Shocking Facts - What Debt Settlement Companies Don't Tell You
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 ommission" 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.
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 ommission" 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.
Beware of Debt Settlement Scams
With the declining state of the current economy, more and more individuals are turning toward debt settlement as a means of eliminating their mountains of debt. Debt can cause stress and an overall decline in health. Creditors calling at all hours of the night even bothering you at your place of employment, no wonder many consumers reach a level of extreme desperation, even depression. Is there a light at the end of the tunnel?
There are many debt settlement companies that are completely legitimate. A debt settlement company will review your loans, your income, and assets, and determine a realistic level of payment for each debt you owe. They will then contact each creditor and negotiate a payment plan that's realistic.
Once you've made the lump sum settlement with your creditors you're out of debt. Debt settlement companies don't work for free. The fees can be based on a percentage of your loans, a set up fee, payment fees, and even closing fees.
Unfortunately, there are many debt settlement companies that are only after your money and have no intention of working with you or your creditors. These companies exist only to bilk service fees out of desperate consumers who see no other way out. Instead of a light at the end of the tunnel there's only a brick wall.
They promise to contact your creditors in effort to lower your current balance and reduce your current payments as much as 50% or more. While legitimate debt settlement companies typically negotiate your balance 'scam companies' offer empty promises... take your money... and run!
One debt settlement scam that is gaining in popularity is the 'no hassle' enrollment plan. This occurs when the company in question wants you to 'enroll' in one of their plans over the phone, without any type of qualifying process or verification of your actual debts. Of course you have to pay a membership initiation fee and, most likely a monthly fee while they review your finances. If you decide not to continue in the program, too bad, there aren't any refunds.
Another popular debt settlement scam is one in which the company tells you that your creditors have agreed to the repayment plan and they haven't even been contacted. Or the settlement company has sent a letter to the creditor telling them the payments are being held in a trust account and have to reach a certain balance before they'll be paid. The consolidation company comes up with a monthly payment that the consumer pays them every month. A good chunk, as much as $50 to $100, goes to the settlement company as service fees. The money is held in a "trust" account until the balance reaches a certain level. The consolidation company then pays the creditor. But if the creditor hasn't agreed to this plan, and most won't, they can continue to collect on the debt through whatever means legally available.
This type of plan could only make matters worse, because most creditors will not wait that long to receive full payment. In all likelihood, they could still take you to court.
Be aware that debt settlement is not the same thing as debt consolidation, or debt counseling.
There are many debt settlement companies that are completely legitimate. A debt settlement company will review your loans, your income, and assets, and determine a realistic level of payment for each debt you owe. They will then contact each creditor and negotiate a payment plan that's realistic.
Once you've made the lump sum settlement with your creditors you're out of debt. Debt settlement companies don't work for free. The fees can be based on a percentage of your loans, a set up fee, payment fees, and even closing fees.
Unfortunately, there are many debt settlement companies that are only after your money and have no intention of working with you or your creditors. These companies exist only to bilk service fees out of desperate consumers who see no other way out. Instead of a light at the end of the tunnel there's only a brick wall.
They promise to contact your creditors in effort to lower your current balance and reduce your current payments as much as 50% or more. While legitimate debt settlement companies typically negotiate your balance 'scam companies' offer empty promises... take your money... and run!
One debt settlement scam that is gaining in popularity is the 'no hassle' enrollment plan. This occurs when the company in question wants you to 'enroll' in one of their plans over the phone, without any type of qualifying process or verification of your actual debts. Of course you have to pay a membership initiation fee and, most likely a monthly fee while they review your finances. If you decide not to continue in the program, too bad, there aren't any refunds.
Another popular debt settlement scam is one in which the company tells you that your creditors have agreed to the repayment plan and they haven't even been contacted. Or the settlement company has sent a letter to the creditor telling them the payments are being held in a trust account and have to reach a certain balance before they'll be paid. The consolidation company comes up with a monthly payment that the consumer pays them every month. A good chunk, as much as $50 to $100, goes to the settlement company as service fees. The money is held in a "trust" account until the balance reaches a certain level. The consolidation company then pays the creditor. But if the creditor hasn't agreed to this plan, and most won't, they can continue to collect on the debt through whatever means legally available.
This type of plan could only make matters worse, because most creditors will not wait that long to receive full payment. In all likelihood, they could still take you to court.
Be aware that debt settlement is not the same thing as debt consolidation, or debt counseling.
