Most people have no idea what debt settlement is until they find themselves with a serious debt problem and start their research seeking a helpful solution. So you go to Google and type in something like credit card debt help and you’ll find a long list of companies claiming they will get you out of debt.
There’s one problem…You’ve never heard of any of these companies and have no idea what you should even be considering in deciding which company you should talk to about your problem.
It helps if you understand the inner working of the debt settlement industry so let’s let you in on the details.
- There are 3 types of debt settlement firms
- Law firms who specialize in debt relief
- Sales offices who enroll you then pass your case onto a third party company who actually handles the debt negotiation on your behalf
- Full service debt settlement companies who both enroll you and negotiate the debt for you so everything is done under one roof
- Law firms can charge whatever they want but non-law firm debt settlement companies are regulated and can only make the vast majority of their fees based on their performance. So if they save you money with a successful settlement, they get paid but not until then.
- Debt settlement companies are relatively easy to set up for a low cost so the industry has many companies that seem to come and go as they either succeed as a business or fail
- However, as the industry has faced stiffer FTC government regulations over the past 5 years or there have been fewer fly by night companies than there used to be
- Most companies have sales people often referred to as counselors who are paid on commission
- Many websites you see that claim to rank the top companies are actually owned by the companies ranked number 1 so take them with a grain of salt and do your own research (hint use the BBB.org website)
- Not all companies work in all states. In fact most debt settlement companies only accept clients in 25-40 states as many have strict filing requirements, fee cap regulations, or arduous licensing standards that keep many companies out of that particular state.
- Most debt settlement companies will not take on clients with less than $10,000 in credit card debt. This is not because they can’t settle lesser amount but because it isn’t profitable for them to do so therefore they use that as their cut off amount.
- Debt settlement companies can only settle credit card debt, medical bills, some personal loans, and other unsecured debts. They cannot assist with student loans, auto loans, mortgages, and other secured debts.
- When researching debt settlement companies online be aware that the industry is very competitive and so many like to bash each other in forums with fake reviews. Again, the BBB.org website is often the best place to research the credentials of a company you may be considering.