SHOPPING FOR THE BEST DEBT SETTLEMENT COMPANY?
I believe Debt Settlement is a viable option to help you eliminate your debt if you are too far in to do it yourself or work with a credit counseling agency, and you can't or won't file for bankruptcy. However, if you choose the wrong company, you may easily find yourself in worse shape than you were before. It is critically important that you choose the right company. Like any other industry, there are good companies and there are bad companies. Unfortunately, the bad ones can be really good at getting people to believe their claims, and do a lot of harm before they are caught or go out of business.
If you are thinking about working with a debt settlement company to negotiate or settle your debts, there are some essential questions you should ask them before you sign up. (At the end of this post you’ll find out which company I recommend because it meets all the criteria I have described here.)
1. What are your fees?
The majority of fees should be based on performance and results. Many companies charge a flat fee based on a percentage of your debt amount. Their fees are collected in the beginning months of the program and are collected even if no settlements are completed.
If fees are based on a percentage of the debt and not tied to results – Red Flag!
2. Are you being paid a commission?
Salespeople may stretch the truth or leave out vital information if they are paid by commission.
If they say yes – Red Flag!
3. Do you have a money back guarantee if I change my mind?
Don’t accept anything less than a full 30 days.
Anything less – Red Flag!
4. If I have faithfully made my payments for one year and you haven’t settled any of my debt, how much money would I get back if I decided to quit?
Many companies charge excessive fees whether or not any of your accounts are settled.
If fees are based on a percentage of the debt and not tied to results, the company will probably refuse to make any refund of your fees – Red Flag!
5. How long have you been in the debt settlement business and how much debt have you settled?
Many companies don’t settle much debt at all, and young companies have very little experience. If the company cannot provide proof of their experience – Red Flag!
6. Can you stop my creditors from calling me?
It is not possible to stop all creditor calls. If they say they can – Red Flag!
7. Will you be making monthly payments to my creditors?
Settlement companies do not make monthly payments to your creditors. If they claim to do so or if they give you the impression that they do – Red Flag!
8. Can I get sued?
The answer to this question is yes; it is a possibility. If they say anything to the contrary – Red Flag!
9. Will this have a negative effect on my credit report?
The answer to this question is yes. All debt management programs will have a negative impact on your credit report. If they say anything to the contrary – Red Flag!
10. When can I expect my first settlement?
Your first settlement should be made well within the first 12 months of your program. Any longer than 12 months – Red Flag!
11. Can you tell me exactly how long this will take and exactly how much this will cost?
Debt Settlement is not an exact science, and there are too many variables to quote exact time frames and figures. Many companies will tell you anything to get you in the door. Any attempt to provide exact information would be a Red Flag!
12. Are there tax consequences I should be made aware of?
The answer is yes. The debt amount forgiven may be a taxable event. This should be explained. If not – Red Flag!
A savings of over $600 may or may not be taxable depending on your individual and unique situation.
13. Who is holding my money while I’m waiting on a settlement?
Your funds should be held at a third party escrow company in an FDIC insured trust account. If the company tells you to save your own money or to send the funds to them – Red Flag!
14. Are you a member of TASC?
TASC, The Association of Settlement Companies, is the largest trade association serving the debt settlement industry. TASC members voluntarily agree to comply with TASC's strict industry standards. Any company you choose should be a member.
If not – Red Flag!
Now for the company I recommend: For several years I have been recommending the folks at New Era Debt Solutions. They meet or exceed all the criteria on this list. I have met them in person, spent time with their team and in their offices, and feel very comfortable recommending them to you if you think settlement may be the best option for you.
Tuesday, January 15, 2008
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12 comments:
Things I know now. I started out with one company, that sold my account to another. They promised me I wouldn't owe anyone anymore if I made 37 $575 payments. I only have $1,290 a month income, but so far, I've made 9 consistent payments and we get by with food stamps and the food pantry. Last month, the Sheriff served me a summons from Citibank who is suing me for $22K++, I called my debt people & they said to fax the summons so
I did the next day. I only had 30 days to figure out how to respond in proper legal form along with a $188 filing fee I couldn't afford, or lose automatically, so after 2 weeks of not hearing from them, I got nervous and called again. After being put on hold transferred and disconnected several times, someone finally told me they were all busy & would call me back in 24-48 hours. After almost 72 hours, I called again and after getting through, they told me they were all busy & someone would get back to me in 48-72 hours! I said NO- I want to talk to someone now or stop taking my money! They put me through to someone within 5 minutes. This woman didn't seem too interested and told me they couldn't legally advice me. She suggested I write a hardship letter and give it to the court clerk. I explained that I had already been there and was told all answers must be in proper legal form and submitted with the required $188 filing fee. She then suggested I go to the library to find out what legal document I needed. I asked her how I would pay the $188, she said I would just have to find a way. Then she asked if there was anything else she could help with! I said yeah, call citibank's attorney. 3 business days later, after still not hearing back from them, I called and terminated our contract. If I was refunded the money I already paid ($5,175) and save up for 2 more months, I should have enough to settle my other 3 debts that add up to $10K on my own, then I could offer to make payments to Citibank of the same $575 for 3 years which would be a little over $20K...but wait! Here's my contract of which they gleefully reminded me
Retainer Agreement (funny, I tried to copy and paste the agreement, but it all came out as little blank boxes)..anyways, it says, word for word on line 2. Compensation of Law Firm. In consideration of the services to be performed by Law Firm, Law Firm shall receive from Client a non-refundable fee in an amount equal to 13% of the total debt placed with the Law Firm.The remainder of Client funds will go into an Attorney Escrow account and is accessible by Client at any time, to be used for personal use, or to settle a contract dispute with a third party. Your payment schedule shall be $575 per month for a period of approximately 28 months, (remember, I was bought by them from another debt lawyer)and shall be distributed in accordance with the attached "Exhibit A". Payment of the NON-REFUNDABLE fee entitles Client to ongoing negotiations. In addition, there is a $59.00 monthly processing fee included in your payment. This processing fee is also NON-REFUNDABLE. In the event the Law Firm is successful in settling a lawsuit with any third party, Client shall receive 100% of the settlement, exclusive of attorneys' fees. Yep, I signed this when my first debt lawyer sold me out to these people. I read it, but somehow did not comprehend. I just kept hearing them tell me to tighten my belt, make 37 payments total and it would all be over. I just don't see why I must pay 13% of $32K to a company that has done nothing but ignore me and how come they wouldn't give me $188 to file my answer to the lawsuit? I reported this to the BBB, but I am still naive as to the good of any of my efforts.
