Is it Possible to Find a Good Debt Settlement Company? BestBadCreditCards.info

Is it Possible to Find a Good Debt Settlement Company?

July 23, 2009 – 7:25 am

Perhaps we’ve asked an impossible question – are there even any good ones out there TO be found? Isn’t the entire premise of the creditinfocenter.com website to educate and teach individuals that they can pursue credit repair, debt settlement and other credit and debt-related actions effectively on their own?

Although we are strong advocates of avoiding the use of debt settlement companies, we also recognize that not everybody has the time, or desire to take on the task of tackling debt settlement negotiations with their creditors. So the next best step is to find a company that is trustworthy, knowledgeable, honest, and reliable.

Finding a good debt settlement company isn’t easy. There are so many companies out there babbling about how great they are, how you can settle your debts for pennies on the dollar – they all start to look alike after a while. Ads on TV, the radio, in newspapers – their jingles are likely plastered in your brain. But how in the world can the average person tell the good ones from the bad ones?

The answer is, to “interview them”. Much like you would interview a potential caregiver for your child with appropriate questions to assess their skills and knowledge, it is crucial that you ask a potential debt settlement company relevant questions to determine their level of expertise (or lack thereof). Here is a list of questions that you should always ask!

How much experience do you have? In this industry, if a company hasn’t been around for at least 3 years, stay away from them!

Are you a member of TASC? The Association of Settlement Companies is the most prominent trade association for the industry, and has a fairly strict code of ethics. Any company you choose should be a member. Additionally, review the company’s record with the Better Business Bureau as well as their state Attorney General or Commissioner of Banking.

How are your fees structured? Settlement companies charge significant fees, but there are two basic approaches. One approach involves collecting a flat fee based on your total debt amount, and the fees are often collected up front even if no settlements are completed. Another option the settlement company may offer is to base their fee on the amount of debt reduction they can negotiate. Fees should ultimately be based on performance and total debt reduction achieved, not debt amount. Furthermore, if employees are paid on a commission basis, run away!

If I decide to cancel, what is your refund policy? You should be provided AT LEAST a 30 day period to cancel with a full refund of any up-front fees.

How long will it take to get results? If they promise immediate results, or indicate it will be more than a year before progress is made, both are red flags. Some settlement activity should occur well within the initial 12 months of the process.

What happens to my credit score? If they tell you that it won’t be affected negatively, they are being dishonest. Your score is highly based on repayment of debt, and the debt settlement process usually involves a period of non-payment to the creditor while negotiating and collecting payments into a third party account. Expect your score to be reduced initially.

Where will my payments be sent? The answer should always be to a third party escrow company and held in a FDIC insured trust account.

Will there be any tax implications from the debt settlement process? In many cases a consumer will be responsible for taxes on the forgiven debt. If the forgiven debt totals $600 or more, you will generally owe income taxes on the amount forgiven, substantially reducing the total savings from debt settlement. If the company tells you otherwise, run away!

When you are at your lowest point and feel there is no other way out, you may hear a commercial that says you can be “debt free in a matter of months”. It is easy to fall prey to these companies when you are in a vulnerable state, and feel you have few options. Use the information above to help screen and choose a company wisely if this is the route you choose to pursue. For further information on debt settlement companies, consult the The National Foundation for Credit Counseling (NFCC).

Readers, if you have any experiences with debt settlement companies that you would care to share, please do so with a comment?

Credit Cards For Less Than Perfect Credit