You have went through the process of trying to lower your monthly payments, you have budgeted and you are still coming up short to pay the minimum monthly payments on your credit card balances. One way to lower your monthly credit card payments is to consolidate your debt into one loan.

This is called a debt consolidation loan which usually takes a home equity loan out to pay off the unsecured debts that you want to consolidate into one loan payment. This can lower the monthly payment considerably and make the debt more manageable.

Things you that you will want to beware of when you get a debt consolidation loan are if it is a secured or an unsecured loan. A secured loan can be tied to either a car, or a home. If you don’t make the payments you can loose your home or car. If you can get a personal loan that is unsecured to complete the debt consolidation, failure to pay it back will not result in a home foreclosure or car forfeitures. The type of loan that you will ultimately qualify for depends on your credit rating, the amount you are requesting and the type of debt you are going to consolidation. Sometimes there are up front points that can add to the cost of the debt consolidation loan and you should be cautious of these points as they can be costly. (I would never recommend taking unsecured debt and securing it with property)

A debt consolidation loan can often lower your interest rate considerably, and most often they are fixed interest rate. This will speed up the repayment process considerably. Another benefit to having a home equity debt consolidation loan is that you can deduct the interest off on your taxes.

Today debt consolidation loans are not your only solution and you should research all options available to you in reducing, settling and eliminating your debt before making your decision. The benefit to doing debt consolidation is that it may help save your credit rating, simplify the repayment of your credit card balances with lower interest rates which should reduce your monthly payment considerably.

Other debt relief options are Credit Counseling Services/Debt management Plans, Debt Settlement Programs (I would only recommend debt settlement with an attorney) and as a last result bankruptcy. For more information on these debt relief options please visit us on the web at www.tdrelief.com

Article by:
Christopher L. Kessler

Legal Debt Settlement vs. Traditional Debt Settlement

I have been working in the Finance, credit collections and debt settlement industry for almost 16 years now and have very extensive knowledge as to how it works.

The purpose of this article is to explain to you first how debt settlement works and what the process entails; both the good and the bad. Next I will explain the differences between how a debt settlement law firm works and how it compares to a standard debt settlement company. There are many differences between how this process is handled by the two. Because of this debtors should learn these differences before enrolling into any program. Many people may already know how a debt settlement company works but have no clue as to how a law firm works and this article will explain just that.

First of all, I would like to state that debt settlement as a means of credit card debt relief is not for everyone; some people simply do not have the right state of mind, while others may benefit more from bankruptcy.

I would like to go over the purpose of credit card debt settlement and how the process works. The purpose of debt settlement is for the debtor to get out of debt quickly without having to file bankruptcy and save a lot of money in the process. The goal of the debt negotiator is to negotiate a one time lump sum payment or a term payout on the debtors' behalf at a far reduced amount than what the debtor currently owes.

The debtor could save themselves close to half of what they currently owe and be out of debt in a few years. However, as with most things in life there are drawbacks to this process and there is no way to avoid them.

In order for any creditor to be willing to negotiate a debt settlement on a debt the account must fall into default status. Creditors simply are not willing to negotiate when you are current and up to date on your monthly minimum payments. If they feel you can maintain your monthly minimums than this is precisely where the creditors want to keep you. This is where their profit is made, by just paying the minimum each month you will be in debt for over thirty years, even if the interest rate is not very high. If your rate is above 20%, you will be stuck in debt for well beyond thirty years and payback the creditors well over ten times the original balance in interest.

So understandably they will not negotiate with you when you are current and they feel they can still bank on your minimum payments for years to come. Therefore, you must fall behind on the monthly payments. Once you do this you will be negatively affecting your credit score and will also be receiving calls from collectors. Typically this is what may put some people off from doing debt settlement. For consumers already behind this will not make such a severe difference.

You must also be made aware that this process in the end will begin to help rebuild your credit. Thirty percent of your MyFICO credit score is made up of your debt to credit ratio, which will look a lot better after you get out of debt. Additionally the negative remarks from falling behind will not hold much bearing on your credit score after two years. Your credit score is only a snapshot in time and only uses the last two years of payment history to determine the score.
Now during the process of falling behind your goal is to save up as much money as possible in the quickest possible time. This money is then used later on to pay off the settlement that is negotiated by the debt negotiator. The faster someone looks to save money and complete this process the better for many reasons. The faster you are out of debt the more money you stand to save and the less risk you take from the negative aspects of settlement such as lawsuit and further damage to the credit report.

This brings us to the title of the article "How Does a Debt Settlement Law Firm Work?" As I explained above there are great benefits to debt settlement such as saving lots of money and time; and there are also some downsides such as collection calls and the possibility of a lawsuit.

