Debt Settlement Companies Are They A Scam Or Do They Really Work?
When it comes to seeking debt relief, many Americans feel the only viable option they have is credit counseling or filing bankruptcy. What many people are not aware of is the little known process of debt settlement. The goal of debt settlement is too, one satisfy your creditors for less than what they claim you owe and two save you as much money as possible during the process.
One reason many people choose a debt settlement company is because their debt amounts are too high for them to realistically manage to payback in full and want to avoid bankruptcy. Another reason why thousands of Americans choose a debt settlement company is because they are extremely upset and fed up with the credit card company over the fact that their interest rate has increased to an unfair high rate like 28 – 30% and the company refuses to lower it no matter how much you plead.
But the number one reason why Americans choose a debt settlement company is because their desire to have closure on being in debt and their priority of becoming debt free becomes their number one goal and it outweighs any real or perceived thought of any negative impact that it could have on their credit history while going through the process of debt settlement.
According to the Fair Isaac Company your debt to credit limit ratio accounts for more than 30% of your score, so it becomes absolutely essential to eliminate your debt first when you are trying to improve your credit score. Also remember your credit report is only a snapshot in time and is never a permanent record, you can recover and improve your credit score over time. Everyone gets a second chance in America!
The banks would love to keep you in the mind set that your credit score is absolutely the most important part of your life and by not paying them back in full would decrease your score and put you in the gutter forever. By all means your credit is important but should not completely dominate your life. This mentality works in the banks behalf and keeps you in fear, just where they want you.
But think about it, if the banks where really were concerned about you and your credit score then why would they extend you more credit on your current credit card so you can charge more when they know that this will decrease your score. So do they really care, NO.
When researching the option of debt settlement as your choice to become debt free understand that there are basically two types of companies to use when considering who you will choose to settle your debts. First there are the very common non-lawyer based debt settlement companies which comprise of over 95% of the companies currently advertising over the internet and TV. The rest are law firms that practice debt settlement as one of their services.
In the rest of this article I am going to list some of the major important points that you need to consider when choosing a debt settlement company to help you become debt free. As well as give you a warning sign for each point when speaking with the representative of a debt settlement company.
1. The company should save you at least 40% of your debt including fees and paying your creditors.
You can usually save 20% on your own with very little effort but any more than that requires experience and negotiating savvy.
Warning Sign:
When you are speaking to the representative from any debt settlement company you need to be cautious and do your homework. There are many debt settlement companies that just want to make as much money as possible without any real regard for the clients best interest. A lot of these representatives will say just about anything that pleases you to enroll you in their program. One way to recognize this type of company is by the tactic of setting a monthly payment amount to whatever the client wants. Usually very low and for a much longer period of time than what other reputable companies offer. This defeats the purpose of their claim of saving huge amounts of money because the interest keeps growing and the consumer does not realize that the longer the payback plan time frame the less they save.
Most Americans are getting caught in the magic bullet or quick fix syndrome, which these unscrupulous companies’ operators understand all to well and sign up tens of thousands of trusting people each year. If the representative is saying that they will save you over 60-70% of your debt be wary, at first it might sound great but verify what the overall cost is before signing on. Once they add on their fee and include your payback to your creditors it will be a lot less and they never mention this. Make sure to ask the representative if their claim of high savings for you is also including the companies fee.
2. Make sure your payback plan is in a realistic time frame to complete this process.
The major benefit of debt settlement is to become debt free in a very short period of time verses paying minimum payments to the credit card company which averages over 38 years to pay back. You should choose a debt settlement company that will focus and emphasize on enrolling you to becoming debt free in two years or less, but only under specific circumstances no longer than three years.
Warning Sign:
By stretching a debt settlement payback plan farther than three years you’ll never receive the full benefits that you were told in the beginning. Why, because of accruing interest. In other words the percentage of money your saving on the original debt decreases drastically when you enroll in a program that has you paying for four or five years because the debt amount drastically increases.
3. Make sure the collections calls will be stopped.
One of the negative aspects of debt settlement is that you do need to fall behind in order for these creditors to be willing to accept less. While falling behind you will get barraged with calls from collection agencies. Simply put these can be very annoying, scary, embarrassing, and aggravating. Now when it comes to preventing collection calls from 3rd party collectors, only by retaining a lawyer to represent you will stop them from calling. The Fair Debt Collection Practices Act states that if a client has attorney representation the 3rd party collector by law must deal with the attorney and not the debtor. Once the collector has been notified but continues too contact you directly then the collector becomes subject to a potential law suit.
