What is the Difference Between a CareOne Services, Inc. Debt Settlement Plan and Bankruptcy?

An approach to debt reduction in which we negotiate with your creditors on your behalf to accept payment of a percentage of your unsecured debt to satisfy your entire unsecured debt. You make monthly plan payments to us, which are held in an escrow account to build in value until your creditors agree to accept our settlement offers. This is an attractive alternative to bankruptcy for those who want to pay back at least a portion of their debt and cannot afford the DMP payment.

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.

Types

While different debt relief providers offer different takes on debt settlement, the goals are always to allow you to repay a percentage of your debt in full satisfaction of your total debt over a time period and to avoid bankruptcy.

There are two types of bankruptcy cases designed for consumers: Chapter 7, which erases most of your debts and is filed if you have insufficient income or property to pay your debts, with no prospect of creating additional income. The US 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.

Minimum Criteria

For our DSP, you must have at least $7,500 in unsecured debt, and have the ability to repay at least 50% of that debt, along with our Success Fees.

You must demonstrate that you qualify for Chapter 7 relief based on a complex 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 are below certain limits.

Provider

CareOne provides Debt Settlement Plans in some states and Persels & Associates, a national law firm that provides debt restructuring as part of their suite of legal services, works with clients to settle debts in those states which require legal services to settle debts.

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.

Length of Program

Our plan estimates that debt settlement will take approximately 3 to 5 years to complete, based on your debts, our estimates of what your creditors will accept to settle the debts, and how fast you can save the settlement funds. This time period is very dependent upon your ability to make timely payments and your creditors’ willingness to accept our settlement terms.

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.

Creditor Acceptance

Your creditors are not required to accept our settlement offers or to participate in the plan.

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.

Payments

When enrolled in our DSP, you make monthly plan payments which are held in an escrow account to build in value until a creditor agrees to settle your debt for a percentage of the debt owed.

In a Chapter 7 case, you are not required to pay creditors. However, a Chapter 7 trustee can administer 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.

Payment Flexibility

We are able to work with you to create a flexible 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 we have successfully negotiated a settlement for you, your creditor may withdraw from the settlement, which can be detrimental to the successful completion of your plan.

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

Fees

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

The court filing fee for a Chapter 7 case is $299 and for a Chapter 13 case is $274. 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.

Credit Report

Debt settlement has a negative impact on credit and, 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 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.

Frequency of Enrollment

Our 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 options, our resources and educational materials are always available online for anyone interested in learning ways to take control of their 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.