Frequently Asked Questions

Learn more about your Debt Relief Options

Will I be totally debt free when I am done?

Our program is focused on dealing with only unsecured debts (credit cards, medical bills, utility bills, pay day loans, unsecured personal loans). We cannot help you with debt that is secured by collateral (such as mortgages or auto loans). If you no longer have the automobile and there is a deficiency remaining we could enroll that debt into the program. After completing the program, however, the money that you are no longer paying towards your unsecured creditors can now be used to pay down secured debts, as well as to save for your financial future. Not all consumers complete our program, and sticking with your monthly savings plan is the most important factor in determining your success.

Will I have to take out another loan to cover my current debts?

No. Our debt settlement program is not a loan and you will not take out a new loan to afford settlements. Most of our clients fund their settlements with a monthly payment whereby funds are saved in a settlement account over the duration of the program.

What happens if Rabideau Debt Law goes Bankrupt? Is my money safe?

First off Rabideau Debt Law will not file for bankruptcy protection as we are a successful law firm, have no creditors and are current with our CRA payments. However, if ever anything was to ever happen, your savings are held in a federal protected non-interest bearing settlement account. According to the Law Society of Upper Canada all funds in trust for a client will remain the clients regardless of what happens to the law firm. Further, upon graduation from the program if you should have any savings remaining in the settlement account, due to our negotiators doing a fantastic job on your behalf, such savings are returned to you.

Should I put all of my credit cards in the program?

If you have one card with a low balance that you can quickly pay down to zero, then you may hold onto it for emergencies. However, the program will generally not work unless you enroll all of your high balance (greater than $500 but less than $10k) credit card accounts. As you can imagine, it makes it difficult for us to negotiate with your creditors if they can see that you are negotiating on some accounts but not others.

How does this affect my credit?

If you do not make the required minimum payments to your creditors, you may be breaking the terms of your agreement with them. Your accounts will probably be reported to consumer reporting agencies as late, delinquent, charged-off or past due balances. This is true whether or not you enroll in a debt settlement plan. Depending upon the condition of your credit report at the time of enrollment, a debt settlement plan may have an adverse effect on your credit report and credit score. Our goal is to resolve your debt for the lowest cost, in the shortest period of time, without declaring bankruptcy. Once you graduate from the debt settlement program and no longer have the enrolled debts outstanding your credit score will rebuild. As you can understand you are temporarily trading your credit score to be debt free.

How is a credit score calculated?

A number of specific factors go into determining a credit score. These factors are based on what someone does or doesn’t do with the credit they already have available. A credit score can range from 300 to 900. There are five factors that affect your credit score.

Payment History (35%)
Paying as agreed definitely holds the most amount of weight when calculating your credit score. Creditors want to see that you are paying as agreed upon in the terms of conditions of your original contract.
How much is owed (30%)
If you are using more than 75 % of the total amount of credit you have available to you, lenders are less likely to lend to you. Reason being is the more you owe, the harder it will be for you to repay on your debts in the event of life changing event ( loss of income, accident )
Length of credit history (15 %)
How much information is provided from your credit file can impact your credit score, if a lender can base your faithfulness in your repayment trends over a longer period of time they are more likely to lend to you. Remember credit scores are based on statistical calculations and trends.
New credit applications (10%)
The amount of inquires that appear on your credit file can have a negative impact on your credit. If an individual has multiple inquiries from several lender it might raise alarm that something is not financially sound.
Types of credit used (10%)
The types of loans and creditors that appear on your credit file have the least amount of impact when it comes to your credit score. Consolidation loans, pay day loans, and high interest credit cards indicate that you may have a hard time managing your money. Positive types of credit include installment loans which show lenders that you only apply for credit when you need it and pay it back within the agreed terms.

What do credit ratings mean? (ie. R1-R9, I1-I9 ratings)

Lenders may use codes when they send information to the credit reporting agencies about how and when you make your payments. These codes can have two parts: a letter and a number. For example, an account may be coded as R2. The letter stands for the type of the credit you are using.

I – Installment credit – You borrow money for a specific period of time and repay it in fixed amounts, on a regular basis, until the loan is paid off.

O – Open status credit – You can borrow money when you need to, up to a certain limit.

R – Revolving or recurring credit – You can borrow money up to your credit limit on an ongoing basis. You make regular payments in varying amounts depending on the balance of your account.

M – Mortgage loan – Mortgage information may be included on your credit report.

The codes also use numbers that range from 1 to 9. The best rating is 1. It means you pay your bills within 30 days of the billing date. Ratings of 1 will help you achieve a strong credit score.

