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Debt Settlement Companies

Credit card debt has always been problematic for some consumers, but the problem seems to be rising as household debt increases and people find that they cannot make their monthly payments. Turning to a debt settlement company for help can be a wise, money-saving move, but you have to make sure that you hire a legitimate organization that wants to eliminate your debt instead of taking advantage of your desperate situation.

What Do Debt Settlement Companies Do?

Debt settlement companies negotiate with your creditors to reduce the amount of money that you owe. Technically, you can do this yourself, but debt settlement companies have more experience with the negotiation process so they might be able to get you a better deal. They can also tell your creditors that there is no way you will ever be able to pay off the full amount of your debt. This would be difficult for you to do yourself because it would sound more like a threat than a realization.

Professional debt settlement companies have been able to reduce personal debt by thousands of dollars, which is obviously a boon for consumers who cannot pay off their debts but do not want to apply for bankruptcy.

Are Debt Settlement Companies Reliable?

While a debt settlement company can help you get out of debt quickly, not all of them are ethical. Many people have had experiences with companies that gave them bad advice, charged high fees upfront and never followed through with their promises. To some extent, it is easy for companies to do these things. Many consumers feel desperate by the time they contact a debt settlement company so they are willing to pay up front for services. Unfortunately, not everyone gets the debt reduction that there have been promised.

Choosing Debt Settlement Companies

The first step to choosing a reliable debt settlement company is knowing what types of tricks an unethical company might use against you. Creditors will not negotiate with debtors who are still making payments, so some debt settlement companies suggest ceasing all payments to them. This makes it possible for you to negotiate with your creditors, but it also makes it possible for the settlement company to drag out the process so that they can make more money. In the meantime, your creditors can sue you for non-payment. In some states they can even garnish wages and seize your personal property.

You can avoid this situation by finding a company that only charges for their services after a settlement has been reached. Make sure that they charge you a percentage of the reduction that they negotiate. This encourages them to do a good job and work quickly. Companies that charge by the month might drag their feet to make more money. You should also consider contacting the Better Business Bureau to get information about legitimate debt settlement companies that can help you.

TSC Sources and Resources

• New York Times - Debt Relief Can Cause Headaches of its Own
• Better Business Bureau
• The Association of Settlement Companies

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