alternative.

ii. Are you committed to avoiding bankruptcy?

Debt Settlement is best viewed as a bankruptcy alternative, one that allows you to keep control over the process and maintain privacy while working through your financial difficulties. As with most things in life, success is determined by your level of commitment to staying the course, even when the road gets a little bumpy. If you are likely to give up at the first rough spot, then Debt Settlement is probably not the best choice for you. But if you are determined to find an alternative to bankruptcy, Debt Settlement will likely be the most attractive debt solution for you.

iii. Do you owe more than $10,000 in unsecured debt?

We are the first to admit that Debt Settlement is strong medicine, and it should be reserved for serious debt problems. While everyone's budget is different, most people can work their way out of smaller debt obligations. If you only owe $5,000, for example, unless you are really in dire straits you can probably deal with that obligation the old-fashioned way - by paying off the debt in full, over time. In other words, smaller debt loads are more of a budgeting problem than a serious financial hardship. At New Era, we use the benchmark of $10,000 for evaluating whether or not a prospective client qualifies for our program. (Note: Exceptions are sometimes made based on hardship circumstances, so the $10,000 figure should be used as a rule of thumb or guideline. If you aren't sure whether you meet the requirement, please call one of our knowledgeable representatives at (888) 639-4050 for a free, no-obligation consultation.)

iv. Are your debts primarily from credit cards?

Most types of unsecured debt can be negotiated, including medical bills, lines of credit, signature loans, repossession deficiencies, financing contracts, department store cards, miscellaneous bills and more. The deepest discounts, however, are usually obtained with credit card debts. The results are far more predictable with credit card accounts than with other types of obligation, so if the majority of your debt load is comprised of credit card debt, you can anticipate good results from the Debt Settlement strategy.

v. Is your monthly budget up to the job?

With a Debt Settlement program, it's necessary to be realistic about your budget. If you cannot build up funds for settlement at a reasonable pace, then the program becomes less viable. A good rule of thumb is that you should be able to set aside roughly 2% of your debt level on a monthly basis. So, for example, if you owe $30,000 in unsecured debt, you should be able to consistently set aside $600 per month. This would allow for a program of approximately three years' duration. Budgets vary from month to month, so it's possible to set aside 1% one month, and make up for it by setting aside 3% the following month, so long as the average, over time, is around the 2% figure. This makes the program ideal for people whose income varies up and down because of overtime pay, seasonal cycles, or commission-based income. But if you're funding the program consistently below the 2% monthly level, the duration will stretch out to the point where you may become frustrated with the lack of progress.

vi. Do you have additional resources to work with?

Debt Settlement can work very well if you have access to one-time lump sums. Small inheritances, insurance settlements, cash-value life insurance policies, borrowing from friends and family, ebay auctions, and even garage sales are a few of the alternate sources of funding that clients have used in lieu of a monthly payment stream. So even if you can't consistently fund the program on a monthly basis, if you have other resources to work with, Debt Settlement can still help you get out from udner your debt.

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What happens to my credit?

The effect of our Debt Settlement program on your credit score will partly depend on your current credit status before starting the program. Few people with debt troubles have perfect credit to begin with. In general, your credit score (usually called the FICO score) will decline during the program. We recommend against applying for new credit while going through the program. It simply doesn't make sense to take on new debt while you're trying to tackle your existing debt problem.

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What are the fees?

The fees charged by New Era for professionally-assisted Debt Settlement are among the most competitive in the industry. Before describing our fee structure in detail, however, it's important to place the matter of fees in perspective. Choose to consolidate debt through a loan, and you will pay back, over time, the full amount borrowed plus loan origination fees. Choose to work with a Debt Counseling (or credit counseling) agency for a traditional debt management plan, and again you will pay back the full amount of your debts plus the fees charged by the agency. By using New Era as your Debt Settlement firm, your total payout (including our fees) will still be much less than the total amount you currently owe!

The primary fee charged by New Era is based on performance and results. We charge 15% of the account balance that we negotiate on your behalf. So, for example, if you owe $5,000 on a particular account, and we negotiate a debt settlement to $2,000, that means we've saved you $3,000. Our negotiation fee would then be 15% of the starting balance, or $750. So you would pay $2,000 to the creditor, $750 to New Era, and that debt would be gone forever! The total payout here would be $2,750 versus the $5,000 originally owed. We call this a success-oriented fee structure, because New Era doesn't charge this fee until after the work is done. Most of our competitors charge a high fee up front before any work is done. At New Era we feel that it's better to ensure our clients the best possible result through this approach.