The main differences between how debt settlement is handled by a debt settlement law firm and standard debt settlement company is how they deal with the negative drawbacks. A law firm has much more legal power and is set up correctly to comply with their states' laws.

Collection Calls

One of the first major differences in how debt settlement is handled has to deal with collections calls. When you first fall behind and your debt is still in the hands of the original creditor there is nothing legally that can be done to stop them from calling. However, once the creditor passes the account off to a third party collection agency which will happen anywhere between 3-6 months after falling behind things change. Legally once in the hands of the collectors a law firm will have the power to have all calls to their client stopped, and if the collector continues to call and harass the client legal action can be taken against that creditor seeing as they will be in violation of the FDCPA (Fair Debt Collections Practices Act).

So the client's first advantage by using a law firm will be a much decreased activity in collection calls, and this is very important for some people. Regular debt settlement companies that claim they can stop the calls are simply not telling you the truth and you should be very weary of them because of this.

Lawsuits

The next major advantage a law firm has concerning debt settlement is how a lawsuit can be handled. In case you are not aware once you fall behind on your credit card debts the creditors/collectors do hold the legal right to pursue you through the courts to collect the debt. I will mention, that suing is not the mainstay of the collectors and is not exercised very often; reason being it simply costs too much money and time on the creditor's behalf with no guarantee of getting any money even if they were able to obtain a judgment.

The advantage the law firm has is they can still legally contact and negotiate a settlement with your collector after they have issued a summons to court. A debt settlement company does not have this legal power. The collectors are very willing to negotiate a settlement even after the summons has been issued; they realize they may get very little if anything regardless, so being contacted by a reputable law firm who is willing to offer them money and settle the debt without wasting anymore time or money with going to court is very beneficial to the collector.
If you get sued and you only have a standard company representing you, you can expect to go to court and try to figure it out yourself. This often results in a judgment for the debtor!

Correct Legal Set Up

Perhaps the biggest advantage the law firm has over a company is how they are set up. The vast majority of debt settlement companies are not legally allowed to work in all the states; many are not even set up correctly to operate in their own state.

The states' attorneys and the FTC (Federal Trade Commission) are cracking down several on these companies and shutting them down as fast as possible. When this happens often times the company does not have the money to payback its clients for the fees they paid to a company that will no longer be in business and can no longer help to settle their debts. Now the debtor will be left holding the bag having paid fees but still be stuck in debt, and this nightmare scenario happens more than you may think. Thus making law firms a much, much safer option!
Another issue that many people have with debt settlement companies is they will not disclose how this process works and will simply sugar coats things and preach about the great benefits but never mention one downside. A law firm legally must disclose everything about how this works before being able to enroll anyone into any structured payment plan. A lot of companies do not have your interest at heart and will say whatever it takes to get you signed up even if they are fully aware that they are setting you up to fail.

Which brings me to my last point; a lot of unscrupulous companies will allow their clients to sign into a program and pay whatever they want and put them into programs that are set up for much longer than they should be. By stretching a debt settlement program out the savings will decrease and the potential for a lawsuit will increase. These companies cannot legally give the client advice or assistance if they get sued; it is considered unlicensed practice of law and this is what I mean by them knowing they will be setting you up to fail. If you can't get this process done within three or four years, on debt under 65K and a max of six years on debt over 65K, you should seriously consider bankruptcy. A law firm will be strait up and tell this to you, where many shady companies will keep trying to sign you up.

I really hope after reading this article you feel enlightened and now have a much better understanding of how debt settlement works and how a law firm can advantage you the most. I know for the most part I have been focusing on the negative aspects of debt settlement, but I feel it is important for people to understand both the good and the bad, allowing them to make an educated wise financial decision on how to get out of debt. But you must realize just how powerful the benefits of this process are! Saving close to half of what is currently owed and becoming debt free in a few years will be so beneficial to your current and future financial well being. Credit card debt has a way of destroying people's finances and their lives and debt settlement is the perfect alternative for those who want to escape debt quickly and avoid the embarrassment of filing for bankruptcy.

If you are curious as to whether using a debt settlement law firm can benefit your financial situation then I invite you to contact us at 800-627-9667 or simply follow the link below fill out an application. Total Debt Relief, inc. welcomes the opportunity to review your situation to see if you qualify debt settlement, if you qualify your application will be processed and forwarded to an attorney for approval.

Avoid Debt Settlement Scams

If you are planning to go for a debt settlement, it is important to be aware of the characteristics of the most legitimate settlement services. Even though there are numerous settlement companies, some among them can not be trusted. In order to get the service from a trusted company you have to have a fair knowledge about the qualities of a genuine debt settlement service.

