Debt settlement company

A Google search for “Debt Help” will generate page after page of financial service companies offering different solutions to help you get out of debt. The various “Debt Help” options are generally Debt Settlement, Credit Counseling, Debt Consolidation, and Bankruptcy. In this article I will focus on Debt Settlement and what you can look out for in the consultation process to help you make your decision with confidence.

Most Debt Settlement (also known as Debt Reduction) companies follow a similar process in qualifying and enrolling their clients into the program. I will break this down into 5 steps:

1. Initial Contact: Many customers will find a list of “Debt Help” companies by typing phrases into search engines such as Credit Card Debt, Get out of Debt, or Debt Relief. The initial contact will be initiated by filling out a form or calling the company directly. This first call will give you the most clues on what kind of business you are dealing with. The most important thing to remember is that Debt Settlement does not work for everybody. If a Debt Consultant makes the program sound like everyone gets accepted, you do not want to go with that organization. The only way a company can successfully reduce your debt is if you are in a financial hardship. Basically, if you don’t need the help, the program will not work because the creditors will have no reason to lower your debt amounts. If you’re current on the bills you still might qualify for debt reduction but only if you are struggling to make the minimum payments. If a Debt Consultant neglects to ask about your state of affairs and pushes you to send in your credit card statements, hang up and call a firm that cares about your specific predicament. An ethical Debt Consultant representing a reputable firm will discuss all the aspects of Debt Settlement, both positive and negative. Remember If it sounds too good to be true, it is. If the initial phone conversation is going well and you have a general understanding of how Debt Settlement works, then it is time to have the company review your credit card/loan statements or a credit report.2. Submission of Credit Report or Statements: If a company approves you without reviewing your statements, this is a bad sign. Reputable Debt Reduction services will want to review your statements or a credit report to do a comparative analysis. Having the company review your information is part of the approval process and in no way should commit you to anything. This part of the process is crucial because the specific creditors that you are indebted to historically settle at different amounts. The amount by which a creditor will reduce your debt will vary depending on the debt settlement company, financial hardship, creditor collection practices, and credit card delinquency. The job of the Debt Reduction Company is to take everything into account and give you the most accurate quote possible. If you speak with a Debt Relief company and this step is missing, I would not recommend taking the process any further.

3. Underwriting: The underwriting (also known as approval, qualification) process is designed to ensure that only qualified applicants are being approved for the program. This is an extremely important step to a reputable Debt Settlement firm because it’s a system intended to help ensure that approved applicants make the transition to satisfied clients with the highest rate of success possible. If a company is letting everyone in the door, chances are many of these clients are getting settlements rejected by their creditors because they are not qualified to have a Debt Reduction.
4. Approval: If you are approved for a Debt Settlement program the consultant will be able to tell you how much your monthly payment is and for roughly how long it will take for you to be debt free. In the field of Debt Settlement the successful programs are usually not more that 3-4 years in length. Every creditor has a window of opportunity when they are willing to accept settlements and the vast majority will be approved within 3 and 42 months. If a company says that they can reduce your debt by fifty percent and offers you a 5 year program, be cautious. In Debt Settlement the creditors will be paid off one at a time and the possibility of legal action from the creditor increases as the debt becomes more delinquent.

5. Agreement: If the approval is within range and you would like to move forward the next step is to look at the agreement. The agreement should clearly state your monthly payment and fee schedule. Make sure to read the entire document and write down any extra questions that come up. You should be able to cancel the Debt Settlement mid-program if needed, without being responsible for future monthly payments. Of course nobody enters a Debt Settlement Program intending to cancel 10 months down the road but if something unexpected happens to your income, you need to be able to sever the relationship. If you read the agreement and it seems the opposite of what your Debt Consultant explained to you, it is not a wise idea to sign up with that company.

Now that you have found the best company for your needs focus on your new monthly payment. If you ever can afford to pay above your minimum monthly, I highly recommend doing so. Remember, the goal is to pay off this debt as fast as possible. Stay in communication with the customer service department and refer communication from your creditors to the Debt Relief Company. Before you know it the debt will be showing $0 balances and you will be on the road to financial freedom. If you ever get discouraged in the program and the anticipated 2-3 years to pay off the debt, just remember the alternative of making minimum monthly payments or the financial position you were in before the program started.