Dawn,
I am so sorry to hear of the problems you went through! Unfortunately I didn't have comment notification on for the blog and didn't realize you wrote in -- so sorry about that.
There are some creditors that will sue very quickly if they learn you are using an outside firm. In addition, large amounts of debt like yours are riskier.
That's one reason why I always tell consumers to meet with a consumer bankruptcy attorney first, before you decide on debt settlement. That way if you do get sued you'll understand what your options are.
I hope you were able to find a solution to your mess, and thank you for sharing your warning with my readers.
Gerri
Did you know that New Era Debt Solutions has a "F" with the Better Business Bureau?
Also, I unfortunately have $70,000 in credit card debt. I am only a few days late on a few of the cards. I am self employed as a Real Estate Title Abstractor and the recent banking failures have caused a sharp decrease in my business and slow payments from clients. I somehow got in over my head a few years ago after a split with my husband and last year breaking an ankle and out of work and no medical insurance. So unfortunately I have no savings left. I have somehow managed to pay the minimum payments on time up until a couple of weeks ago. Also being that I have a payment due to Citibank today that I can't make today will most likely cause them to raise my interest rate from 15.99 % to some ridiculous rate along with raising the rate on 2 other cards I have with Citibank. Citibank doesn't allow you to be 1 day late. I have had that card for 22 years and have never paid it late, but they have already informed me that they don't care and they won't allow you to pay a week late even if you call them before the payment is due.
I do not want to lose my home. I am current on my purchase money mortgage and equity line of credit. My house payment is less than what my family could rent for. I tried to redo my equity line and pay off some of this debt a few months ago, but was denied.
Is debt settlement for me? I did contact CCCS thru The National Foundation for Credit Counseling and their advise was to contact a bankruptcy attorney.
Please help!
Hi Becky,
I am so sorry to hear what a rough time you've had.
I would really encourage you to talk with a consumer bankruptcy attorney. With your level of debt, I think it's important that you find out what that option may involve. It may be the best thing for you in the long run, especially if you want to save your home. Please visit www.nacba.org to find a consumer bankruptcy attorney in your area.
I am aware of New Era's BBB rating and it is very frustrating to me. Many people think the BBB is a completely objective organization, but it is a membership organization, and unfortunately there are politics that come into play. I still feel very comfortable recommending New Era them because of the due diligence I have done. (Keep in mind that there are companies with no BBB complaints that I wouldn't recommend because they haven't been around long enough to generate a file!)
Finally, I will reiterate that my view debt settlement can be an excellent option for consumers who cannot or will not file for bankruptcy, but you should not make that decision without first consulting an attorney to learn whether you can file.
I know this is an extremely difficult time for you and I really do wish you the best as you move forward.
I would need to be 60 days out on my cards to consult with an attorney.
Are you saying that I should not consult with a company about debt settlement first?
I do not want to file for bankruptcy. In this state you must pay back your debt even if you file for bankruptcy.
What state do you live in Becky? And what do you mean...you would have to be 60 days out?
And no, I don't mean don't consult a debt settlement firm. I just mean don't make a choice without looking at both options objectively.
Hi Gerri-I appreciate you responding to me. I did consult a local bankruptcy attorneys' website and one of the questions they asked was if I was a least 60 days behind with 3 creditors.
I live in Georgia. I would like to get something going as quickly as possible.
Also, one debt settlement company I contacted to get information told me that in Georgia debt settlement has to be attorney-based. I don't know if that is true.
Ahhh...you are in Georgia. Yes the rules are different! I recommend you check out the do-it-yourself option you'll see at www.UltimateDebtNegotiationSolution.com.
(Make sure to mention my name as they offer a discount for my readers.) And if you have any more questions, feel free to ask.
Hi Gerri-Will that link you gave me take me to Consumer Recovery Network?
Hi Gerri-I had made an inquiry with New Era Debt Solutions and just received an email from Consumer Legal Services America. New Era gave them my information since I live in Georgia. The email states they are attorney based. Do you know anything about them?
Thanks!
Hi Becky,
Feel free to call me in my office at 941-227-4496 and I'll be happy to try to answer all your questions. It might be faster than us going back and forth on the blog. :-)
Gerri
Hello Becky,
This is Damon Day with Consumer Recovery Network. I am not sure if you have contacted me for a consultation yet or not.
While it is true that most debt settlement companies can not work with consumers in Georgia, we can because we do things very different than most settlement companies. Also our fee will be substantially less than an attorney debt settlement firm will be. In your case, many thousands of dollars less. If you would like to set up a consultation, please go to our website and first watch the video I created titled "How to Decide if Debt Settlement is the Right Solution for you." You can access that website by going to
www.UltimateDebtNegotiationSolution.com
After the video you can request a consultation with me. I will be happy to review your specific situation and let you know what options you have available.
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