Warning Sign:
If a representative from a non-attorney based debt settlement company tells that they can stop the collections calls ask them how and why the collector has to abide by what the debt settlement company claims. By law the collector does not have to deal with them. Typically their advise is to send a cease and desist letter, this can stir up a hornets nest. While this may stop the calls it will leave the collector no other option of contacting you to collecting the debt. So if they wish to continue to pursue with their collection attempts they will have to serve you papers to appear in court. Meaning that you will be sued.
4. Make sure the company is reputable.
A good place to start is to check the Better Business Bureau (BBB). Next thing to consider is how long the company has been in business. A general rule of thumb is to look for a company to have been in business for over 10 years. Thus ensuring that they know what they are doing and have settled many people’s debts in the past. What the scam operations do is open up as ABC company put through hundreds of people on their program that they know are not qualified for debt settlement just to take fees. Once they have these people complaining about not doing the right job they close down and start up somewhere else brand new as XYZ company. So if the company is brand new within a year or two that may raise a red flag and should be a major concern.
When it comes to law firms you have an extra layer of protection, the bar association. Check the state bar for the attorneys standing if you are going with a law firm. The attorneys are held to a higher standard by being a member of the bar association. With unanswered complaints to the bar an attorney can lose his/her license and business. The attorney cannot get another law license and just open up somewhere else. So it is in their best interest to do the best job for the client.
Warning Sign:
This is pretty obvious, if a company has an unsatisfactory record with the BBB and is not a member it would be best to stay away. If a law firm is not in good standing with the bar in other words under investigation, then stay away. If the company is relatively new and is showing some of the warning signs mentioned above, definitely stay away.
While debt settlement can be a very smart and viable option for many you need to be very cautious about the organization you are employing. By following the points and warning signs above you will greatly reduce the risk of being enrolled into a program that will not benefit you.
By: Stephen Bis
Get These Debt Relief Tips
Debt settlement is one good chance to prevent one’s self from being drowned in debts. Normally, Debt settlement firm headed by a lawyer facilitates the process. The firm offers debt solutions such as to settle debt.
It is suitable for individuals who can make one time payment at reduced amount than what was actually owed. To be debt free means to have a peace of mind. Nonetheless, not everyone favors debt settling negotiation because it affects their credit score. To be debt free, it is imperative not to panic. Think ahead and know your options, resources and plan your actions.
To get out of debt, the first thing to do is to find out the greatest amount of money you can set aside to clear debt or portions of it. When you are confident of the amount for debt settlement, make an appointment with the lenders whom you owed money and make your offer. Often, lenders provide up to 70% off of the actual debt. If you can be debt free without getting help from debt settlement firm, the better.
The second step in getting out of debt is to have the cash or money ready for payment after closing the deal. This is also one effective way to show sincerity in having credit settlement. Lenders are as anxious as you in having debt relief. If the lenders are too stiff with their rules, negotiate with them. What other people successfully did was to start offering 10% lower than what they could afford to pay in debt settlement. It is natural for lenders to increase the settlement amount. This way, you can study your options.
If the first step does not work, move on to finding other resources that can help you negotiate debt elimination programs such as debt settlement firm. Present your proposal and be sincere with your intention to settle debt. It is also important to let them understand the amount of money that you can afford in settling debt.
Next, there is wisdom when you put everything into writing including the information from the lender before giving them the payment. One advice from an expert says to have the payment sent by courier or any means that require signature upon receiving. Require the lenders to have the necessary debt settlement document faxed to you. The document should bear the lending company’s letterhead stating that your credit has been settled in full.
Make a follow-up to ensure that the lending company has indeed received the payment and it has been applied to your credit account. Generally, the clearing of your credit account takes up to 10 days to take effect.
Another good advice from the debt counselors is to classify the debt. Some have incurred credit cards debt while other debts are accumulated from unsecured loans. For credit card debt, the best way to settle it is to transfer the outstanding balance from a higher interest rate to one account that offers lower interest rate.