How to Choose a Debt Settlement Company
As consumer debt continues to spiral out of control, debt relief is fast becoming a major concern for many American's. In 1999, American's made $1.1 Trillion worth of credit card purchases. In 2001, American credit card debt hovered around $690 billion. Unfortunately, in today's unstable economic conditions, many American's are being forced to turn to credit cards as a way to extend their income. Consumer debt is at an all-time high and American's need to know what they can do to get out of debt. Often, consumers are seeking the services of professional debt settlement companies to help regain control of their finances. However, prior to making such an important decision, it is important to fully understand who you are doing business with.
The most important thing you can do when making the decision get help with your debt related problems is to be an informed consumer. It is absolutely critical to do your research. Do not rush into things; this can cause more harm that good. Prior to signing on with any Debt Settlement company, make sure you ask the following questions and consider their responses:
* Is the debt settlement company you are considering accredited by The Association of Settlement Companies (TASC)? Personally, I would not consider doing business with any debt settlement company that's not! TASC accreditation reduces risk to consumers and gives overall confidence because the member company has been independently evaluated by a third party for its competence and performance capabilities. Any company that truly has the client's best interest in mind will take the time, and make the effort, to do so. While the process can be long and difficult, in the end, it is best for the consumer and the company.
* How much does the service cost? When choosing a solution for debt relief, it's important to make sure the program is something that's affordable and realistic within your monthly budget. If you can't afford the program and join anyway, you're are just causing more long-term financial problems for yourself; however, if you are able to meet the monthly financial requirements of the program, Debt Settlement is a great form of debt relief for unwanted credit card debt. Most people don't realize that Debt Settlement is the quickest and least expensive form of debt relief outside of bankruptcy.
* Does the company offer any type of service guarantee? If so, what is the guarantee? If a company can not get settlement on your debt, you should never have to pay a fee, or the fee should be fully refunded. Additionally, steer clear of any debt settlement company that promises a quick fix to your debt related problems or tells you that debt settlement will not have a negative effect on your credit. Upon enrolling in a debt settlement program, your credit score will probably get worse before it gets better. This is a minor price to pay for being given a substantial debt settlement and not having to file for bankruptcy! However, it is important to realize that if you want to maintain a "good credit rating", you have to pay you bills on time; anything else will cause your credit score will suffer.
* Does the debt settlement company you are considering have IAPDA certified debt arbitrators? IAPDA certified debt arbitrators possess a solid understanding of the laws governing the Debt Settlement industry and fully understand your current financial situation.
* Does the debt settlement company you are considering offer any type of bankruptcy assistance should debt settlement not work out for you? For example, some debt settlement companies will offer a refund of some of the program costs to help pay for a bankruptcy attorney of your choice. Of course, the funds would have to be paid to a licensed attorney and not directly back to you. Again, a company that does this will most likely have your best interest in mind.
* Does the debt settlement company you are considering belong to the local Chamber of Commerce? If so, is the Chamber an accredited member of the Chamber of Commerce of the Unites States? This type of affiliation will help ensure that the company is conducting business in a proper manner.
* Is the debt settlement company you are considering a member of the Better Business Bureau? If they do not advertise this, you can always inquire with the BBB first. The BBB is a great way to determine if the company has a list of prior complaints. Any company with more than a few complaints per year is a company that you do not want to do business with.
The most important thing you can do when making the decision get help with your debt related problems is to be an informed consumer. It is absolutely critical to do your research. Do not rush into things; this can cause more harm that good. Prior to signing on with any Debt Settlement company, make sure you ask the following questions and consider their responses:
* Is the debt settlement company you are considering accredited by The Association of Settlement Companies (TASC)? Personally, I would not consider doing business with any debt settlement company that's not! TASC accreditation reduces risk to consumers and gives overall confidence because the member company has been independently evaluated by a third party for its competence and performance capabilities. Any company that truly has the client's best interest in mind will take the time, and make the effort, to do so. While the process can be long and difficult, in the end, it is best for the consumer and the company.
* How much does the service cost? When choosing a solution for debt relief, it's important to make sure the program is something that's affordable and realistic within your monthly budget. If you can't afford the program and join anyway, you're are just causing more long-term financial problems for yourself; however, if you are able to meet the monthly financial requirements of the program, Debt Settlement is a great form of debt relief for unwanted credit card debt. Most people don't realize that Debt Settlement is the quickest and least expensive form of debt relief outside of bankruptcy.
