Debt settlement company

Debt settlement companies are growing enormously in popularity and they are doing so for good reason. Many people are in a situation where their debt is completely out of their control and they need a reliable means of paying off their amassed debt. Paying the minimum payment every month simply will not get a person out of debt. It will only delay the payoff until it becomes impossible. That is why companies that offer a means of being able to settle debts are so helpful. They can allow a debtor to close out an account and put an end to such piles of delinquency notices.

But, what does a debt settlement entail? It is a rather simple process that is not even very complicated to engage in. Basically, a debt settlement program offers a lump sum payment with the intention of closing out an account. That means if you owe $4,000 on a credit card, an upfront, lump sum payment of $2,000 could be offered and once the credit card company received the payment, the bill would be considered paid in full. The credit card balance would be zeroed out and no more payments would be required for the debt. Yes, debt settlement companies can push such a deal through on your behalf and this will certainly allow you to get your financial accounts in order.

Some may wonder why the credit card companies would accept such a deal. The reason is simple. This is the best option they will have to acquiring a payment since a person who is headed into an out of control debt situation will surely present a potential default threat. If the person goes into default, the credit card company will have a very difficult time collecting anything on what is owed.

Also, when someone is heavily in debt, the possibility of filing for bankruptcy will rear its head. This can be a nightmare scenario for both the lender and the borrower. For the lender, bankruptcy could mean they will receive next to nothing as a payment on the money owed. The credit cards would have to rely on a judge’s decision in terms of what they will collect and this is not a good scenario. Hence, they would be much more open to what the debt settlement companies are willing to offer.

For the borrower, a debt settlement is a much more painless process than dealing with the complexity of bankruptcy court. Debt settlement is less involved and is much more immediate. As such, it is a much better plan to engage in than walking into the trap of bankruptcy court which can take weeks and even months to get worked out.

Of course, it is also important to select the right service to handle your debt settlement offer. While most debt settlement companies are top of the line, there are a number of scams out there. That is why it is best to perform a little due diligence research on any company you opt to deal with. This way, you can avoid being taking advantage of when you seek to close out your credit card debts.

By: Jon Arnold

Everyone’s debt situation is unique and determining what will work best for you begins with categorizing your debt. Whether your debt is secured or unsecured significantly effects the measures you can take to eliminate debt.

Secured debt is a loan which is “secured” by property. Simply put, if the bank can come and take something from you if you don’t pay (ie; home, car) then the debt is secured.

Unsecured debt is the most common type of debt and is typically in the form of credit card debt.

Eliminating Unsecured Debt

The three most common ways to eliminate unsecured debt are

1. paying as agreed

2. bankruptcy

3. reaching a settlement with the creditor for less than the balance due – also known as debt settlement or debt negotiation

Bankruptcy is rarely a viable option. Due to the changes to the Bankruptcy Law in 2004 by the Bush administration, estimates are that less than 10% of people who file for bankruptcy are successfully discharging any debt. Most have to pay it back now under Chapter 13.

Credit Counseling and Debt Consolidation services typically focus on eliminating your debt by settling with your creditor for less than the balance due. These services are typically owned by large banks and credit companies and typically charge a fee. The good news is, this is something you can do on your own.

Settle For Less than the Balance Due

The key to a successful settlement is leverage. If a bank thinks they can get more out of you, they will not settle. This means that you may have to go months without making any payments. This will reflect poorly on your credit report and affect your credit score, but it is a necessary to obtain a good settlement.

During the time you are not making payments to the credit card company they will constantly attempt to contact you to discuss it. This is best dealt with from the very beginning by sending them a letter requesting that they only contact you in writing. Also, it is very important that you familiarize yourself with your rights under the Fair Debt Collections Practices Act and the Fair Credit Reporting Act. Collections representatives often behave in unscrupulous ways and knowing your rights is your key to fighting back.