For loan debts, debt management counselors advise to make payments every time you receive your salary from work. Nevertheless, it is best when you make an agreement with the lending company for this type of debt settlement to make it official, formal and to avoid accruing further charges or interest.
By: Rudy Silva
What Is A Debt Consolidation Program?
Debt consolidation programs are devised to get you out of debt in the quickest and most inexpensive manner possible. When you sign up with a debt consolidation manager they will work with your creditors to combine all your debt and lower your monthly payments. It is a debt settlement arrangement that works by lowering your interest rates and forgiving your late fees thereby lowering your monthly payments.
When you are approved for a debt consolidation loan all of your debt will be combined into a single monthly sum. This payment is then split up and distributed between all of your creditors. You will pay one simple low interest rate on this amount as opposed to the several different high interest rates you were paying before. A debt consolidation loan is an excellent way to avoid extreme debt relief methods such as bankruptcy. You will need collateral when applying for a debt consolidation loan, how much will be determined by how much you need to borrow.
Banks and creditors look upon debt consolidation loans favorably because they realize you are taking positive methods to repay your debt. The majority of creditors are willing to work with debt consolidators in lowering your monthly payments or interest rates because they see this as an opportunity to have debts paid in full and in a timely manner.
Debt consolidation loans are helpful aspects of improving your credit history. When you pay off your debt you will often earn more credit and higher credit ratings.
There are several different debt consolidation services on-line today. 7debt.com lists seven of the best agencies advertising on the net. ADNSgroup of the National Legal Debt Centers ranks as number one on their list. There is a $20,000 minimum debt required to apply. Achieve Financial Security ranks in at number two with a $10,000 minimum debt required to apply. USAconsolidate.com is number three, has no minimum debt required and gives you the option select consolidation or settlement. CareOneCredit ranks in at number four and has a $2,500 minimum debt. CuraDebt is number five and has a $10,000 minimum debt requirement. FamilyCreditHelp ranks as number six, has no minimum debt requirement and specializes in helping you free up extra cash. Last but not least on the top seven lists is DebtAdvocatesOfAmerica with only a $5,000 minimum debt requirement.
By: Tim Gorman
John Cummuta – Debt Elimination Expert
Have you heard of John Cummuta, the debt elimination expert? If not you need to read on as he can change your life by making you debt free and financially free.
Now, the average person’s initial reaction is that it is impossible for the average American to get out of debt today. Most people have mortgages, mounting credit card debt and are faced with rising prices.
However, for those who are serious about becoming debt free, John has been the driving force behind thousands of people becoming financially free. He teaches a revolutionary but long standing program called Transforming Debt into Wealth.
The program stands on its own with proven and consistent success. John and his teachings have been endorsed by many financial companies and associations. But, if you learn a little more about John Cummuta, you will know that he has the expertise and the vision to back his success and effectiveness. As his history shows, he has devoted his career to helping people get out debt, manage their money and life the lives of their choosing.
John is an entrepreneur and has been named an Inc. 500 CEO at least 3 times. He has 30 years of experience in the financial arena. He has perfected his Transforming Debt into Wealth program by adding not only a unique way of teaching how it works, but also proprietary worksheets, exercises and even software that does most of the work to eliminate debt for any student of his course. He is also a prolific author in the area of debt management and wealth creation.
His approach involves what is known as optimized reallocation and it basically works by looking at current assets and debt and then coming up with a method to most efficiently lower the debt and increase assets using your current income. He has been teaching this for years and has applied it in his own life to create financial freedom and the freedom to start businesses and spend time the way he wants
By: Sarah Davidson
Debt Resolution – Learn 5 Strategic Ways to Resolve Your Debt
Debt resolution is a hot topic these days. Debt affects more households now than ever before. Currently, the average United States household carries a credit card debt over $9,000! Consumer debt is nearing a record 2.5 trillion dollars. Most economists are in agreement this trend of high debt is bad for the country and feel people need to develop financial awareness and a sound debt resolution program. But many people don’t even know where to begin to resolve their debt. The important thing is to take action, some kind of action. We will look at 5 ways you can begin to resolve your debt today.
1. Get a Free Credit Report. Knowing where you stand with creditors is probably the first step to debt resolution. Being able to know how creditors view your credit worthiness affects everything from getting credit when you need it most, to receiving the most competitive interest rates available.