Any number higher than 1 will likely hurt your credit score. The worst rating you can receive is 9. It usually means the lender has written your account off or sent it to a collection agency.

0 – Too new to rate, Approved, but not yet used

1 – Paid within 30 days of billing, Pays as agreed

2 – Late payment: 31–59 days late

3 – Late payment: 60–89 days late

4 – Late payment: 90–119 days late

5 – Late payment: more than 120 days late, but not yet rated “9”

6 – This code is not used

7 – Making regular payments under a consolidation order, orderly payment of debts, consumer proposal or debt management program with a credit counselling agency

8 – Repossession

9 – Written off as a “bad debt”, Sent to collection agency, Bankruptcy

Each of your credit accounts will have one of these codes. The codes can be different depending on how you make your payments for each account. For example, if you have a credit card account that you paid on time, it will be reported as “R1.” If you also have a line of credit, and you missed your payment by 45 days, it would show up as “O2.”

How can credit be rebuilt? What is the length of time it takes to rebuild?

Discipline is key; identifying how your credit problem started will help you rebuild and maintain a positive credit rating. Budgeting also comes into play so you do not find yourself heading down the same path. Creating a spending plan will do wonders with this difficult challenge. Dealing with your existing debt is a crucial factor when looking to repair your credit. The three things to consider when dealing with your existing debt are:

  • Paying down your balances
  • Catching up your late payments
  • Keeping in mind that accounts that have no activity on them will purge off your credit file in 6 to 7 years.
  • Making consistent payments on the accounts you intend to keep will also repair your credit score. Re-establishing your credit by various means will also help strengthen your credit score. Consumers can do this by taking out secured credit cards and/or lines of credit.

What do I do if I need to obtain new credit while enrolled in the program?

At Rabideau Debt Law we discourage obtaining any new credit while undergoing the debt settlement program.  In cases of emergency such as a vehicle replacement or suddenly needed renovation on your home your client care specialist can aid you in ways to obtain such needed credit. Whether you entered the program with a poor credit score or if your credit score is weakened while undergoing the debt settlement program; there are high risk lenders that will lend to consumers for a good purpose. Your interest rate may not be ideal, however once you have successfully graduated the program and your debt load has been managed you can re-negotiate your interest rate with the current lender you are with or you can opt to go with another lender and do a balance transfer. The fact of the matter is that if you find yourself drowning in debt and are considering doing debt settlement your credit score is probably not at a rating that would allow you to borrow funds from an ideal lender.

Will entering the debt settlement program repair my credit?

No. We are not a credit repair company. Our goal is to negotiate settlements at less than face value on your unsecured debts. However after you graduate the program your credit should rebuild itself as you make payments and keep to your budget.

What is the client support like? Do you have a dedicated team assigned to you throughout the program? Are you in the hands of a call center? Is the customer support outsourced?

With Rabideau Debt Law you will have a dedicated client care representative to work with you for the duration of your program. Our client care representatives all have previous experience working as a collector or at a collection law firm and use this knowledge to your benefit. Upon your enrollment we will immediately reach out to you to welcome you into the program and discuss the details of the program as well as answer any questions you may have.  Thereafter we will connect with you every 4 weeks to keep you up to date on your enrolled accounts. You are always invited to connect with your client care representative who is your point of contact.  We DO NOT outsource!!

Will I receive phone calls from collectors?

There are federal and provincial laws designed to protect you from collection harassment. However, the fact is that most of our clients experience some collection calls. RDL’s goal is to get your creditors to call us and not you. We will work to minimize any calls that get through to you.

What does ‘charge-off’ mean?

Charge-off is a declaration by a creditor that a debt is unlikely to be collected.  The purpose behind this declaration is it supports the creditor’s income tax filing where it declares the charged-off debt as bad debt, which affords the creditor the ability to deduct the bad debt, dollar for dollar, from its income.

Why do accounts ideally need to charge-off for RDL to negotiate?

Based on the above tax implications, the creditor has already written off the debt as bad debt and thereafter sells the debt to a collection agency for a fraction of the amount owing. Knowing this, the negotiators of Rabideau Debt Law settle these debts for a little more than the collection agency paid for it. Thus, the original creditor receives a tax deduction which lowers their income, the collection agency makes a little bit of profit and you reap the savings.

Why can’t you send a cease and desist letter while the account is still with the original creditor?

Rabideau Debt Law can only send a Cease and Desist letter to a collection agency as the original creditor, be it a bank or credit card company is exempt from collection agency laws, which only regulate collection agencies. There are no laws which regulate how original creditors collect on their outstanding debts. Once the account has been assigned or sold to a collection agency Rabideau Debt Law has the ability to send a cease and desist letter which should stop all collections calls.

