Debt settlement involves negotiating with
creditors to lower the amount that a consumer owes. When done
properly, a client is able to meet the savings requirements, and
creditors agree to cooperate, a debt settlement company may be able
settle their debts for less than they, saving thousands in the
process. For consumers with
overwhelming credit cards, medical debt, personal loans,
repossessions, or collections accounts, a debt settlement company
may be able to provide tremendous financial and emotional relief,
but on the same token, when done poorly, a consumer can end up in
worse position than when they originally sought debt relief. The
following are series of questions to consider when choosing a debt
settlement company. Keep in mind, that even when a settlement
company does in fact properly service a consumer, this does not
guarantee a successful program. Results do vary.
Is the Debt Settlement Company being
Inquisitive about your Recent Account Activity?
There are instances when creditors will refuse
to negotiate an account, and some of these cases occur on accounts
that have had large recent balance transfers, cash advances, large
purchases, or a recent loan. In other words, if you withdrew a lot
of cash from your credit card and then promptly enrolled in a debt
settlement program, it is likely that the creditor will refuse to
offer any settlements and will instead opt to pursue legal action to
collect the full balance from you. The same is true with large
recent balance transfers and large purchases. In many cases, credit
card companies would rather settle an account than risk forcing
someone into bankruptcy, but if they feel the consumer has been
fraudulent in their business with them, there's a chance that they
will spurn any settlement offers to make an example of the client.
On the same token, even if the balance transfer or cash advance was
over 6 months ago and you've made several payments since then, it
will still increase the settlement that the creditor is willing to
accept. It is extremely important for a debt settlement company to
be thorough during the approval phase of a client's program because
it can have effects down the road.
Is the Debt Settlement Company being Upfront
about the Potential Downsides
This should go without saying---any debt
settlement company that does not mention the likely credit impact
and collection calls and the possibility of legal action and taxes
associated with their program should be avoided. Some debt
settlement companies make a point to discuss the potential downsides
of the program, but there are some that value the sale over having
long-term satisfied clients. A reputable debt settlement company
will make a point of disclosing the potential downsides. Even with
Franklin Debt Relief, although we make every effort to disclose the
risks associated with debt negotiation, oversights do occur, and we
encourage all consumers to rely on the contract for full details
about the disadvantages and costs of using our service.
Is the Debt Settlement Company Putting you in a
The only way to avoid legal action on past due
accounts is to settle accounts before they ever reach that stage. As
a rule of thumb, clients should avoid debt settlement companies that
are pushing them into programs longer than 36 months. Even then, one
should always strive to pay off their debts as quickly as possible
and clients in shorter programs have a higher likelihood of success.
Not only can this reduce the chances of a lawsuit, but it will allow
you to start rebuilding your credit from the negative impact of the
program sooner rather than later.
Is the Debt Settlement Company Allowing you to
keep a Large Account out of the Program?
This goes in line with the first question
regarding instances when a creditor may refuse to negotiate.
Creditors may willingly engage in negotiations with debt settlement
companies when they feel the consumer has not been fraudulent in
their dealing with them. Similarly, the creditors want to see that
the client is not showing preferential treatment to another
creditor. In other words, if a client is remaining current on an
account with a large balance, the creditor may refuse to negotiate
on the grounds, "If he or she can afford that big account, then they
could afford to pay us back." It also shows a lack of a financial
hardship, which is an important factor for debt settlement as well.
Has the Debt Settlement Company Asked if you
Filed Bankruptcy Recently?
If you've filed bankruptcy in the past 7 years,
then a creditor may be more likely to refuse to negotiate since you
have no other alternative but to pay them back in full. This tends
to happen mostly to consumers who have filed within the past 3
years, but a thorough debt settlement company will investigate
everything in order to ensure that they are enrolling a consumer who
has a decent chance of obtaining settlements, although the
possibility of non-settlement will always exist even for the