In addition to the negotiation fee, we also charge a one-time setup fee and a small monthly maintenance charge. These amounts will vary depending on the size and nature of your debt, as they are designed to cover the cost of establishing and maintaining your account until you can build up sufficient resources for us to use to settle your debts. Please call us at (888) 639-4050 for a free, no-obligation consultation with one of our professional representatives. We'll analyze your situation and let you know exactly what the setup and monthly charges will be for your case. We're proud of the fact that we have no other hidden fees or surprise charges. Everything is fully disclosed so that you can proceed on our program with total confidence. And remember, if you do your part in building up the resources for us to negotiate with, your total payout including fees will be far less than the total debt balance you currently owe.

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What are the tax consequences?

Financial institutions are required to report canceled debts over $600 (the portion forgiven during the settlement transactions) to the IRS, and the debtor is required to report that as income on their tax return. However, the IRS permits you to offset any "income" from canceled debts up to the amount you were "insolvent" at the time the debts were canceled. You are "insolvent" if you owe more than you own, or in other words, if you have a negative net worth. If you're deep in debt, it's not likely that you have a positive net worth, so it's rare that a client would have to pay taxes on the forgiven debt balance. The exception might be an individual with a high level of home equity, which might make the overall net worth positive and thereby Negotiate the insolvency exclusion. However, this is the exception rather than the rule. Our view is that even in the unlikely circumstance that you might owe tax on the forgiven debt balance, you'll still be way ahead of the game by negotiating your debt balances sooner rather than later.

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What about creditor calls?

New Era cannot realistically promise to eliminate all collection calls, however, we do understand the stress collection calls can create and recognize the importance of offering the support and expertise needed to help counteract potential collection harassment.

In an on-going effort to support our clients during their journey to relieving themselves from the burdens of their dbet, we have taken a proactive step by utilizing the services of Consumer Justice Group (CJG) and passing those services on to you at no extra charge. This third-party advocacy organization aids in protecting the rights of consumers afforded by the Fair Debt Collection Practices Act (FDCPA). Their knowledgeable and courteous advocates are experienced with the strict guidelines that regulate fair debt collection; in turn, providing invaluable education, easily adopted measures to address collection calls, and step-by-step instruction to help protect and effectively exercise your rights.

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What about lawsuits?

While creditors have the legal right to bring a lawsuit for non-payment of a debt obligation, such lawsuits are far less common than most people think. It costs money to sue someone, and a legal judgment is simply a piece of paper unless there is a way to collect money against it. The threat of litigation, on the other hand, is all too common, even though debt collectors are not supposed to threaten legal action unless they are specifically authorized to bring suit. In general, lawsuits can normally be avoided, provided you are willing to work out suitable arrangements with your creditors through the negotiation process. Contrary to popular belief, most creditors would rather work things out amicably in a negotiated settlement than spend more money taking a customer to court (with no guarantee of being able to collect on a judgment). That's why thousands of litigation-free settlements are transacted every month all across the country. Creditors won't admit it publicly, but our method works much better for them than forcing people into bankruptcy through overly-aggressive collection techniques. While New Era is not a law firm and does not provide legal advice, we do want our clients to understand that the worst-case scenario is that a client might be required to pay a debt balance in full in the event of legal action by a creditor. This is little different from the starting situation most clients find themselves in, and again, it is a fairly rare occurrence.

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Can my wages be garnished?

If you listen to some debt collectors, you might be fooled into thinking that they will seize your very next paycheck unless you make a payment right then and there. The threat of losing part of one's wages to a garnishment action is truly frightening to someone already struggling financially. But this is mainly an intimidation tactic used by collectors to scare people into committing to a payment schedule whether or not they have the funds available. Actual garnishment actions are relatively rare, and do not happen without advance warning. First, a creditor must bring a lawsuit, obtain a judgment, and then take an additional step to obtain authorization for the garnishment. No one can take your paycheck without court approval, and you must be given notice of such court action through formal documentation. So don't be fooled by one of the oldest collection tricks in the book.

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Will I still be able to use my credit cards?

You will not be able to continue using any of the credit cards or other accounts enrolled into our Debt Settlement program. That's because you are aiming to have the creditors forgive half or more of the balances owed, and they simply will not extend more credit unless you bring the account current again and get back on a plan to pay off the full balance. However, at New Era, we recognize that it's very difficult to make do without at least one credit card for identification and/or emergency purposes. To that end, it is permissible for clients to maintain one card (preferably one with a small balance) outside of the program. This is another great benefit of the Debt Settlement approach versus other methods, which take an all-or-nothing approach to handling your debt.

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What are the differences between Debt Settlement and Credit Counseling?