2. Monitor your Credit. This action item coincides with and should be a follow up to getting a free credit report. Many negative marks unknowingly occur on people’s credit daily. You should take action and avoid becoming one of those victims. It is a very straightforward process, simply sign up for a credit monitoring system with any reputable company. Many offer a free 30-day trial period as well as a free credit report to start. A trial period will allow you to see first hand, the benefits of a reliable monitoring system.
3. Clean up your Credit Rating. You might see a trend with this article. Although some of these things may seem obvious. You would probably be surprised at how many people leave their credit in shambles. Then, when they want to purchase a high ticket item such as a car, boat, or even a mortgage, they are denied because of bad credit. After you get a free credit report and set up a monitoring system, begin to clean your credit up tackling each blemish one at a time.
4. Reduce the interest of your credit. Many people pay 15%, 20%, and even 25% interest rates on their credit cards. This is unfortunate because many can pay much less with a little bit of due diligence. Lowering your interest rate can save hundreds and even thousands of dollars every year on interest charges! Many credit cards charge unacceptable rates. This is a fact. You can fight back by getting a credit card with a much lower interest rate. Better yet, negotiate with your current credit card company for a lower rate. This in itself is a great way to way to reducing your debt.
5. Stop Paying Penalty Fees. Again, this is obvious, but many people succumb to needless penalty fees on a regular basis. Simply pay your bills on time. You will be surprised how much you can save.
Well, there you have it. At least 5 ways you can start reducing your debt and on your way to a debt resolution plan. Don’t wait until tomorrow, begin today to plan for your future.
By: Dan DeRoeck
Utilizing Christian Debt Counselors
Whenever you need some help with debt problems, you can use the outstanding services provided by Christian debt counselors. These professionals are well-trained in their field and are compassionate sources for you to use when you find yourself in a financial crisis. They are there to assist you in any way possible and to help you pay off your debt without having to obtain a loan. They work directly with your creditors in finding ways to consolidate your unsecured debt into one affordable monthly payment.
Counselors are trained to work amicably with your creditors to get your interest rates reduced and to eliminate accumulated late charges. By doing this, your debt can be decreased substantially and you will only have to make one monthly payment. Of course, you will be expected to make your payment on time every single month until you are debt free. As you conscientiously make your monthly payment, you will gradually rebuild your credit.
Christian counselors are professionals who will carefully analyze your debt, your monthly payments and your monthly budget. He or she will then work with each individual creditor so that the payment set up for you is affordable. Then, as you faithfully make your monthly payments, your account will remain in good standing until it is paid off.
Christian debt relief services are available for just about anyone. Christians prefer using these services because they know that the philosophy of the counselors is based on Christian beliefs. Everyone wins because you are able to pay your debt and live stress-free again. You no longer will get harassing phone calls interrupting your life, night and day. Your creditors will eventually get paid and not have to deal with collection costs and/or losing everything because of your bankruptcy.
Christian debt counselors are there to help you get on with your life in a positive and successful way. In addition to helping you meet your current financial obligations, they will help you re-evaluate your spending habits and suggest ways for you to live within your means. Everyone wins – you, your creditors and the helpful Christian counselors who have met their own personal goals.
By: Matt Murren
Stop Paying Credit Card Debt – Gain Leverage Over Your Credit Card Company For Debt Relief
If you want to get out of debt once and for all, the action of doing a stop paying credit card debt might not seem like a wise choice. After all, won’t this just increase the number of collection calls and letters your get? Of course it will. However, most consumers who opt for debt settlement are encouraged to stop paying their credit card debt, at least directly to their creditors. Why and how does this work?
Debt settlement is a debt relief process that works to reduce the total you owe. As you know, it is a lot easier to payoff a lesser amount. As for how much of a settlement you will get, it all depends on a number of factors. Most times, those who owe more than $10,000 in credit card debt see a reduction around 50 or 60 percent. You can also improve your chances by doing business with a legitimate settlement company.
But wait! What about the “stop paying credit card debt?” To get your creditors to agree to a settlement, you must prove that you have financial troubles. After all, they are never going to agree to reduce your debt if you have a history of always paying your bills on time. A settlement company will request that you stop paying your creditors. Instead, you will be paying them money that should go into a trust-like account. While saving, they will negotiate with your creditors to get your total owed reduced. You are out of debt when you have saved that much through the settlement company.
