Debt Settlement - How can I avoid being scammed?
Debt settlement will only work if you are with a good, reputable company. Because the industry is unregulated, you must beware. Here are some telltale signs of a scam:
1) They represent that this will not harm your credit, or that it is better for your credit than a bankruptcy. This is false. Your credit rating will be negatively affected. There is no doubt about this. (Any program other than paying your debts in full, on time, will have a negative impact on your credit). However, if you are behind on your bills, your credit may already be bad. But, since our program is designed to have you out of debt soon, your debt to income ratio will improve significantly and you may be able to get new credit. At the end of your debt settlement program, we give all our clients a packet on how to rebuild your credit.
There is also an excellent book on rebuilding credit by Steven Snyder called Credit After Bankruptcy. Although it applies to post bankruptcy credit rebuilding, most if not all of the principles described in the book work for rebuilding credit regardless of your situation. We highly recommend the book.
2) They will accept monthly payments and settle your debt over 3-5 years. This will simply not work, and it is not in your best interest for 2 reasons. First, if you wait more than about 18 months, you will almost surely be sued by multiple creditors. With the low payments you are making, you will not have the funds in your account to settle with all of them. The pressure will be too great and you will probably end up filing bankruptcy for protection. All the money you have paid to your debt settlement company will have been wasted! Second, you cannot begin to rebuild your credit until you are done settling all of your debts. If you wait 3-5 years, you are just prolonging your poor credit rating.
The reason this is essentially a scam is because they make all of their money on the front end and they may not care if you end up leaving the program. They get paid a bunch of money and do basically nothing.
3) They ask for a high up front fee, or a fee that is paid primarily in the first year. This is a huge signal and it goes hand in hand with taking low payments over a longer period. If they charge a large up front fee, such as $2000 or more, than you can be fairly sure they will not care if make through the program. We saw one client who paid $2500 down, and then $300 per month for a year. The first year of payments were to go to the settlement firms fee as well! She paid about $6000 and then was overwhelmed by lawsuits. (The firm did settle one debt for her). She ended up filing for bankruptcy and lost her $6000.
Our up front fee is a reasonable fee, based on the number of creditors you have. It usually ranges from $600-$1000.
4)They state that they can settle your debts at 25-40 cents on the dollar. Although settlements like these can happen, they are extremely rare. You should expect settlements of approximately 60-75 cents on the dollar, including settlement fees. Beware if you get promises of unrealistically low settlements. If you expect to settle all your debts at 25 cents on the dollar, you are probably going to be disappointed. We have the experience to get you the lowest settlement value available.
Our goal is to give you accurate information so that you can make a sound financial decision. We will be frank with you about your options, and we will give you excellent customer service. If you are looking for firm with the highest level of experience, and one that can get you out of debt fast, give us a call or fill out our online consultation form now.
Debt Settlement Services - Our Debt Settlement Company will help you settle your debt with ease.