* Does the company offer any type of service guarantee? If so, what is the guarantee? If a company can not get settlement on your debt, you should never have to pay a fee, or the fee should be fully refunded. Additionally, steer clear of any debt settlement company that promises a quick fix to your debt related problems or tells you that debt settlement will not have a negative effect on your credit. Upon enrolling in a debt settlement program, your credit score will probably get worse before it gets better. This is a minor price to pay for being given a substantial debt settlement and not having to file for bankruptcy! However, it is important to realize that if you want to maintain a "good credit rating", you have to pay you bills on time; anything else will cause your credit score will suffer.
* Does the debt settlement company you are considering have IAPDA certified debt arbitrators? IAPDA certified debt arbitrators possess a solid understanding of the laws governing the Debt Settlement industry and fully understand your current financial situation.
* Does the debt settlement company you are considering offer any type of bankruptcy assistance should debt settlement not work out for you? For example, some debt settlement companies will offer a refund of some of the program costs to help pay for a bankruptcy attorney of your choice. Of course, the funds would have to be paid to a licensed attorney and not directly back to you. Again, a company that does this will most likely have your best interest in mind.
* Does the debt settlement company you are considering belong to the local Chamber of Commerce? If so, is the Chamber an accredited member of the Chamber of Commerce of the Unites States? This type of affiliation will help ensure that the company is conducting business in a proper manner.
* Is the debt settlement company you are considering a member of the Better Business Bureau? If they do not advertise this, you can always inquire with the BBB first. The BBB is a great way to determine if the company has a list of prior complaints. Any company with more than a few complaints per year is a company that you do not want to do business with.
Debt Consolidation Or Debt Settlement?
Debt settlement and debt consolidation are quite different. An outstanding debt settlement group can reduce your overall outstanding debt by as much as 40-60%. As the title details, they do all this by negotiating a reduced figure with creditors.
Debt consolidation merges all of your separate debts - with no reduction in these amounts - into a monthly total. The collateral required is frequently an individual's residence. Debt settlement actually saves you potentially thousands of dollars. Debt settlement outfits, many times employing their existing relationships with collectors, are able to deal in a way that is not possible for most individuals. Due to the advantages of settlement, it's fast gaining preference over debt consolidation.
It's a common concern: "How will debt settlement hurt my credit rating?" In some respects, it may be worth any price to simply free your thoughts of the weight that's often connected with having more owed than people can manage. Most are happy to discover that settlement typically results in only a short lived reduced credit score. Weighing the state of your credit presently, your credit level may not be affected at all. If you are not current with many of your accounts - with several of these cards near their maximum - your credit report may not change at all as a result of settlement. Debt settlement might move your debts to a "zero balance". Over time, this can fully change your credit score. This method can also drop thousands of dollars.
Be reminded: states don't regulate many so called credit arbitrators. Watch for these when selecting a service offering debt consolidation:
1) A credible debt settlement company will have a great better business bureau rating. Chamber of commerce membership is always good.
2) Look for reasonable fees.
3) No excessive upfront costs.
4) Be positive that all of your concerns are satisfied.
Lots of people are meeting with debt help. This includes a qualified debt arbitrator. These experienced debt mediators are experts in debt settlement. Appreciating and staying up-to-date with debt laws is one of their unique attributes. A debt arbitrator can help you better appreciate your next move with respect to local debt relief laws, bankruptcy help and debt relief.
You probably know about debt consolidation loans, debt settlement help and debt counseling services. These are several of the talked about options, but what's the best method for you? The plain way to really know -as every individual case is slightly different- is to get informed on the choices, and to speak with several different types regarding your special situation.
Of course the options of the choice you take will affect your situation for some time. As a bankruptcy firm will tell you, bankruptcy will stay on a record for years. This is yet another contributor to why great options like debt settlement are quickly becoming more popular. As awareness of the benefits spread, more people are choosing more beneficial routes.
Debt consolidation merges all of your separate debts - with no reduction in these amounts - into a monthly total. The collateral required is frequently an individual's residence. Debt settlement actually saves you potentially thousands of dollars. Debt settlement outfits, many times employing their existing relationships with collectors, are able to deal in a way that is not possible for most individuals. Due to the advantages of settlement, it's fast gaining preference over debt consolidation.
It's a common concern: "How will debt settlement hurt my credit rating?" In some respects, it may be worth any price to simply free your thoughts of the weight that's often connected with having more owed than people can manage. Most are happy to discover that settlement typically results in only a short lived reduced credit score. Weighing the state of your credit presently, your credit level may not be affected at all. If you are not current with many of your accounts - with several of these cards near their maximum - your credit report may not change at all as a result of settlement. Debt settlement might move your debts to a "zero balance". Over time, this can fully change your credit score. This method can also drop thousands of dollars.
