How to Properly Choose a Debt Settlement Company
As of 2005 a new bankruptcy reform was enacted, which makes filing for a Chapter 7 bankruptcy much harder for the majority of debtors. Which in turn severely limited the number of options available to debtors to get debt relief. The industry which has seen the biggest spike in business due to the bankruptcy reform is the debt settlement industry.
Debt settlement is a form of debt reduction in which a debtor can look to save a substantial amount on what their debt balances are by reducing the balance itself. Needless to say it is a much more attractive method of debt relief than filing for bankruptcy be it Chapter 7 or 13. So after the change in law was complete a lot more debt settlement companies have been popping up than there were previously. Just as with most industries there are companies that can do a very good job and some that cannot. Usually the ones that cannot are more in it for themselves, than to really help out people in debt. In this article I would like to briefly go over some of the points to consider if you are looking to hire a debt settlement company to help you with your debt situation.
Right off the bat one of the first things to look for is to make sure the company is registered with the BBB and has a decent rating. By signing up with the BBB the company is putting themselves out there. Meaning the potential negative consequences they could have if they accrue to many complaints against the BBB, which looks pretty negative for potential clients to see.
Another very big thing to consider is how the company charges their fees. The vast majority of companies will charge their entire fee up front before the first settlement is ever made. This is much more beneficial to the company rather than the client. While it is understandable that the company should charge a portion of their fee up front before settling because there are expenses for a company to operate effectively, they should never charge the entire fee up front. A client friendly company will charge a portion of their fee up front and then the remaining portion of their fee should be collected after they settle. And the fee should operate in part by contingency, meaning by how well they perform. A contingent fee is a fee which is based upon a percentage of the money that is saved. So the better a company can get for a settlement the more money a client will save and the more money the company will earn, resulting in a win-win situation. This type of fee structure ensures the company will look to get the best possible settlement for a client.
One often overlooked aspect of settlement is the relationship the client will have with their client services. Nobody likes to call a company to get an answer to a question they have only to either have no one pick up the phone, or have to deal with a new person every time they call and have to explain their situation over and over again. In settlement the client should have the contact information to get in touch with the specific negotiator handling their case, someone who knows them and their situation. This is critical for the clients overall peace of mind throughout the settlement process.
Here’s a little tip to figure out whether a company is very client friendly or not. The unfriendly companies will have within their contracts a cancellation charge. Many companies put in writing that after you enroll you will only have 2-3 days to cancel. And that if you cancel after that they will charge you X amount of dollars depending on the company. If you see this in a contract run away, this company is in it only to make money and not help people out.
One more thing that is again often overlooked is whether or not a client can miss a payment. Some companies will not allow this and will kick a client off of the program. Most people who are enrolling into settlement have at some point experienced financial hardship and it is possible it may happen again. Which sometimes can result in a client needing the money they set aside for settlement, for something else. While this is not a recommended habit to get into if you are trying to get out of debt, sometimes it must happen. A company should be understanding if a month or two goes by and you cannot make a payment, after all the reason you hired the company in the first place is to help you through this financial hardship not make it harder upon you, the client.
My goal with this article is to help individuals looking for debt settlement make a more educated decision on the company in which they hire. I hope the points illustrated above will help people find the right choice and become debt free. I will monitor the progress of this article and if anyone has any questions feel free to post it in the comment section of ezinearticles, which is where this article will be hosted. Thank You.
Steve Bis is a senior debt analyst and research assistant with the USCA/Roll Law Firm which has a debt settlement service.
Add comment November 16th, 2007