Debt settlement is absolutely a legal way of eliminating debt, only if you go through a legitimate company. This can not be done legally with an illegitimate company. The best way to locate services, is to search in the World Wide Web. There you will be left with thousands of results.

A genuine company will be a member of a reputed debt relief network. They should publish a detailed company profile in the internet. That profile should be updated and enriched with their updates, service, packages, and history as well.

A good company will not offer you lower rates. Do not go for lower rates thinking of saving your money. This can put you in more danger because; these lower rates are most of the times offered by the fake companies, which are unable to do the job.

Then a legitimate company should have a clear history. It shows their experience in the field. It should not be black listed for any reason. Their performance should be smart. You can check the former customer comments and verify about their service.

Before starting business with you, a legitimate company will provide you with an agreement in order to have faith towards each other.

Thus it is clear for you that a most legitimate debt settlement company should be a well experienced, proven, and established one.

If you are deeply in debt and are looking for legitimate ways to control and eliminate your financial obligations then a debt settlement could be the answer. Consumers can expect to eliminate 50%-60% of their unsecured debt on average with the help of a legitimate debt settlement company. To find established and proven debt relief companies in your state check out the following link: www.tdrelief.org

Uniform Debt-Management Services Act

The National Conference of Commissioners on Uniform State Laws (“NCCUSL”) finalized and issued the UDMSA in July 2005. Nearly every state has already adopted legislation pertaining to such matters as debt adjusting, debt management, debt pooling, debt settlement, and consumer credit counseling – that vary considerably in scope and content. According to NCCUSL, the UDMSA represents the first national effort at providing some uniform rules to govern both consumer credit counseling services and debt settlement services. » Download the final NCCUSL draft of the UDMSA.

Preface: Consumer credit counseling and debt settlement services have been available to individuals with serious debt and credit problems going back to the 1950's. There are generally two kinds of services that have been available. Some of these services have provided counseling coupled with assisting debtors in establishing programs to reduce interest charges and pay off debts over an extended time. Others have provided debt settlement services, in which agreements are reached with creditors to settle on a percentage of debt. Most of these services have collected a periodic amount from the debtors from which payment to creditors has been made. The general objective of these services has been debt satisfaction without resort to bankruptcy.

The history of consumer credit counseling and debt settlement services is somewhat checkered. There have been abuses and efforts to counter abuses statutorily in many states. Consumer credit counseling and debt settlement services have been criticized in the past for their efforts to steer debtors away from bankruptcy when it may have been more advantageous and less costly for some debtors to file bankruptcy. State legislators have struggled to find legislative solutions but the industry remains unregulated in most states. One of the controversies in many states was whether for profit services should be allowed to operate along with not for profit services.

However, federal bankruptcy reform effective in 2005 has changed the perspective on such services. For an individual to file for Chapter 7 bankruptcy, that individual will in most cases have to show that credit counseling and debt education/management has been sought and attempted. This shifts a highly significant burden upon private services to perform honestly and effectively. Because the new bankruptcy rules are federal and apply in every state, regulating the consumer credit counseling and debt settlement services in every state must be uniform in character for the new bankruptcy rules to be effective and for consumers to be protected.


In 2005, just in time for consideration in the state legislatures, the Uniform Law Commissioners promulgated the Uniform Debt-Management Services Act (UDMSA). It provides the states with a comprehensive act governing these services that will mean national administration of consumer credit counseling and debt settlement services in a fair and effective way.

UDMSA may be divided into three basic parts: registration of services, service-debtor agreements and enforcement. Each part contributes to the comprehensive quality of the Uniform Act.

Registration

No service may enter into an agreement with any debtor in a state without registering as a consumer debt-management service in that state. Registration requires submission of detailed information concerning the service, including its financial condition, the identity of principals, locations at which service will be offered, form for agreements with debtors and business history in other jurisdictions. To register, a service must have an effective insurance policy against fraud, dishonesty, theft and the like in an amount no less than $250,000.00. It must also provide a security bond of a minimum of $50,000.00 which has the state administrator as a beneficiary. If a registration substantially duplicates one in another state, the service may offer proof of registration in that other state to satisfy the registration requirements in a state. A satisfactory application will result in a certificate to do business from the administrator. A yearly renewal is required.