In short, it will seem very weird at first when a professional urges you to stop paying credit card debt directly to your creditors. However, this process of settlement is 100% legal and a great way to get back on your feet in terms of finances. If you would like more information or are ready to find a legitimate settlement company, visit the online website of a debt relief network.
By: Jamie Wiles
Beware of Debt Settlement Scams
With the declining state of the current economy, more and more individuals are turning toward debt settlement as a means of eliminating their mountains of debt. Debt can cause stress and an overall decline in health. Creditors calling at all hours of the night even bothering you at your place of employment, no wonder many consumers reach a level of extreme desperation, even depression. Is there a light at the end of the tunnel?
There are many debt settlement companies that are completely legitimate. A debt settlement company will review your loans, your income, and assets, and determine a realistic level of payment for each debt you owe. They will then contact each creditor and negotiate a payment plan that’s realistic.
Once you’ve made the lump sum settlement with your creditors you’re out of debt. Debt settlement companies don’t work for free. The fees can be based on a percentage of your loans, a set up fee, payment fees, and even closing fees.
Unfortunately, there are many debt settlement companies that are only after your money and have no intention of working with you or your creditors. These companies exist only to bilk service fees out of desperate consumers who see no other way out. Instead of a light at the end of the tunnel there’s only a brick wall.
They promise to contact your creditors in effort to lower your current balance and reduce your current payments as much as 50% or more. While legitimate debt settlement companies typically negotiate your balance ’scam companies’ offer empty promises… take your money… and run!
One debt settlement scam that is gaining in popularity is the ‘no hassle’ enrollment plan. This occurs when the company in question wants you to ‘enroll’ in one of their plans over the phone, without any type of qualifying process or verification of your actual debts. Of course you have to pay a membership initiation fee and, most likely a monthly fee while they review your finances. If you decide not to continue in the program, too bad, there aren’t any refunds.
Another popular debt settlement scam is one in which the company tells you that your creditors have agreed to the repayment plan and they haven’t even been contacted. Or the settlement company has sent a letter to the creditor telling them the payments are being held in a trust account and have to reach a certain balance before they’ll be paid. The consolidation company comes up with a monthly payment that the consumer pays them every month. A good chunk, as much as $50 to $100, goes to the settlement company as service fees. The money is held in a “trust” account until the balance reaches a certain level. The consolidation company then pays the creditor. But if the creditor hasn’t agreed to this plan, and most won’t, they can continue to collect on the debt through whatever means legally available.
This type of plan could only make matters worse, because most creditors will not wait that long to receive full payment. In all likelihood, they could still take you to court.
Be aware that debt settlement is not the same thing as debt consolidation, or debt counseling.
By: Dee Power
Transforming Debt Into Wealth – Is it Possible?
The average American family is struggling these days financially. With the economy in a horrible state, rising prices and many people losing their jobs or their businesses, debt and money management issues are becoming a major concern.
Have you heard of a program called Transforming Debt into Wealth? This course promises to not only to eliminate debt for any person or family but also to create new worth at the same time. For those of you who do not know what net worth is, it means creating money that accumulates in your accounts so over time you have savings and other assets. When someone says they have a net worth of $1 million, it means they have $1 million dollars in the bank an no debt.
The program states that it works even if you are knee deep in credit card debt and are currently unable to meet all your debt obligations. It goes even further and promises that if you follow the program, not only will your credit card and other normal debt be eliminated, but your mortgage on your home will be paid off in 5 to 7 years!
Is this even possible for the average person? It definitely sounds too good to be true. However, Transforming Debt Into Wealth is the best selling program on debt elimination available and it has succeeded in making thousands of people financially free. It is distributed by a well respected publisher and has been endorsed by many prestigious financial associations.
John Cummuta is the creator of the program and the reason it is so unique is because John is not only a financial expert and genius but he is extremely creative in a way that an innovative entrepreneur is creative. This program is the result of meshing these two skills and it is an incredibly practical and easy to follow solution for anyone wanting to be financially free.
