How Debt Settlement Companies Work

: Chris Lee Law Firm

  Filed under: Debt settlement

Debt Settlement BasicsMany Americans are in debt over their heads and are having difficulty maintaining their finances. There are several ways to begin the process of reducing your debt. The path to financial stability can be one of many tempting offers and services. With so many companies and services available, finding the right solution for your financial needs can seem overwhelming. There are a few things you should know about finding the best financial assistance to meet your needs.

Costs For Service

Companies that specialize in debt settlement generally work in similar ways. Typically, the company will charge a prospective client a percentage of the debt that they owe. For example, if a borrower owed $10,000 and the company charged 1% then the client with the debt would pay $1,000 for doing the settlement. More often than not, the fee is static regardless of how much the debt is reduced. In some cases the client will end up paying more then they originally owed after the fees are paid to the settlement company.

Help With Creditors

Often, the company will advise the client to stop making payments to the creditor and instead place the payment money into a separate account. Once the client has accumulated enough money to make an offer, the company will send a letter to the creditor offering to settle for that much. For example, if the client has stopped making credit card payments and accumulated $3,000 in a separate account, then the company will offer to settle for $3,000.

One major selling point with some debt settlement companies is that they will “handle” creditors when they begin to call and send notices of past due payment. To some extent that is true, the company will field the harassing calls and junk mail that is normally sent to the borrower by having the client forward calls and correspondence to the company instead. The other major selling point is that the company will get a good deal with the creditors because they deal with all the major creditors daily.

Not all debt settlement companies provide professional services. There are plenty of non-reputable companies that may be out to make money and not to represent the best interests of the consumer. There are many experienced attorneys that serve as debt negotiation specialists that are professionally bound to be an advocate for the consumer’s best interests. If in doubt about the nature of the debt settlement company, it is best to seek advice from many different agencies before choosing one to manage your debts.

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