What is the difference between a Debt Settlement Plan

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CareOne Team Members

What is the difference

between a

Debt Settlement Plan

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“I’m struggling

with my debt.

Do I have options?”

We understand that each of our customers is in a unique situation, and that’s why we offer a customized plan to help get them back on track.* For some customers, a CareOne Debt Settlement Plan (DSP) may be a better alternative to bankruptcy; and many customers ask us about the specific differences between the two. We created this Resource Guide to help answer the question in order to prepare you to make the right choice for your budget and lifestyle.

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At CareOne Services, Inc., we hear this question

from our customers every day and we understand. CareOne Services, Inc. is unique because our founder, Bernie Dancel, has been in your shoes. When he was struggling financially, he sought the advice of a lawyer who presented him with one solution: bankruptcy. In retrospect he realized that he could have pursued a less drastic path if he had known other options existed. This experience was the spark that motivated him to create CareOne Debt Relief Services®. Ever since, our mission has remained the same: to ensure that customers are fully informed of all their options so they can make a decision that suits their individual and unique circumstances.

CareOne Team Member

“I don’t want a

one-size-fits-all solution.

Do I have options?”

CareOne Team Member

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An approach to debt reduction, different from a Debt Management Plan (DMP), in which a provider such as CareOne Services, Inc. negotiates with your creditors on your behalf to have them accept payment for a portion of your unsecured debt in order to satisfy your entire unsecured debt balance. You make monthly payments to your provider, which are held in an escrow account to build in value until your creditors agree to accept settlement offers. This is an attractive alternative to bankruptcy for those who can only pay back a portion of their debt.

A complex legal process created by Congress to provide relief from financial distress when you can no longer pay your debts. Depending on your circumstances, you may need to hire an attorney to get effective relief in bankruptcy.

Definition

criteria. For a CareOne Services, Inc. Debt Settlement Plan (DSP)*, you must have at least $7,500 in unsecured debt, and the ability to repay at least 50% of that debt, along with our Success Fees.

qualify for Chapter 7 relief based on a formula that takes account of your assets, income, and expenses. If you do not qualify for relief under Chapter 7, you may be eligible for Chapter 13 relief if your secured and unsecured debts do not exceed certain limits.

Criteria

Criteria

Debt Settlement Plan (DSP)*

Bankruptcy*

Types

The goals of all debt settlement

plans are to allow you to repay a percentage of your unsecured debt over a period of time and to avoid bankruptcy.

There are two types of bankruptcy cases designed for consumers: Chapter 7, which discharges most of your debts and is filed if you have insufficient income or property to pay your debts, and no prospect of creating additional income. The U.S. Bankruptcy Code was revamped in 2005 to make it more difficult to qualify for Chapter 7 relief. Chapter 13 involves the creation of a debt repayment plan for approval by the bankruptcy court. A trustee is appointed to collect your plan payments and distribute them to creditors.

A debt relief provider (like CareOne Services, Inc.) provides DSPs in some states*. Please note that in some states, DSP counseling and debt settlement representation are prohibited by law.

Attorneys (or persons directly supervised by attorneys) must perform most services in

connection with a bankruptcy case. In both Chapter 7 and 13 cases, a bankruptcy trustee is appointed to oversee the case.

Provider

Every situation is unique, but completion of a typical DSP can take approximately 3 to 5 years, based on: your debts, your provider’s estimates of what your creditors will accept to settle the debts, and how fast you can save the settlement funds in your escrow account.

A Chapter 7 case may take only a few months to complete if there are no objections to the discharge of your debts and no assets available for liquidation. A typical Chapter 13 case takes 3 to 5 years to complete because you must complete your plan payments before a discharge is granted. A discharge is a formal, statutory injunction against any continued collection actions.

Length of

Program

Your provider works on your behalf to submit individual offers to each of your creditors. Your creditors are not required to accept settlement offers or to participate in the plan. But, with careful monitoring of your escrow account, your provider can identify opportunities to settle accounts as they occur. This can maximize the effectiveness of your escrow account and help streamline the process for quicker completion.

Creditors must act in conformity with the U.S. Bankruptcy Code and Rules. Generally, creditors must go along with bankruptcy court decisions, although they do have the right to raise objections or ask the court for relief.

Creditor

Acceptance

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Depending on your specific financial situation, debt settlement may be a great alternative to bankruptcy. It is our hope that this guide helps you make an informed decision as to the options that are available to you.

Employees of CareOne Services, Inc. are passionate about helping you achieve success, and work hard to support and assist you in creating a customized plan that is right for you. Please feel free to call one of our Certified Personal Finance Counselors® at 1-800-977-3918 with any questions.

Please feel free to contact us at

1-800-977-3918

with any questions.

You typically make monthly plan payments which are held in an escrow account to build in value until your creditor(s) agrees to settle your debt(s) for a percentage of the overall debt owed to them. With a CareOne Services, Inc. DSP, we work closely with you and the creditor so that you’re informed every step of the way.

In a Chapter 7 case, you are not required to pay creditors. However, a Chapter 7 trustee can administer (sell) your eligible assets for the benefit of your creditors. In a Chapter 13 case, you must make the payments required by your Chapter 13 plan.

Payments

Comparison

Criteria

Debt Settlement Plan (DSP)

Bankruptcy

With a CareOne Services, Inc. DSP, we only charge a Success Fee once we have successfully negotiated a settlement with a creditor on your behalf. You will be notified at that time of the specifics and you will be prompted to approve our Success Fee.

There are court filing fees for both Chapter 7 and Chapter 13 cases and these fees can be several hundred dollars or more. While you can file a bankruptcy case without an attorney, the bankruptcy process is complex, and you may be more likely to succeed if you hire an attorney to represent you. Attorneys’ fees in bankruptcy vary, but they usually range from $2,000 to $5,000, and generally must be paid before any work is done.

Fees

Debt Relief Services® *Not all services are offered in all states. CareOne Services, Inc. provides debt settlement services in Alabama, Alaska, Arizona, California, Colorado, Delaware, Washington D.C., Indiana, Iowa, Maryland, Missouri, Nevada, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, and the U.S. Virgin Islands. Only a licensed attorney can make a recommendation regarding bankruptcy.

With a DSP, once settled, your accounts may show “paid as agreed,” or “settled,” as opposed to “paid in full.” This can remain on your credit report for up to 7 years.

Bankruptcy filings may show on your credit report for up to 10 years. This can affect your job and loan applications because job and credit applications sometimes require you to declare if you have filed for bankruptcy in the past.

Credit

Report

Comparison

Criteria

Debt Settlement Plan (DSP)

Bankruptcy

Care One Services, Inc. can work with you to create a payment schedule. If you are unable to make a payment, this may affect the estimated length of your plan. If you miss a payment after your provider has successfully negotiated a settlement for you, your creditor may withdraw from the settlement, which can be detrimental to the successful completion of your plan.

Therefore, it is extremely important that you make your payments in a timely manner.

In a Chapter 7 case, there are no payments. In a Chapter 13 case, payments are not flexible and are mandated by the bankruptcy court.

Payment

Flexibility

A CareOne Services, Inc. DSP is voluntary, and can be entered into at any time. We do not charge a fee should you need to cancel your enrollment at any time. No matter when (or if) you enroll in one of our debt relief plans, our free resources and educational materials are always available online to educate you about ways to take control of your debt and finances.

There is a limit as to how often you can file for bankruptcy. You will need to consult with an attorney to determine if you qualify.

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What is the difference between a Debt Settlement Plan