Agreements

In order to enter into agreements with debtors, there is a disclosure requirement respecting fees and services to be offered, and the risks and benefits of entering into such a contract. The service must offer counseling services from a certified counselor or certified debt specialist and a plan must be created in consultation by the counselor for debt-management service to commence. The contents of the agreements and fees that may be charged are set by the statute. There is a penalty-free three-day right of rescission on the part of the debtor. The debtor may cancel the agreement also after 30 days, but may be subject to fees if that occurs. The service may terminate the agreement if required payments are delinquent for at least 60 days.

Any payments for creditors received from a debtor must be kept in a trust account that may not be used to hold any other funds of the service. There are strict accounting requirements and periodic reporting requirements respecting funds held.

Enforcement

The Act prohibits specific acts on the part of a service including: misappropriation of funds in trust; settlement for more than 50% of a debt with a creditor without a debtor’s consent; gifts or premiums to enter into an agreement; and representation that settlement has occurred without certification from a creditor. Enforcement of the Uniform Act occurs at two levels, the administrator and the individual level. The administrator has investigative powers, power to order an individual to cease and desist; power to assess a civil penalty up to $10,000.00, and the power to bring a civil action. An individual may bring a civil action for compensatory damages, including triple damages if a service obtains payments not authorized in the Uniform Act, and may seek punitive damages and attorney’s fees. A service has a good faith mistake defense against liability. The statute of limitations pertaining to an action by the administrator is four years, and two years for a private right of action.

Banks as regulated entities under other law are not subject to the Uniform Act, as are other kinds of activities that are incidental to other functions performed. For example, a title insurer that provides bill-paying service that is incidental to title insurance is not subject to it.

UDMSA provides comprehensive regulation of debt counseling and debt settlement services. It becomes an essential part of the law of creditor and debtor as bankruptcy reform enacted by Congress in 2005 takes effect.

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PURPOSE:
This Act provides guidance and regulation to the consumer credt counseling and debt settlement industries. The Act applies to both consumer credit counseling services and debt settlement services. The Act is a comprehensive statute that provides rules for, among other things, registration requirements, bond requirements, certification requirements, disclosure requirements, and penalties for non-compliance.


ORIGIN:
Completed by the Uniform Law Commissioners (National Conference of Commissioners on Uniform State Laws) in 2005.

STATE ADOPTIONS:

Colorado » Download the Colorado UDMSA. (Effective January 1, 2008)

Note: Colorado is the first State to recognize and treat with their legislation the two distinctly different debt-management functions performed by Consumer Credit Counseling Agencies and Debt Settlement Companies. The Colorado Act requires personnel be "Certified Debt Specialists" for Debt Settlement Companies and "Certified Counselors" for Consumer Credit Counseling Agencies.

Note: Approved accreditation programs for the new Colorado Act can be found on the State's website at: http://www.ago.state.co.us/UCCC/DMCertProgs.cfm

Delaware » Download the Delaware UDMSA. (Effective January 17, 2007)

Rhode Island » View the Rhode Island UDMSA. (Effective March 31, 2007)

Utah » View the Utah UDMSA. (Effective July 1, 2007)

Note: Approved accreditation programs for the Utah Act can be found on the State's website at: http://consumerprotection.utah.gov/lists/credit-counselor-cert-programs-and-orgs.pdf


Nevada » View the Nevada UDMSA. (Effective May 29, 2009)

Tennessee » View the Tennessee UDMSA. (Effective July 1, 2009)

UDMSA - Links of Interest

The UDMSA represents the first national effort at providing some uniform rules to govern both credit counseling services and debt settlement services.


The following are links to the Debt Settlement Training, Certification & Trade Associations who are participating in the adoption of the Uniform Debt-Management Services Act (UDMSA) for all 50 States.

Individuals - The International Association of Professional Debt Arbitrators (IAPDA) - Has developed a Certification Training Program - "Certified Debt Specialists" that complies with UDMSA draft version certification requirements specific to Debt Settlement.

Companies - The United States Organizations for Bankruptcy Alternatives (USOBA) - Working with and lobbying State Legislators who are introducing the UDMSA on issues specific to the Debt Settlement industry.

Companies - The Association of Settlement Companies (TASC) - Working with and lobbying State Legislators who are introducing the UDMSA on issues specific to the Debt Settlement industry.


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The following are links to Consumer Credit Counseling Associations who may participate in the adoption of the Uniform Debt-Management Services Act (UDMSA).

The Association of Independent Consumer Credit Counseling Agencies (AICCCA) - A national membership organization representing non-profit consumer credit counseling companies.

National Foundation for Credit Counseling (NFCC) - A national membership organization representing tax exempt consumer credit counseling organizations.

American Association of Debt Management Organizations (AADMO) - A national trade association providing its members and the public with information about credit counseling.