Actual Case Examples

 

The following three examples will give you a good idea of what Debt Arbitration / Debt Settlement entails, across three different situations. The names have been changed, but they should provide you with an inside view of the debt settlement and debt arbitration business, and how it differs from (and provides an advantage over) debt consolidation, bankruptcy, and similar.

 

 

Example 1 - Credit Card Debt

John Q. Public is a consumer who, like millions of others, has gotten himself into debt problems with credit cards. He comes to you with seven credit card accounts totaling $32,000.00

John Q has a good job, but has realized that with the high interest payments, he'll never get out of debt. This is a very common scenario – people CAN make the minimum payments, but they get nowhere in doing so. John needs help.

 

Rather than declare bankruptcy, he decides to use your professional CDS services. You arrange settlements with the individual credit card companies for a total amount of $12,000.00. You are saving John $20,000.00

 

Your fees, (at 35% of savings), come out to $7,000.00 His total payout (including your fee) is $19,000.00.

 

So in the end, John reduced his total debt from $32,000 to $19,000, (59% of what it was). This is low enough for John to take out a home equity loan (or similar) to pay it all off at once.

 

The benefit to the card companies is that they didn't lose everything in an inevitable bankruptcy. Since virtually every consumer with debt problems knows others with similar problems, you are able to receive several referrals from John.

 

 

Example 2 - Business Invoicing

You don't only help consumers - you can help businesses arbitrate and settle debt as well.

 

Business Supply, Inc. has a dispute with Acme Assembly Corp. over Acme's failure to pay an invoice of $12,000 for goods. Unfortunately, neither company knew of the services of a Certified Debt Specialist beforehand, and so, communication broke down and the problem escalated.

Acme Assembly has some valid reasons for having failed to pay. Their purchase order for the goods was very specific in that the components were part of a very large assembly, and timeliness of delivery was crucial. Business Supply delivered the components a full 1 1/2 days after the deadline on the purchase order. Although Acme accepted the shipment, this delay cost Acme several thousands of dollars. However, refusing the order would have cost even more time and money (this is the proverbial “rock and a hard place”).

 

In the interest of a continued business relationship, Acme wanted Business Supply to acknowledge its mistake and correct it by discounting the invoice. But Business Supply's position was that such minor delays were a common business practice and unavoidable in the context of large fulfillments, shipments, and deliveries. Neither side could see the other’s point.
 
Eventually, Acme Assembly was referred to you (a Certified Debt Professional), and you take the case. Over a series of several days, you are able to use some friendly, consensus-building techniques of negotiation and communication, and you reach an out-of-court settlement of $4,000 which Acme will pay to Business Supply. Your work has not only saved Acme $8,000 off of the principal amount of the lawsuit, but you've also saved the additional interest, costs, and attorney fees which would have resulted had the case escalated to a lawsuit. And the business relationship continues.

 

The gross fee on this case can be 35 % of the $8,000 on the principal that you saved your client. That's $2,800 (plus your setup and monthly fees) for a case where the client could have spent thousands more. That's truly a WIN / WIN / WIN situation. One individual CDS can manage a portfolio of 20 cases simultaneously, and rather easily.



 

Example 3 - Credit Card Debt

 

Mr. and Mrs. O. are parents of three children, two of whom are living at home. Their financial problems started in 2002 when Mr. O. lost his construction job. Since that time, he has been either unemployed, or severely “under-employed”. As such, his earnings have declined from an average of $52,000 annually to an average of $26,000. During this time, Mrs. O has been earning a part-time income as an administrative assistant at an insurance company, bringing their total income to approximately $35,000.


Since the construction job loss, Mr. and Mrs. O have struggled to maintain payments on a home they bought (and was affordable) during better times (1999.) In addition, Mr. and Mrs. O have also had significant credit card bills since the late 1990's. Despite their financial problems, they avoided default on those debts by making minimum payments between 1999 and 2002. However, the total amount of their credit card debts increased from about $11,000 in 2002 to about $29,000 in 2006, largely due to the accumulation of interest at an average annual rate of 18.5%.

 

Mr. and Mrs. O attempted to make payment arrangements with her credit card lenders so that she could focus on her mortgage obligation. They were told that no payment arrangements were possible and that they should "borrow money to pay off the debts." Mr. and Mrs. O went to consumer credit counseling where they were advised that their budget did not support any payments on credit cards. They were advised to consider chapter 7 bankruptcy in order to eliminate the credit card debts so that they could maintain their payments on the mortgage.

 

In September 2005, Mr. and Mrs. O obtained advice from a bankruptcy lawyer and seriously considered the option of bankruptcy, but they did not want to be burdened with the lengthy credit consequences.

 

As a last resort, they were referred to you (a CDS) by a friend, and you were successful in negotiating with the credit card companies, because you know how to. Rates were frozen, balances were reduced, and a feasible monthly payment plan that suited their budget was setup. Within 3 years, the credit card debt was gone, without the need for bankruptcy.

 

 

 

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