Debt Settlement 101

Debt negotiation, also called debt reduction or debt settlement, has become very popular over the past 5 years. Since the change in the bankruptcy law in 2005, debt negotiation has become the best alternative for people who were contemplating bankruptcy. When filing Chapter 7 became more difficult, another new market sprang up in debt negotiation services. If you are considering debt consolidation or reduction, read on.

Any good debt settlement company will be listed in the BBB, and have a good track record. They may have complaints, but they also should have been addressed. Secondly, a company should charge a portion of their fee based on their actual performance. And by performance, I mean how successful they are in reducing your overall debt level. The best settlements are 50% or more as a discount off your total amount owed prior to getting them involved. This means, your overall debt load will be less, and your interest will be included in any remaining amount owed.

Some companies are not willing to take part of their compensation as a commission. They want a flat percentage fee, and all of it up front. Stay away from these companies, as they have no incentive to drive a good settlement for you once you pay. When the company negotiator works on the actual performance and results, they will earn more for themselves by getting you a better deal and thereby saving you more. This is certainly better for you and makes the relationship with your debt settlement company fair and reasonable.

Beyond the BBB, you should check with your state Attorney General’s office for any ongoing investigations. If they are being investigated in any fashion, then stay far away, because it means there have been several complaints to the AG from unhappy customers.

And of course a good debt negotiation service should have a very capable and friendly client services department that is capable of handling the day to day operations of the business. But don’t confuse happy and friendly with competence. They all are great sales folks, even thou they don’t call themselves salespeople. Dig into the details of your agreement and don’t believe anything they say without seeing it in writing. You must take all reasonable steps to avoid any surprises down the road.

One company I am aware of that has had good ratings in the past is US Consumer Advocate. They were rated A+ at BBB, the last time I checked 2 months ago. But please do the same level of checking on them as you would on anyone. Things can change today in rocket speed, so do your due diligence.

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