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At CareOne Services, Inc. we understand that job-loss, unexpected expenses, life-events, and other factors may make it difficult or impossible for some Debt Management Plan (DMP) customers to continue making consistent and timely payments. There are times when customers enrolled in our DMP who are unable to make their payments, or whose budget no longer fits within the DMP payment plan, ask to be switched to a Debt Settlement Plan (DSP) because it seems like a better alternative. It is extremely important to fully understand the differences between these two distinct approaches to paying off debt before making the decision to switch plans.
While settlement may be the perfect alternative for some customers, switching to a different debt relief solution is not something that should be taken lightly. On the following pages you will find a list of Frequently Asked Questions from customers when they consider switching from a DMP to a DSP.
With a DMP, we consolidate all of your unsecured debt into a single monthly payment that we distribute to your creditors each month on a set schedule. The goal of a DMP is to help you pay off all of your unsecured debt in full, so that when you successfully complete the plan, your credit report states "Paid in Full."
Customers enrolled in our DSP are unable to pay back all of their debts, so we negotiate with your creditors on your behalf to accept a percentage of the debt owed. You will stop making payments to your creditors and instead, each month, you will make payments directly to us to deposit into an escrow account to build in value. Payments are not distributed to your creditors until we successfully negotiate a settlement offer on your behalf. The goal of settlement is to assist you in paying off a percentage of your debt, usually around 50%, in order to avoid bankruptcy.
While no one can answer this question for you, most customers who enrolled in our DMP did so because they were struggling to keep up with their monthly payments and were having trouble meeting the increasing demands of their creditors on their own. By consolidating their payments into one consistent monthly payment and by negotiating with creditors to lower interest rates and to eliminate late-fees, our DMP customers are able to budget and make that same payment each month until they have worked their way out of debt. If you feel that, with some budgeting assistance, you could continue to make your monthly DMP payments, it might make sense to try out our money management tools before switching to a DSP.
In contrast, most of our DSP customers cannot afford the DMP monthly payments and are able to repay only a percentage of their debt in order to avoid bankruptcy. If you are constantly falling behind or missing your monthly DMP payments, and feel that you simply cannot afford to continue making these payments each month, settlement may be the appropriate option for you, as your monthly payments will be lower, and, ultimately, you will only pay back a percentage of your debts.
Once you have made the decision to cancel your DMP, we will send all of your creditors on file a DMP termination notice, which notifies them that you are no longer enrolled in a DMP.
When you make the decision to enroll in a DSP, we will notify all of your creditors, except Bank of America, Citi, Wells Fargo, and American Express, as it has been our experience that these particular creditors tend to escalate legal action when they receive notices from third party agencies. We will send a Power of Attorney letter, which informs your creditors that you are enrolled in our DSP and have given CareOne Services, Inc. permission to discuss your debt with them.
CareOne provides Debt Settlement Plans in all states that do not require legal services to settle debts. In those states which require an attorney to manage the settlement process, the client is placed in debt settlement representation with Persels & Associate (P&A), a national law firm that provides debt restructuring as part of their suite of legal services.
Please note that in some states, DSP counseling and debt settlement representation are prohibited by law.
Unlike a DMP, which is a creditor-approved debt relief option, creditors are not always willing to accept our settlement offers or to participate in the plan. Because of this, you may have some creditors who still require a separate monthly payment.
With a DSP, your creditors will no longer receive monthly payments. Instead, your accounts will become delinquent and your monthly payment will be deposited into an escrow account to build in value until your creditors are willing to negotiate for less than the amount of debt that is actually owed.
Because they are no longer receiving a monthly payment from you, your creditors may increase their collection activities in an effort to recoup the debts. Unfortunately, we cannot stop creditors from calling. You legally owe them the debt, and they want to collect on it. As your account becomes delinquent, their tactics for collecting the money may begin to escalate, and creditors may harass or threaten you in an effort to get you to make a payment.
It is important to be courteous and explain that you have hired a firm to help you with you debt and that they should contact us directly. Also, keep in mind that the people calling you are being paid to collect payments. Because of this, they can and will say whatever they think will work to get you to make a payment directly to them. You have certain consumer rights when it comes to dealing with aggressive and unfair debt collection practices. Please read this article in order to better understand your rights when dealing with debt collectors.
With settlement, unfortunately, there is a possibility of being sued by your creditors. When your account becomes delinquent, the creditor may become more aggressive in their collection activities, which can include taking legal action by filing a lawsuit against you.
While this is extremely scary and unsettling, we do provide you with access to an attorney who can offer legal advice and assistance with creditor collection activities, whether you are enrolled in a DSP or in debt settlement representation.
As a DSP customer, you have access to an attorney who can assist you in handling increased collection activities at a greatly reduced rate. Your attorney is only able to assist you with creditor collection activities, and can provide legal advice, prepare a response, and explain your options should a creditor become more aggressive with their collection methods. Should you need legal assistance with other types of issues, such as divorce or custody arrangements, it is your responsibility to hire a personal lawyer to help in these situations.
When seeking help with a creditor collection issue, it is critical that you fax any and all legal documentation regarding your creditors, as soon as you receive it, to us at 1-888-862-0623.
Debt settlement has a negative impact on your 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 seven years. With a DMP, your credit can be negatively impacted while you are enrolled on the plan. However, once you successfully complete the plan, your credit report will show "paid in full."