Once you have sufficient leverage against the company it is time to attempt a settlement. A realistic goal would be to settle the debt for between 35%-50% of the balance. Contact the bank or credit card company directly and they will likely transfer you to their collections department. Once in touch with the collections representative simply let them know you wish to resolve the debt. Typically, they will make you an offer to settle for 65%-80% of the balance before you ever make an offer to pay. Let them know what you do have; an initial offer of 15%-25% of the balance is reasonable. They may tell you no or tell you that they have to speak with their manager but continue the negotiation as necessary to settle within the range that you desire.

Some credit companies are more apt to settle than others. For instance, American Express can be a very difficult company to settle with for less than 60%. Search the internet for information on your particular bank or credit card company to see how others have fared.

By: Adam Tijerina

As of 2005 a new bankruptcy reform was enacted, which makes filing for a Chapter 7 bankruptcy much harder for the majority of debtors. Which in turn severely limited the number of options available to debtors to get debt relief. The industry which has seen the biggest spike in business due to the bankruptcy reform is the debt settlement industry.

Debt settlement is a form of debt reduction in which a debtor can look to save a substantial amount on what their debt balances are by reducing the balance itself. Needless to say it is a much more attractive method of debt relief than filing for bankruptcy be it Chapter 7 or 13. So after the change in law was complete a lot more debt settlement companies have been popping up than there were previously. Just as with most industries there are companies that can do a very good job and some that cannot. Usually the ones that cannot are more in it for themselves, than to really help out people in debt. In this article I would like to briefly go over some of the points to consider if you are looking to hire a debt settlement company to help you with your debt situation.

Right off the bat one of the first things to look for is to make sure the company is registered with the BBB and has a decent rating. By signing up with the BBB the company is putting themselves out there. Meaning the potential negative consequences they could have if they accrue to many complaints against the BBB, which looks pretty negative for potential clients to see.

Another very big thing to consider is how the company charges their fees. The vast majority of companies will charge their entire fee up front before the first settlement is ever made. This is much more beneficial to the company rather than the client. While it is understandable that the company should charge a portion of their fee up front before settling because there are expenses for a company to operate effectively, they should never charge the entire fee up front. A client friendly company will charge a portion of their fee up front and then the remaining portion of their fee should be collected after they settle. And the fee should operate in part by contingency, meaning by how well they perform. A contingent fee is a fee which is based upon a percentage of the money that is saved. So the better a company can get for a settlement the more money a client will save and the more money the company will earn, resulting in a win-win situation. This type of fee structure ensures the company will look to get the best possible settlement for a client.

One often overlooked aspect of settlement is the relationship the client will have with their client services. Nobody likes to call a company to get an answer to a question they have only to either have no one pick up the phone, or have to deal with a new person every time they call and have to explain their situation over and over again. In settlement the client should have the contact information to get in touch with the specific negotiator handling their case, someone who knows them and their situation. This is critical for the clients overall peace of mind throughout the settlement process.

Here’s a little tip to figure out whether a company is very client friendly or not. The unfriendly companies will have within their contracts a cancellation charge. Many companies put in writing that after you enroll you will only have 2-3 days to cancel. And that if you cancel after that they will charge you X amount of dollars depending on the company. If you see this in a contract run away, this company is in it only to make money and not help people out.

One more thing that is again often overlooked is whether or not a client can miss a payment. Some companies will not allow this and will kick a client off of the program. Most people who are enrolling into settlement have at some point experienced financial hardship and it is possible it may happen again. Which sometimes can result in a client needing the money they set aside for settlement, for something else. While this is not a recommended habit to get into if you are trying to get out of debt, sometimes it must happen. A company should be understanding if a month or two goes by and you cannot make a payment, after all the reason you hired the company in the first place is to help you through this financial hardship not make it harder upon you, the client.

My goal with this article is to help individuals looking for debt settlement make a more educated decision on the company in which they hire. I hope the points illustrated above will help people find the right choice and become debt free. I will monitor the progress of this article and if anyone has any questions feel free to post it in the comment section of EzineArticles, which is where this article will be hosted. Thank You.

By: Stephen Bis