There are many debt relief programs to choose from, and it’s important for consumers to know how to choose a legitimate debt settlement company. By doing some research, it is possible to find one that will be effective in negotiating and settling one’s debt.
What is a Debt Settlement Company?
Debt settlement companies act on behalf of consumers to help them clear their debts. They do this by negotiating directly with creditors to facilitate the repayment of debts.
The Claims
When knee-deep in debt and with few avenues to turn to, it tempting to believe in companies claiming they will arrange to pay only a fraction of the balance owed on unsecured debt. Typically they’ll claim to settle this debt for 10 to 50% of the balance owed. They tout their services as an alternative to bankruptcy, claiming it will have little or no impact on credit history, that any negative impact can be removed after the program is completed.
The debt settlement company advises consumers to stop paying their creditors and send the payments to them instead. They promise to hold these funds in a special account and pay creditors on the behalf of the consumer.
The Truth
There’s no guarantee, even though the company may claim to be “non profit,” that the services they offer are legitimate. There is also no guarantee that the creditor will accept a partial payment on the account. Late fees and penalties can continue to accrue, increasing the debt further. Worse, the creditor may report the whole process to credit reporting agencies as a failure to make timely payments, which reflects negatively on one’s credit report.
The debt negotiation firm will charge a substantial fee for their services—an initial fee to set up the payment plan with the creditor, a monthly fee for handling the transactions, and sometimes a fee at the end of the plan based on the amount of money saved by participating in the program.
The Solution
To find a legitimate debt settlement company, go to The Association of Settlement Companies (TASC) website www.tascsite.org. TASC has a list of debt settlement vendors, searchable by state. These members are accredited in debt settlement processes and must adhere to TASC’s mission of “being able to demonstrate that they comply with the standards set out in the TASC bylaws.”
Before doing business with any debt settlement company, check them out. Verify that the company doesn’t have any consumer complaints on file with the state Attorney General, consumer protection agencies, and the Better Business Bureau. Make sure the company is licensed to work in the state of residence.
If researched properly, a debt settlement program can be a manageable solution to unmanageable debt.
Cathy Miglorie - Cathy Miglorie began writing professionally in 2002. Her writing is based on her work experience in the Vermont marble industry. She ...
