Making the initial decision to negotiate my debt was a big step. However, the hardest part of process was just beginning; figuring out what company to use.
There are tons of debt relief scams out there. Google “debt negotiation” and you’ll see that the paid inclusion section on the right is flooded with companies offering you immediate freedom from your debt. Many of these debt settlement services are actually looking to tie you up in long-term programs that charge non-refundable fees and never actually achieve the desired result of negotiating and eliminating the debt.
1. Speak with the debt negotiation firm by phone before signing up. You want a firm that is committed to building a relationship with you, are knowledgeable about all of the major credit card companies’ collection processes and will contact your creditors directly. The debt negotiator should act as an arbitrator on your behalf and be in constant interaction with your creditors. You do not want them to simply charge you fees and neglect contacting the creditors to resolve the debt. This seems like a no-brainer, but it is surprising by how many consumers fall into this trap.
2. Make sure that you will have a dedicated representative assigned to your case. It is important that you are able to easily reach your debt negotiator and that you know exactly who to call when you have questions or issues that arise. Don’t let your case fall into a black hole wherein you have no idea who is managing your case or how to get in touch with them.
3. Get a detailed fee schedule from the debt negotiation service before signing up. You want to know exactly how much in fees you are paying, when the negotiator’s fees are paid and what portion of your monthly payments are directed towards your debt and what is directed towards paying their fees. Avoid companies that use your money to pay their fees rather than immediately start paying your debt. Typically, debt negotiators will allocate 40% - 50% of your monthly payments to their fees and 50% - 60% to paying off your debt.
4. Make sure that the negotiator will set up a trust account in your name. A legitimate debt settlement company will arrange a FDIC insured trust account through a third party bank that is created in your name. The purpose of this account is to allow you to save money in a separate account and to give the negotiator easy access to the funds needed to settle with creditors. You will make one monthly payment into this account. Month over month, the funds will accrue in your account. The typical debt settlement trust account does not earn interest, however it is FDIC insured up to $100,000 dollars. Companies that utilize a trust account model usually have a higher success rate than those that don’t.
5. Check the debt negotiator’s history with the Better Business Bureau. Do your own due diligence on the debt negotiation firm before you sign up to see what their reputation in the industry is like. The best way to do this is through the BBB or by Googling the firm’s name to see if any consumer complaints come up.
In our next installment, we will discuss how bankruptcy compares to debt negotiation.
There are tons of debt relief scams out there. Google “debt negotiation” and you’ll see that the paid inclusion section on the right is flooded with companies offering you immediate freedom from your debt. Many of these debt settlement services are actually looking to tie you up in long-term programs that charge non-refundable fees and never actually achieve the desired result of negotiating and eliminating the debt.
1. Speak with the debt negotiation firm by phone before signing up. You want a firm that is committed to building a relationship with you, are knowledgeable about all of the major credit card companies’ collection processes and will contact your creditors directly. The debt negotiator should act as an arbitrator on your behalf and be in constant interaction with your creditors. You do not want them to simply charge you fees and neglect contacting the creditors to resolve the debt. This seems like a no-brainer, but it is surprising by how many consumers fall into this trap.
2. Make sure that you will have a dedicated representative assigned to your case. It is important that you are able to easily reach your debt negotiator and that you know exactly who to call when you have questions or issues that arise. Don’t let your case fall into a black hole wherein you have no idea who is managing your case or how to get in touch with them.
3. Get a detailed fee schedule from the debt negotiation service before signing up. You want to know exactly how much in fees you are paying, when the negotiator’s fees are paid and what portion of your monthly payments are directed towards your debt and what is directed towards paying their fees. Avoid companies that use your money to pay their fees rather than immediately start paying your debt. Typically, debt negotiators will allocate 40% - 50% of your monthly payments to their fees and 50% - 60% to paying off your debt.
4. Make sure that the negotiator will set up a trust account in your name. A legitimate debt settlement company will arrange a FDIC insured trust account through a third party bank that is created in your name. The purpose of this account is to allow you to save money in a separate account and to give the negotiator easy access to the funds needed to settle with creditors. You will make one monthly payment into this account. Month over month, the funds will accrue in your account. The typical debt settlement trust account does not earn interest, however it is FDIC insured up to $100,000 dollars. Companies that utilize a trust account model usually have a higher success rate than those that don’t.
5. Check the debt negotiator’s history with the Better Business Bureau. Do your own due diligence on the debt negotiation firm before you sign up to see what their reputation in the industry is like. The best way to do this is through the BBB or by Googling the firm’s name to see if any consumer complaints come up.
In our next installment, we will discuss how bankruptcy compares to debt negotiation.
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