Proper Qualification for a Debt Settlement Program

Choosing the right debt relief solution is an essential step in achieving financial freedom. While it is obvious that each company has different internal policies to handle your finances, there is, on some level, a particular formula that must be followed in the debt settlement industry. An important factor of the equation is the methods that debt settlement companies use in order to qualify their potential clients into their programs. Failure to readily assess every individual’s circumstances at the time of potential enrollment can have severe financial consequences down the line for that client. As a consumer, it is important to distinguish between companies who are practicing business under ethical codes of conduct and those companies who will enroll anyone into their debt settlement program if it will make them an extra dollar. Unfortunately, there are a handful of companies who choose to neglect the standards of proper qualification when considering who fits the mold for a debt settlement program. Consider the following neglectful enrollment practices and some resulting consequences.

To begin, every company should pass each individual’s information down to an underwriter for further analysis before qualification can occur. At this level, a person’s creditors, amount they owe, and hardship status can be evaluated. As a result, a firm estimate can be generated in terms of a monthly payment the client could expect to pay and how much money, roughly, could be saved through the program. If every creditor the client owes has a bad history in terms of negotiating and reaching low settlements, then the client should be informed that the program will probably cost them more money. A potential disaster could result if the client is not informed of this fact, set up on a payment plan that assumes 50% settlements, and then the negotiators can’t settle for anything less than 70% of what the client owes. The result: the client has no money left to fund the program, and their debts cannot be settled in full.

Additionally, a portion of debt settlement companies do not attempt to uncover the potential client’s recent activity that may hurt the negotiation process. For instance, if a client owes 50,000 dollars in debt and recently bought a new car, the creditors will be very disgruntled and most likely refuse to settle for anything but the full amount of outstanding debt owed. Or, if a client has received one or several large cash advances in the recent time leading up to contacting a settlement company, that too will also hurt the negotiations and they should be informed immediately. Unfortunately, some companies do not properly warn their potential clients of these facts and enroll them anyway to build their business. The result: consumers enroll into the program expecting to save 50% of what they owe to their creditors, and end up having to pay well over that target if they can afford it at all.

These two examples do not even mention the legal implications that may result from neglectful qualification methods. Since the debt is considered past due, the creditors reserve the right to sue any client enrolled in a debt settlement company. Without properly qualifying every client, it is likely that these people will end up in the program for a longer period than originally estimated. The longer the time a client spends in a program, the more likely it is that a creditor will pursue legal action, and essentially nullify the goal of any debt settlement company- to settle the debt before this could ever happen. Make sure when you are determining which company is the best fit for you that you ask the necessary questions to make sure these programs take into account your individual circumstances.