Debt Negotiation Advice - How do I find a reputable debt settlement company?

How do I find a reputable debt settlement company?

I get tons of email from these companies, but how do I know which ones are the best? I'm not looking to get out of what I owe, but I need help getting back on track after being laid off for a few months and I'd like to get the creditors off my back. Any ideas?

Public Comments

You are correct to be wary. If debt settlement companies sound too good to be true it's because they are. When they tell you about "a little-known piece of government legislation that could write off part of your debt" they're actually trying to sell you an IVA which will make them money, and may eventually result in bankruptcy for you. Remember to only trust companies if you can clearly understand where their profits are coming from. If you can't spot how they're making their money then it's usually going to be coming out of your pocket. In the UK the two main debt advice charities are: Payplan http://www.payplan.com Consumer Credit Counselling Service (CCCS) http://www.cccs.co.uk/ These organizations can set up a Debt Management Plan (DMP) on your behalf, or put you in touch with a reputable IVA practitioner. Remember that even though it may seem overwhelming now, you might be able to manage on your own. One of the best resources I've ever come across on the internet is the Motley Fool Dealing With Debt discussion board: http://boards.fool.co.uk/messages.asp?mid=10941308&bid=50079 You'll get truly expert, free, unbiased, anonymous advice there. If you're worried about threats your creditors are making in the short term read their article "What can they do to me?": http://boards.fool.co.uk/Message.asp?mid=7759984 That should help put things in perspective. The Money Saving Expert Debt Free Wannabe board is also quite good, particularly if you want a morale boost: http://forums.moneysavingexpert.com/forumdisplay.html?f=76 Congratulations on making the decision to take control of your situation. I hope everything works out for you.
debt settlement (also known as debt negotiation) can help many consumers struggling with debts. There are a variety of firms out there offering debt settlement and other forms of debt consolidation. Check out Freedom Debt Relief. They are a good organization and are members of the Better Business Bureau. They can be reached at: 1-800-544-7211 http://www.freedomdebtrelief.com Generally, I would make sure that any firm you choose is a member of the Better Business Bureau and get a sense for the quality of the organization (www.bbb.org). If you are curious about all of your alternative solutions, I'll outline a few below. Since debt consolidation comes in many forms, it is important that each consumer reflects on what their needs and concerns and financial situation is before signing up for an online debt consolidation program. The four primary concerns for most consumers are: i) monthly payment, ii) time to debt freedom, iii) total cost, and iv) the credit rating impact of the consolidation program. Be sure to evaluate each program, relative to your prioritization of these factors. Credit Counseling Credit counseling, or signing up for a debt management plan, is a very common form of online debt consolidation. There are many companies offering online credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a credit counseling program, you are still repaying 100% of your debts – but with lower monthly payments. On average, most online credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan DOES show up on your credit report… and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy – or using a third party to re-organize your debts. Debt Settlement Debt settlement, also called debt negotiation, is a form of online debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of online debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money. Debt Consolidation Loan Many people think first of a debt consolidation loan when seeking online debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30 year loan, which means that the total cost and the time to debt freedom could be very high… but the monthly payment will be lower than other options and there is no credit rating impact. Net-net: while there are many forms of online debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt consolidation option that fits for you.
Going with a debt settlement company is a good way to destroy your credit and get sued. Not to mention, you don't save a whole lot of money. Here is an example...Let's say you have $20,000 in debt, most debt settlement companies charge you a commission of 15% of your total debt. So you start off with $3000. Let's say they settle all of your debts for 50%=$10,000. Your total is at $13,000 now, but it isn't over. If your debt results in over $600 being fogiven, the banks will file a 1099-C with the IRS, so Uncle Sam will get you the following year when you pay your taxes because that $10,000 that was forgiven is taxable income. Let's say you are in a 25% tax bracket, $10,000 was forgiven=$2500 you will have to pay in additional income taxes. Now, you've paid $10,000 to settle + $3,000 commission + $2,500. This brings you to $15,500 and your credit is destroyed for 7 years. You saved $4,500, but you will pay higher interest rates for the next 7 years because you were either sued or all of your accounts charged off. So, when it's all said and done, it will hurt you more than help you. Citi, GE Money, Bank of America, and HSBC will not work with these companies. I work for one of them, and I know we immediately send your account for legal action once we receive the limited power of attorney and cease & desist, it doesn't matter if it is 1 day or 6 months delinquent. I would suggest a non-profit CCCS to help you with this situation. Good Luck. Oh, by the way....The guy who put Freedom at the top...That is one of the companies that we constantly receive limited POA's and C&D's from. We send all of those accounts out for legal action as soon as we recieve them.