By: Adam Jasa

When it comes to seeking debt relief, many Americans feel the only viable option they have is credit counseling or filing bankruptcy. What many people are not aware of is the little known process of debt settlement. The goal of debt settlement is too, one satisfy your creditors for less than what they claim you owe and two save you as much money as possible during the process.

One reason many people choose a debt settlement company is because their debt amounts are too high for them to realistically manage to payback in full and want to avoid bankruptcy. Another reason why thousands of Americans choose a debt settlement company is because they are extremely upset and fed up with the credit card company over the fact that their interest rate has increased to an unfair high rate like 28 – 30% and the company refuses to lower it no matter how much you plead.

But the number one reason why Americans choose a debt settlement company is because their desire to have closure on being in debt and their priority of becoming debt free becomes their number one goal and it outweighs any real or perceived thought of any negative impact that it could have on their credit history while going through the process of debt settlement.

According to the Fair Isaac Company your debt to credit limit ratio accounts for more than 30% of your score, so it becomes absolutely essential to eliminate your debt first when you are trying to improve your credit score. Also remember your credit report is only a snapshot in time and is never a permanent record, you can recover and improve your credit score over time. Everyone gets a second chance in America!

The banks would love to keep you in the mind set that your credit score is absolutely the most important part of your life and by not paying them back in full would decrease your score and put you in the gutter forever. By all means your credit is important but should not completely dominate your life. This mentality works in the banks behalf and keeps you in fear, just where they want you.

But think about it, if the banks where really were concerned about you and your credit score then why would they extend you more credit on your current credit card so you can charge more when they know that this will decrease your score. So do they really care, NO.

When researching the option of debt settlement as your choice to become debt free understand that there are basically two types of companies to use when considering who you will choose to settle your debts. First there are the very common non-lawyer based debt settlement companies which comprise of over 95% of the companies currently advertising over the internet and TV. The rest are law firms that practice debt settlement as one of their services.

In the rest of this article I am going to list some of the major important points that you need to consider when choosing a debt settlement company to help you become debt free. As well as give you a warning sign for each point when speaking with the representative of a debt settlement company.

1. The company should save you at least 40% of your debt including fees and paying your creditors.

You can usually save 20% on your own with very little effort but any more than that requires experience and negotiating savvy.

Warning Sign:

When you are speaking to the representative from any debt settlement company you need to be cautious and do your homework. There are many debt settlement companies that just want to make as much money as possible without any real regard for the clients best interest. A lot of these representatives will say just about anything that pleases you to enroll you in their program. One way to recognize this type of company is by the tactic of setting a monthly payment amount to whatever the client wants. Usually very low and for a much longer period of time than what other reputable companies offer. This defeats the purpose of their claim of saving huge amounts of money because the interest keeps growing and the consumer does not realize that the longer the payback plan time frame the less they save.

Most Americans are getting caught in the magic bullet or quick fix syndrome, which these unscrupulous companies’ operators understand all to well and sign up tens of thousands of trusting people each year. If the representative is saying that they will save you over 60-70% of your debt be wary, at first it might sound great but verify what the overall cost is before signing on. Once they add on their fee and include your payback to your creditors it will be a lot less and they never mention this. Make sure to ask the representative if their claim of high savings for you is also including the companies fee.

2. Make sure your payback plan is in a realistic time frame to complete this process.

The major benefit of debt settlement is to become debt free in a very short period of time verses paying minimum payments to the credit card company which averages over 38 years to pay back. You should choose a debt settlement company that will focus and emphasize on enrolling you to becoming debt free in two years or less, but only under specific circumstances no longer than three years.

Warning Sign:

By stretching a debt settlement payback plan farther than three years you’ll never receive the full benefits that you were told in the beginning. Why, because of accruing interest. In other words the percentage of money your saving on the original debt decreases drastically when you enroll in a program that has you paying for four or five years because the debt amount drastically increases.