Be reminded: states don't regulate many so called credit arbitrators. Watch for these when selecting a service offering debt consolidation:
1) A credible debt settlement company will have a great better business bureau rating. Chamber of commerce membership is always good.
2) Look for reasonable fees.
3) No excessive upfront costs.
4) Be positive that all of your concerns are satisfied.
Lots of people are meeting with debt help. This includes a qualified debt arbitrator. These experienced debt mediators are experts in debt settlement. Appreciating and staying up-to-date with debt laws is one of their unique attributes. A debt arbitrator can help you better appreciate your next move with respect to local debt relief laws, bankruptcy help and debt relief.
You probably know about debt consolidation loans, debt settlement help and debt counseling services. These are several of the talked about options, but what's the best method for you? The plain way to really know -as every individual case is slightly different- is to get informed on the choices, and to speak with several different types regarding your special situation.
Of course the options of the choice you take will affect your situation for some time. As a bankruptcy firm will tell you, bankruptcy will stay on a record for years. This is yet another contributor to why great options like debt settlement are quickly becoming more popular. As awareness of the benefits spread, more people are choosing more beneficial routes.
Credit Card Assistance Through Debt Settlement
With the rise of the credit card economy, more and more Americans are finding it difficult to deal with mounting bills and an ever escalating debt load. As this all has happened, new industries have sprouted up to help ordinary consumers pull themselves out of the financial burdens - chief among them the debt settlement industry.
In a successful debt settlement negotiation, certified professionals talk to credit card companies in order to convince them to reduce debt balances - sometimes by as much as sixty percent. The lenders generally agree to an even handed debt reduction in exchange for assurances that the debtor will not declare bankruptcy (thereby risking a loss of all unsecured debts owed to the lenders) while the borrowers have a good portion of their debts eliminated without the disastrous credit consequences bankruptcy protection threatens.
Alongside promises to refrain from bankruptcy, the borrower also enters into a strictly defined payment schedule typically lasting from three to five years. This pleases the lenders, of course, but also inevitably helps the borrower. The single payment system's much easier for most borrowers to keep track of and, once they've become accustomed to regular obligations, borrowers should quickly repair their credit rating and learn proper habits that should prevent debt troubles in the future. In short, because of their relative advantages as to the borrowers' credit and the immediate reduction in total debt loads, debt settlement negotiation programs should be investigated by any borrower who finds themselves crippled by bills.
As mentioned in my author bio I have worked within the debt relief community for over a decade now and seen the advantages and drawbacks of all aspects from debt settlement negotiations to Chapter 7 and Chapter 13 bankruptcy protection to credit repair. In the past twelve years, I've learned a good deal about the untold consequences and hidden secrets surrounding debt relief that I'm happy to share with curious debtors.
How does it work?
Though the entire notion may seem inordinately complicated to the average consumer - after all, we're taught to believe that debts are forever and the only solution to unpayable bills would be the credit destroying option of bankruptcy - but debt settlement negotiation makes a good deal of sense when you think about it. Obviously, above all else, creditors want to be sure that the borrowers do not go bankrupt leaving them with no recourse. At the same point, sending debts to collection agencies leaves them with only a small percentage of the original moneys owed, and, should the lenders themselves sue to recover, the costs of litigation can often outweigh the sums collected. As to why borrowers agree to the debt settlement process, this should be even more obvious. Successful negotiations will sudden eliminate a good portion - perhaps half of the debt load - without overly negative repercussions as to credit reports or FICO credit scores.
Then why can't debtors do this themselves?
While the overall process is simple, there's still a good deal of specific information only available to experienced negotiation professionals. Settlement specialists understand precisely how little the creditors stand to receive should they sell the debt balances to collection agents and can bargain accordingly. If the debt has already been sold, then the professional would have an idea (knowing the practices of credit card companies and collection agents) precisely how much the agency has to gain. Debt professionals are certified for a reason, after all, but, even beyond that, they tend to very good at the art of negotiation. Anyone can do their own taxes, just about, or sell their own houses, but accountants and realtors are quite demonstrably worth whatever additional costs may be involved.
