Instead of making payments to creditors, payments are made to a Debt Settlement company who deposits your money into a trust bank account. They negotiate your debts with your creditors, and make lump-sum payments when sufficient funds are available in your account to pay a creditor in full. (NOTE: Debt Settlement is often referred to as “Debt Negotiation”)
Many Debt Settlement companies charge a flat fee based on ten percent to fifteen percent of your debt amount. Their fees are collected in the first two to six months of the program and are collected before settlements are completed.
In my opinion, fees of ten to fifteen percent of the debt amount are reasonable for Debt Settlement. But wouldn’t it make sense to pay those fees based on performance and results? After all, what incentive do Debt Settlement companies have to negotiate big savings if you pay them before they even talk to your creditors?
I recommend Debt Settlement companies that do not expect compensation until after they have negotiated settlements that meet your approval. If they don’t save you anything, you don’t pay them anything! The only exception to this, in my opinion, is to pay a small fee upfront to cover the Settlement Company’s expenses until settlements are negotiated.
I also object to the frequent claims we hear as to how Debt Settlement companies can settle debts at a 40% to 60% savings. It has been my experience that less than two out of 10 people who enroll in a traditional Debt Settlement program experience these results.
If you were a creditor, how motivated would you be to discount the money owed to you by 40 to 60%, if you could collect 100%? To collect the full balance, all you would have to do is to sue your debtors, garnish their wages, lien their property and levy their bank accounts. Also, as a collector, you know the majority of people will submit to the stress caused by your harassing phone calls and letters.
Realistically, if you want big settlements I suggest you locate a Debt Settlement Company that is able to implement simple, legal strategies to protect your wages from garnishments, your property from liens, and your bank accounts from levies? Also, find one that can minimize creditor calls and letters, or make collectors pay you for their violations of the collection laws!
Did you know that when your creditors can no longer harass you, and they can no longer motivate you by threatening to sue you, your account is transferred from collections to a department within the bank that works only to negotiate debts?
At this point, you have taken the power away from them. You are now the one in control. They will realize that they will get nothing from you unless they agree to your terms.
NOTE: I am often asked about using attorneys for Debt Settlement. My response is that attorneys are good to provide leverage when you are on the right side of the law, maybe when you are trying to intimidate someone with a lawsuit. But if you are delinquent in paying your debts, your creditors are not intimidated by a potential lawsuit. Therefore, in my opinion, attorneys are no more effective for Debt Settlement than someone who is not an attorney.
Source: http://www.ArticlePros.com/author.php?Doug Johnson
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