The short answer: it depends. The problem comes from the fact that “debt forgiveness” is often not well defined, which can leave room for companies to offer different types of services under its name. If you are drowning in debt, planning to negotiate with creditors or considered filing for bankruptcy, there are a few things you should know when reviewing your debt elimination options.
In general, it is best to negotiate a debt settlement plan with your creditor directly. Anytime you want to change the terms or conditions of an existing credit account (including mortgages), it is important to get the necessary approval from the creditor directly. If the creditor agrees to change the terms or conditions of the account, such as granting a payment extension or reducing the amount owed, be sure to get this arrangement in writing from the creditor.
In most cases, people that experience problems in debt forgiveness failed to negotiate with creditors directly or did not receive a copy of the arrangement in writing. Debt forgiveness essentially means that the creditor is willing to absolve you of your debt liabilities, which should be clearly defined in any debt settlement arrangement. The exception is in a bankruptcy filing, in which a court appointed trustee serves as the mediator between you and the creditor. However, you should still be aware of your right to obtain copies of the court documents related to your case.
If you are using a third party mediator for the negotiation, be sure the company is legitimate by looking for the following:
- Offers a variety of services, some free or operates as non-profit organization
- Does not require up-front fees for the debt negotiation services
- Allows you to directly speak with your creditor during negotiations, either in writing or over the phone
- Provides you with copies of the debt settlement agreement as provided by the creditor