Furthermore, besides the clear advantage of experience, continued dealings with the same lenders have the additional benefits that most business relationships enjoy. While debt settlement professionals are not financially tied to credit card companies in the way that consumer credit counseling firms depend upon lenders for the majority of their incomes, a mutually advantageous relationship nevertheless exists. In some cases, the settlement companies and lenders even draw up contracts that guarantee savings at a given rate for all borrowers. No matter the specific relationship, though, professional negotiators - by dint of training, experience, and, in most cases, a natural talent - are going to have a better chance at successful settlements. They understand how to best represent the borrower's situation in the context of financial pitfalls and economic troubles that borrowers themselves may be too embarrassed to mention to their lenders. Most importantly, there will always be attempts by the creditors toward paperwork containing hidden penalties or garbled prose that inevitably offers less settlement than was initially promised - sometimes, credit card companies have manipulated borrowers toward helplessly agreeing to repay all that was owed. Certified debt settlement specialists would never let that happen. They understand all the tricks and know the creditors most likely to attempt them
In a successful debt settlement negotiation, certified professionals talk to credit card companies in order to convince them to reduce debt balances - sometimes by as much as sixty percent. The lenders generally agree to an even handed debt reduction in exchange for assurances that the debtor will not declare bankruptcy (thereby risking a loss of all unsecured debts owed to the lenders) while the borrowers have a good portion of their debts eliminated without the disastrous credit consequences bankruptcy protection threatens.
Alongside promises to refrain from bankruptcy, the borrower also enters into a strictly defined payment schedule typically lasting from three to five years. This pleases the lenders, of course, but also inevitably helps the borrower. The single payment system's much easier for most borrowers to keep track of and, once they've become accustomed to regular obligations, borrowers should quickly repair their credit rating and learn proper habits that should prevent debt troubles in the future. In short, because of their relative advantages as to the borrowers' credit and the immediate reduction in total debt loads, debt settlement negotiation programs should be investigated by any borrower who finds themselves crippled by bills.
As mentioned in my author bio I have worked within the debt relief community for over a decade now and seen the advantages and drawbacks of all aspects from debt settlement negotiations to Chapter 7 and Chapter 13 bankruptcy protection to credit repair. In the past twelve years, I've learned a good deal about the untold consequences and hidden secrets surrounding debt relief that I'm happy to share with curious debtors.
How does it work?
Though the entire notion may seem inordinately complicated to the average consumer - after all, we're taught to believe that debts are forever and the only solution to unpayable bills would be the credit destroying option of bankruptcy - but debt settlement negotiation makes a good deal of sense when you think about it. Obviously, above all else, creditors want to be sure that the borrowers do not go bankrupt leaving them with no recourse. At the same point, sending debts to collection agencies leaves them with only a small percentage of the original moneys owed, and, should the lenders themselves sue to recover, the costs of litigation can often outweigh the sums collected. As to why borrowers agree to the debt settlement process, this should be even more obvious. Successful negotiations will sudden eliminate a good portion - perhaps half of the debt load - without overly negative repercussions as to credit reports or FICO credit scores.
Then why can't debtors do this themselves?
While the overall process is simple, there's still a good deal of specific information only available to experienced negotiation professionals. Settlement specialists understand precisely how little the creditors stand to receive should they sell the debt balances to collection agents and can bargain accordingly. If the debt has already been sold, then the professional would have an idea (knowing the practices of credit card companies and collection agents) precisely how much the agency has to gain. Debt professionals are certified for a reason, after all, but, even beyond that, they tend to very good at the art of negotiation. Anyone can do their own taxes, just about, or sell their own houses, but accountants and realtors are quite demonstrably worth whatever additional costs may be involved.
Furthermore, besides the clear advantage of experience, continued dealings with the same lenders have the additional benefits that most business relationships enjoy. While debt settlement professionals are not financially tied to credit card companies in the way that consumer credit counseling firms depend upon lenders for the majority of their incomes, a mutually advantageous relationship nevertheless exists. In some cases, the settlement companies and lenders even draw up contracts that guarantee savings at a given rate for all borrowers. No matter the specific relationship, though, professional negotiators - by dint of training, experience, and, in most cases, a natural talent - are going to have a better chance at successful settlements. They understand how to best represent the borrower's situation in the context of financial pitfalls and economic troubles that borrowers themselves may be too embarrassed to mention to their lenders. Most importantly, there will always be attempts by the creditors toward paperwork containing hidden penalties or garbled prose that inevitably offers less settlement than was initially promised - sometimes, credit card companies have manipulated borrowers toward helplessly agreeing to repay all that was owed. Certified debt settlement specialists would never let that happen. They understand all the tricks and know the creditors most likely to attempt them
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