Debt settlement company

If you currently face a financial crisis due to unforeseen hardship, you may have considered settling your debt. But, how do you know credit card debt settlement is the right way to go? With careful consideration and planning, it may be the best option to get out of debt.

What Does It Mean to Settle Debt?

You may find yourself paying minimally on your credit card each month, only to find that the next month you owe more than you did previously. It is an vicious cycle caused my high interest rates and late fees. Debt settlement stops this process and allows you to negotiate a lump sum payment to your creditors. However, you must stop all payment in order to get debtors to cooperate with you.

Once you stop payments, your debt settlement company will work out a deal with your creditors. Rather than taking out a loan, you negotiate down what you owe to a reasonable amount that satisfies both parties.

By working with your creditor to repay your loan, you regain their trust and begin rebuilding your credit. Due to the current economic crisis, more and more credit card companies are will to settle with consumers. Remember, debt settlement is only good for credit cards. You may not settle debt for other financial obligations such as students loans, mortgages, or car loans.

How Does the Debt Settlement Company Work?

Typically, debt settlement agencies have a long-standing relationship with creditors and can settle debt quickly. They work on your behalf to settle debt for a lower percentage than what you owe so long as you agree to make monthly payments on time. They are able to negotiate a payment between 35%-50% of the money owed.

The company will charge an upfront fee for services. Once your fee has been paid and you have stopped paying all creditors, negotiations begin. Once you negotiate, you begin redirecting your payments to the settlement companies.

Remember that some creditors will strongly resist settlement. Though you are most likely to settle all debt, some may be more difficult than others to negotiate down.

How Do I Find a Debt Arbitrator?

Finding the right company to advocate on your side may seem tricky. However, by checking references and reviewing compliance on the BBB website, you are sure to find the right representative for your needs. Research several agencies before settling on the right one.

By: Hector Milla

The simple answer to a complex question is YES. Debt settlement is a legal solution used by thousands of Americans to help them avoid bankruptcy. The theory behind debt settlement is very simple: negotiate deals with credit card companies that are mutually beneficial for both parties. This ultimately leads in the credit card company receiving a lump sum payment, and the consumer paying off the entire debt for a percentage of the outstanding balance. The greatest advantage for the credit card company is that they avoid any future problems with collecting on the debt, and any concession made on the creditor’s part is most obviously tax deductible. The consumer is at no time breaking any laws or committing any illegal acts.

So, if the answer is so simple, then why is the question so complicated? The problem with debt settlement is not the legality of the practice, but the ethics of those who practice it, namely debt settlement companies. Unfortunately, a number of unethical debt companies have been found to take advantage of consumers’ financial strife to boost business.

They essentially promise clients unrealistic results and then charge them outrageous administration fees for services they never provide. Thus, we see that legislation is not so much to protect credit card companies, but in fact to protect unknowing consumers. For this reason, a number of states are requiring debt settlement companies to complete forms and register activity with the state’s Attorney General in order for them to be more easily tracked. This helps the government to identify unethical companies in a legal and ethical industry. The idea is to eliminate those companies that have

So, if you are considering joining a Debt Settlement program, relax! What you are doing is legal, ethical, and morally correct; just make sure that the company you chose is also!

By: Scott Wallitsch

If you’re thinking about using a debt consolidation or debt settlement service to help you get out of debt faster and save money on your monthly payments, make sure you do your homework before choosing a company. There are definitely shams and scams out there.

First let me say that debt consolidation is *not* the same as debt settlement/negotiation, which most people don’t realize.

Debt settlement companies charge hundreds of dollars as an initial “admin fee” to set up your account, plus a monthly service fee. The fees vary depending on the company and the amount of your debts.

Such companies take your money every month, but don’t make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there’s enough in your account to pay a creditor in full.

That can take *years* depending on the amount of debt you have with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don’t make payments to your creditors. You’ll end up in the same spot without paying someone to help you get there!)

Settlement companies don’t ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will continue to grow! So if you’re sued and a judgement is brought against you, you’ll owe more money than before!

And shoddy companies, which there are alot of, don’t tell you *any* of this up front. I call it “getting permission by omission” because they simply don’t tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, eventually you’ll figure it out. (Or when the crap hits the fan. Whichever comes first.)

Let me give you an example of how debt settlement works.

Let’s say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you pay $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you’re saving $5,000 and you’ll be debt-free in 5 years, right?)

The admin fee will cost you $750. Your first 3 monthly payments go towards that and nothing gets put into your trust account until your 4th month.

The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account.

Most debt settlement companies claim to be able to negotiate your debt for about 50% of what you owe. So let’s use the lowest credit card debt as an example.

If you owe $4,000 and your creditor agrees to accept $2,000 as payment in full, it will take 10 months at $200 per month to have enough in your trust account to pay off just that one credit card.

But remember, your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.

So what’s the problem? It’s simple. Your creditor won’t agree to accept half of your actual debt unless, or until, it can be paid in full. Otherwise, you’re expected to make your normal monthly payments.

Since you don’t have $2,000 in your trust account, and you won’t have it until more than a year after you stopped paying your creditor directly, they’ll probably take you to court and request that your wages be garnished long before you have that $2,000 built up.

And what about your other creditors? Well, they’ll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* months to pay off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.

On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not.

The facts are, you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And, of course, you’ll save thousands of dollars in fees to a settlement company.

Before signing up for any service, please be sure you check out the company thoroughly. And don’t let the words “non-profit” fool you either. Alot of debt settlement companies claim to be non-profit.

Going back to the example above, if you pay them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they’ll make $5,000 from you. I’d call that a profit, especially since they might not have actually helped you in any way.

Most companies will allow you to cancel your account and get a refund of what you’ve paid, less the non-refundable admin fee and the monthly service fees. If you feel you’ve been mislead about their program, don’t hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you’re getting nowhere.

You can visit the Better Business Bureau’s website ( http://www.bbb.org ) and find reports on hundreds of companies. Here’s a small listing of companies that have poor reputations with the BBB:

National Consumer Debt Council LLC – Irvine, CA (A.K.A. NCDC, United Consumer Law Group)

Financial Rescue Services – Burbank, CA

Debt Legal Services – Anaheim, CA

American Debt Relief – Los Angeles, CA (A.K.A. A M Debt, American Debts Relief, Debt Relief)

Please be very cautious when choosing a debt help company and ask lots of questions before agreeing to anything. If you find they’re evading your questions, run fast and run far. There are reputable companies out there, so keep looking until you find one.

By: Denise Hall