The program is an exponential system which means that the benefits accelerate over time. What happens is that it starts off looking at your current debt and financial profile and uses an effective allocation system to instantly boost savings in your current situation. Over time, the most expensive debt is eradicated and the saved interest starts to accumulate as wealth. Within one month you will see benefits and within one year, you will see substantial changes to your financial profile.
There is no need to find other ways to make income or to give up on spending to get things that are important to you. Even if you are not in dire straits, if you have any debt, it is worth working to be debt free.
Debt free means financially free. Being financially free gives you the freedom to choose how to spend your time and to live the life you want today! Life is short and you can live the way you choose today instead of waiting years and years in hopes of a retirement. Live now.
By: Sarah Davidson
Debt Remedies
If you are one of the many British consumers, who are stuck deep in debt, you would probably know, that there are a number of options available, if it ever becomes unmanageable. Bankruptcy is, fortunately, only for the most intractable cases, while the relatively new – and heavily advertised – “Individual Voluntary Arrangement” (IVA) is a kind of half-way house that typically allows property owners to keep their homes.
IVAs are not pain free; for one thing, they leave a heavy black mark on your credit rating, also the company that administers the arrangement charges a sizable fee, reducing the amount that your creditors receive. So if you want to plan your own escape from the burden of debt, how should you go about it?
Experts have agreed that the first step, is to recognize the problem. Banks consider customers to be in financial difficulty when income is insufficient to cover reasonable living expenses and meet financial commitments as they become due, according to the Banking Code. If this applies to you, immediate action is a must.
Most importantly, this means getting in contact with your creditors as soon as you realise that there is a problem. Under the Banking Code, financial institutions are obliged to deal with difficulties “sympathetically and positively”, so the sooner you let them know, the more chance they have of preventing things getting worse.
Rachel Snow of the Building Societies Association said: “Problems are often down to temporary circumstances that can be seen through. So always contact your lender before you start missing payments.”
Heather Scott from the bank, Intelligent Finance; part of Halifax said: “If the customer shows a genuine desire to deal with the problem, we will work with them to do this. This could include reducing repayments for a short period or allowing a ‘payment holiday’. There are no hard and fast rules, but legal action over a mortgage is a last resort.”
Malcolm Hurlston, co-founder of Consumer Credit Counseling Service, a debt advice charity, said: “The key thing is to face up to it ,when you start to go into arrears, your lenders’ main worry is that you have disappeared, so it’s very important to stay in touch – otherwise they will spend a lot of money trying to find you.”
He added: “We then work out how much of this total repayment would go to each creditor and make offers to lenders accordingly. These offers are usually accepted straight away – lenders have come to trust our methods and this way they avoid the further costs involved in scrutinizing each client’s finances themselves. We collect the total agreed from the client every month and pay each creditor – by BACS transfer, which reduces their costs and is another factor in their willingness to agree to our proposals.”
He continued: “Consolidation loans are generally a bad idea as they either are secured on your house or charge a higher rate of interest than your existing borrowing. So unless you change your spending habits – if you carry on using your credit cards, say – you could end up with the same debt but with the chance of losing your home into the bargain.”
He concluded: “Most of our clients end up paying off the agreed sums, although some pay their debts off sooner – through us or directly – if their circumstances improve.”
Other options and sources to turn to, when dealing with debt, include specialist organizations and local service such as, National Debtline, which is geared towards providing help over the phone, while Citizens Advice offers a large network of advice bureaux, where you can talk to a counselor face to face. The CCCS, meanwhile, provides a telephone service but also offers a comprehensive online tool called Debt Remedy (www.cccs.co.uk). This web-based questionnaire takes you through a detailed audit of your finances and then produces an analysis and a list of recommendations. Debt Remedy, which took two years to develop and is believed to be the only example of its type in the world, has the additional benefit of being anonymous. The charity also offers advice on the use of budgeting to avoid debt problems at the following website, http://www.cccs.co.uk/budget/budget.aspx.
Also a Citizens Advise Bureau may be your best port of call if you have problems ranging across secured and unsecured borrowing and utility companies, if you face legal action or if you are unable to pay anything to your creditors.
Moira Haynes of Citizens Advice said: “We can represent you in court and help you to claim state benefits as well as in drawing up financial statements and negotiating with creditors.”
By: Ruth Jacob
