Debt Settlement Programs

Debt settlement also known as debt negotiation is not the same thing as credit counseling or a debt management program (DMP). It can be very risky and have a long term negative impact on your credit report and, in turn, your ability to get credit. That’s why many states have laws regulating debt negotiation companies and the services they offer.

The Claims

As discussed in previous blogs– debt negotiation firms may claim they’re nonprofit. They also may claim that they can arrange for your unsecured debt — typically, credit card debt — to be paid off for anywhere from 10 to 50 percent of the balance owed. For example, if you owe $10,000 on a credit card, a debt negotiation firm may claim it can arrange for you to pay off the debt with a lesser amount, say $4,000.

The Truth

Just because a debt negotiation company describes itself as a “nonprofit” organization, there’s no guarantee that the services they offer are legitimate. There also is no guarantee that a creditor will accept partial payment of a legitimate debt. In fact, if you stop making payments on a credit card, late fees and interest usually are added to the debt each month. If you exceed your credit limit, additional fees and charges also can be added.

While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide accurate information to the credit reporting agencies, including your failure to make monthly payments. That can result in a negative entry on your credit report. And in certain situations, creditors may have the right to sue you to recover the money you owe. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.

Truth of the matter is creditors do settle millions of dollars a month in debt. But a debt negotiation company’s cannot guarantee your debt will be settled nor can they promise a specific dollar amount. All debt negotiations done are on a best efforts basis and quotes given for saving should be estimates based on previous dealing with your creditors. Every creditor has their own settlement criteria just like each person in debt has their own reasons for their current financial troubles.

Tip-offs to Rip-offs

Steer clear of debt negotiation companies that:

• Do not offer a full financial analysis budgeting advice for free
• Only offer debt negotiation/settlement (reputable companies offer multiple financial solutions)
• Do not offer attorney representation
• Do not represent you in court if a creditor files a lawsuit against you
• Do not schedule a face-to-face meeting with you and your attorney
• Do not have attorneys in your state within a 15-30 mile radius of you
• Guarantee they can remove your unsecured debt
• Promise that unsecured debts can be paid off with pennies on the dollar
• Require monthly service fees of more the $79
• Demand payment of a percentage of savings
• Tell you to stop making payments to or communicating with your creditors
• Claim that creditors never sue consumers for non-payment of unsecured debt
• Promise that using their system will have no negative impact on your credit report
• Claim that they can remove accurate negative information from your credit report.

If you are interested in debt negotiation for you are a family member call Total Debt Relief, Inc. at 800-627-9667 to get more information and details of the financial solutions available or click here and visit them on the web.