3. Make sure the collections calls will be stopped.

One of the negative aspects of debt settlement is that you do need to fall behind in order for these creditors to be willing to accept less. While falling behind you will get barraged with calls from collection agencies. Simply put these can be very annoying, scary, embarrassing, and aggravating. Now when it comes to preventing collection calls from 3rd party collectors, only by retaining a lawyer to represent you will stop them from calling. The Fair Debt Collection Practices Act states that if a client has attorney representation the 3rd party collector by law must deal with the attorney and not the debtor. Once the collector has been notified but continues too contact you directly then the collector becomes subject to a potential law suit.

Warning Sign:

If a representative from a non-attorney based debt settlement company tells that they can stop the collections calls ask them how and why the collector has to abide by what the debt settlement company claims. By law the collector does not have to deal with them. Typically their advise is to send a cease and desist letter, this can stir up a hornets nest. While this may stop the calls it will leave the collector no other option of contacting you to collecting the debt. So if they wish to continue to pursue with their collection attempts they will have to serve you papers to appear in court. Meaning that you will be sued.

4. Make sure the company is reputable.

A good place to start is to check the Better Business Bureau (BBB). Next thing to consider is how long the company has been in business. A general rule of thumb is to look for a company to have been in business for over 10 years. Thus ensuring that they know what they are doing and have settled many people’s debts in the past. What the scam operations do is open up as ABC company put through hundreds of people on their program that they know are not qualified for debt settlement just to take fees. Once they have these people complaining about not doing the right job they close down and start up somewhere else brand new as XYZ company. So if the company is brand new within a year or two that may raise a red flag and should be a major concern.

When it comes to law firms you have an extra layer of protection, the bar association. Check the state bar for the attorneys standing if you are going with a law firm. The attorneys are held to a higher standard by being a member of the bar association. With unanswered complaints to the bar an attorney can lose his/her license and business. The attorney cannot get another law license and just open up somewhere else. So it is in their best interest to do the best job for the client.

Warning Sign:

This is pretty obvious, if a company has an unsatisfactory record with the BBB and is not a member it would be best to stay away. If a law firm is not in good standing with the bar in other words under investigation, then stay away. If the company is relatively new and is showing some of the warning signs mentioned above, definitely stay away.

While debt settlement can be a very smart and viable option for many you need to be very cautious about the organization you are employing. By following the points and warning signs above you will greatly reduce the risk of being enrolled into a program that will not benefit you.

By: Stephen Bis

Research from the Nilson Group says that households with at least one credit card had more than $10,000 in credit-card debt at the end of 2008. That figure has only gone up as the nation struggles through a weak economy. With the national unemployment rate rising past 10 percent as 2010 began, U.S. residents are relying more on their credit cards to pay their normal living expenses. The problem is, these debts can add up, what with the average interest rate on consumer credit cards standing at more than 16 percent in December of 2009. For many consumers who are overwhelmed with credit-card debt, the best solution might be to work with a reputable debt settlement company.

Such a company will negotiate with your creditors to reduce the amount of money you owe to them. The best companies in this business will be able to reduce your debt dramatically, significantly easing the financial burden that you face. This usually works best when consumers can offer a lump sum payment to their creditors, though skilled debt companies can still provide financial relief even if you can only afford smaller monthly payments.

Before settling their debt, though, consumers need to research the company with which they plan to work. As in any industry, the business of settling debts does have its share of unethical companies. These companies will take consumers’ money and then do little to help them relieve their debt. Or, they will charge them excessively high interest rates and fees. Fortunately, the majority of companies in the debt-settling business operate in an honest and fair manner. It is up to consumers to do their homework first to make sure that they are working with one of these reputable companies. With the power of the Internet, doing this research is neither difficult nor time-consuming.

First, consumers should run an online news search for the name of the debt settlement company they would like to work with. This will turn up any headlines that the company made. If this search turns up nothing, consumers should then check with their local office of the Better Business Bureau. This agency will list any consumer complaints filed against the company. Finally, consumers should always ask a company they are considering to list their rates, terms and late-payment penalties on paper. This way, there will be no unpleasant surprises as the work of paying down debt proceeds.

By: Hector Milla