The most important difference between these two programs is that with Credit Counseling, you pay back all of the debt balances, plus interest and fees, whereas with Debt Settlement, you pay back only a portion of your debt load. That's why Debt Settlement is a much faster path to handling your debt (2-3 years) than Credit Counseling (5-9 years). This means a lot less money out of your pocket is used through the Debt Settlement approach. Another key difference is that your Debt Settlement firm works solely for you, the consumer, and receives no compensation directly from the creditors. In other words, your Debt Settlement firm is truly on your side. With a Credit Counseling agency, there is a dual relationship, where part of their income comes from the client and the majority of it comes from kickbacks paid by the creditors. This creates a built-in conflict of interest and creates doubt as to whose side the agency is really on. Also, Debt Settlement provides much more flexibility than Credit Counseling in both the monthly budget level and the types of accounts that may be enrolled. For example, if you have a really tough month and need to skip a payment, that situation can be absorbed by a Debt Settlement program, whereas it will cause serious problems with a Credit Counseling program. Further, if your accounts have "charged off" and gone into the third-party collections cycle, you can still enroll those obligations in a Debt Settlement program where they will be rejected by a Credit Counseling agency.

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What kind of debt can be negotiated?

As a general rule, any type of unsecured debt can be successfully negotiated. An unsecured debt is one that is not tied to a specific material item that could be repossessed by the creditor. So an auto loan, for example, could not be included because the creditor could legally repossess the vehicle. Credit card debt, medical bills, department store cards, signature loans, unsecured lines of credit, and revolving charge accounts are all types of accounts that can be included in our program. The main exception here are student loans, which in most cases are government backed loans that cannot even be discharged in a bankruptcy proceeding. (Private student loans that are not sponsored by the government can be included.) Also, we generally caution clients against including credit union debt, even though it may be unsecured. That's because a credit union is a member-owned organization, where a settlement would come at the expense of your fellow credit union members.

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What if a creditor won't negotiate?

New Era has successfully negotiated with thousands of creditors all across the nation. In the course of business, we have established contacts with the major banks, collection agencies, and collection attorneys. Debt Settlement is recognized as a viable solution by collection industry professionals, and at New Era we pride ourselves on the professional reputation we have established by dealing fairly with creditors. In the rare instance where a creditor balks at accepting a reasonable settlement at the time it is proposed, it is often a matter of simply waiting for a different phase of the collection process. Some creditors are more inclined to play "hardball" than others, but virtually all of the major institutions eventually sell their accounts to debt purchasers in order to get what they can for the account. Since the debt purchasers acquire these accounts for pennies on the dollar, they are more inclined to accept a reasonable settlement offer, which still represents a profit on their purchase.

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Are there debts that can't be entered into the program?

Secured debts cannot be entered into our Debt Settlement program. This includes home loans, second or third mortgages, equity lines of credit, auto loans, and financing contracts tied to a specific piece of property that may be legally repossessed by the creditor. Federal student loans, although unsecured, must also be excluded from the program. In addition, Federal and State taxes cannot be included.

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Can I do this myself?

Yes, it is certainly possible for a consumer to negotiate his or her own debts. However, there are several important factors that should be taken into consideration before making such a decision. First, do you have the time? For individuals with serious debt problems, the complexities of the negotiation process can be very time consuming. Many people simply do not have the time to add this labor-intensive task on top of an already busy work schedule. Second, it requires a certain kind of psychological toughness to haggle with creditors. The average consumer is hampered by the embarrassment and shame they feel over having gotten into trouble. With all the tricks, traps, and pressure tactics used by creditors, most people will find themselves better off with professional assistance. Third, as with any profession, there are techniques not easily mastered by an amateur. Without professional coaching, the likely result will be high-percentage settlements in the best case, and outright failure in the worst case. When you consider that the total payout including professional fees will still be far less than your original balances, it makes more sense for the average person to obtain debt help from New Era.

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How do I know New Era is a legitimate company?

As with any large industry, there are both good and bad Debt Settlement companies in operation. That's why New Era fully supports efforts to implement legislation at the Federal level to ensure that the best practices are adopted and enforced throughout our industry. To that end, we are members of The Association of Settlement Companies (TASC), an independent trade association. TASC is presently working to help draft legislation that will clarify and improve the ground rules for our industry. One important aspect of TASC's mission is to set the standards for the industry to ensure that consumers receive good value and quality service from participating companies. Additionally, New Era has been certified by BSI for debt settlement best practices. Clients of New Era can therefore rest assured that we are fully committed to this process. We are very proud of our reputation and we are constantly seeking new ways to improve our clients' experiences.

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