How do I deal with collection calls at home, work, and to family members? What should I say to creditors?

As discussed above we are unable to stop collection calls from the original creditor.  In instances where they are calling you at work, advise them that they are to no longer call you at work and that if they continue to do such it will jeopardize your employment and that you could lose your job.  Say nothing further and hang up. By informing the collectors of such they should understand that if they do continue to call you at the office that they will never get paid as you will no longer have a paycheck.  In instances where they are calling a family member, advise your family member not to answer the call or to hang up, without giving any information, if they call again. If they call you on your cell phone or at home, do not answer the call and if they do get you on the phone hang up. The purpose is to stymie the original creditor such that they will charge off the debt to a collection agency.  Once the debt has been assigned or sold to a collection agency, we will be able to send a cease and desist letter on your behalf which will stop all collection calls.  At the same time we normally will send your signed power of attorney that authorizes us to speak on your behalf on account of your outstanding debt.

Do interest and late fees accrue on my accounts?

If you let your accounts go delinquent, your creditors will continue to add interest and late fees onto your balances. Typically, your balance will increase until a settlement is reached. Keep in mind that the interest is going to accrue regardless of whether you make minimum payments or not. RDL’s goal is to negotiate substantial reductions to the balances on your accounts, even after the interest and late fees have accrued.

Do you begin negotiating with my creditors right away?

Not typically.  The purpose of the debt settlement program is to save you money and we are able to do such by negotiating with the pre-charge off departments of your creditors or with the collection agencies that are assigned or buy the debt. The actual negotiation activity is typically very limited until you have saved enough funds in the settlement account to enable our negotiators to make reasonable offers to your creditors. Most (but not all) creditors do not want to spend time negotiating an account unless they know there are funds available. The first settlement typically happens in month 6 of a client’s program (this varies greatly and depends on your monthly savings amount and the number of creditors you have enrolled in the program, as well as the balance of each individual account). In some instances, it may take more than 6 months before the first settlement is reached.

Will my debts be sent to a law firm? Will this result in a lawsuit?

Creditors do have the right to send debts to third party collection agencies and/or law firms in order to collect a debt. If this happens, we have a dedicated team that will negotiate on your account with the goal of resolving the debt for you. Based on our actual experience, it is a small percentage of enrolled debts on which lawsuits are actually filed. When this does happen, usually the purpose of the lawsuit is to force a settlement. We will continue to negotiate to settle the debt, although the percentages associated with settlements of debts in litigation are often higher than typical non-legal settlements. If a lawsuit is filed before you have saved up enough funds to negotiate a settlement, we may seek to resolve the account by putting it on a long term payment plan for 100% of the balance.

Do you guarantee that you will settle all of my debts for a certain percentage?

No. Every case is a negotiation, and there is no guarantee on how the negotiations will wind up. Furthermore, the success of our negotiations is highly dependent on your ability to save a specified amount each and every month that you are in the program.

Will I owe taxes on my forgiven debt?

No. Forgiven personal debt is not taxable and does not have to be included as income on your tax return.

How will the program and settling accounts affect my mortgage renewal?

Debt settlement programs will no typically affect your ability to renew with your current mortgage lender. Most residential “A” mortgage lenders offer renewals based on your mortgage repayment history alone. However, debt settlement programs may impede your chances of refinancing (borrowing more) or making any other changes to your current mortgage. Debt settlement will adversely affect you if you are looking at changing mortgage lenders, as they will require you to apply for a mortgage and this application process involves pulling your credit report.

Do you have proof of Settlements?

Of course we do. We invite you to visit our real settlement offers.

How does having credit available on existing or new accounts affect negotiations and settlement offers?

The debt settlement process is not as simple as it sounds. There are many factors that affect settlement offers your negotiator is able to secure for you. In order to qualify for exceptional settlements a deficiency based on your income and expenses needs to be present. Each creditor and/or collection agency will have access to your credit bureau. A collection agency will try to source money paths they can send you on in order to pay them back. Should a creditor discover that you have a decent amount of credit remaining on a number of accounts they may base their settlement offers on what you are able to get your hands on immediately. Creditors do not concern themselves with your financial well-being, in the end as long as they turn profit on you they are satisfied. It’s a vicious cycle, a cycle one should never have to be locked in.

Ask A Question!

Have a question? Ask our team of debt experts!

Rabideau Law is committed to respecting the privacy of individuals and recognizes a need for the appropriate management and protection of any personal information that you agree to provide to us. We will not share your information with any third party outside of our organization, other than as necessary to fulfill your request.