Facts That You Need to Know Prior to Hiring a Debt Settlement Firm


When you find your business is going into debt and almost every business owner does at some point, it seems a great idea to seek assistance. However, when it comes to resolving your debts, you have to very careful about the firms and service providers you are going to ask for help, as working with an unethical organization might end up worsening your situation than what it already is. Speaking of the debt settlement companies, they are pretty much different from the likes of credit counseling firms. Besides, the process of debt settlement is not for the faint-hearted and requires you to be patient enough to keep up with the long-lasting procedure.

When you choose and start working with a debt settlement firm, it will help you throughout the process of negotiating the outstanding debts that you owe currently. This starts with ceasing to make any further payments and the late fees, interest and penalties keep on growing. However, debt settlement turns out to be an ideal tool for bringing back your finances on track and start afresh after settling your business debts. All you need to do is choosing the right debt settlement company and here are some of the pointers that you need to keep in mind prior to hiring one:

Debt Settlement Is Better Than Bankruptcy

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Perhaps this is one of the biggest reasons why most of the business owners seek debt relief options such as debt settlement when they face a debt situation. Also, this is used a pitch by most of the debt settlement companies in the market today. It might sound irresistible to the debt-stricken consumers and the firm can help you in lowering your overall debt money and you can walk out of your debt situation after a series of simple monthly repayments. According to marketwatch.com, a 2014 report cited that an average consumer has amassed over an average of thirty thousand dollars around six debts while enrolling into a debt-settlement scheme. Dissecting the theory of debt settlement, it is a relief technique that mostly serves as a win-win situation for the business owner who wants to settle debts lower than the actual amount and the creditor receives more than compared to the situation if the business owner had filed for a Chapter 7 bankruptcy.

You Need to Be Overly Patient

Among all the debt relief schemes, debt settlement is undoubtedly a high-stakes game of chicken where the procedure generally requires the business owner to stop making any further payment of their bills and let their debt to convert into delinquency before it becomes a default. The debt settlement company will help you in creating an escrow account where you will be putting monthly amounts while making your creditors think that they will end up with getting nothing. Hence, when the debt settlement firm will provide them with something, they will probably accept it. While the money keeps on depositing to the escrow account to ensure that there is enough to make negotiations with the creditors, you will keep getting collection calls. Creditors can often increase interest rates and add late penalties. You will need to have a heart of steel when working with a debt settlement company.

They Cannot Ask for Upfront Fee

As per the Federal Trade Commission’s Telemarketing Sales Rule, there has been an additional new amendment stating that it is now illegal and unethical for debt relief establishments to charge upfront fees. Generally speaking, the debt settlement companies are no more allowed to collect any kind of fees from a customer prior to settling their debts or at least resolved their debts with the creditors. As a business owner who is facing an outstanding debt situation, you might start making payments soon after you start working with a debt settlement company, however, these payments directly go into the escrow account that is typically monitored by a third-party organization. If your prospective debt settlement company resolve your debts one by one, then they can charge you with fees for each debt settled, but they are not obliged to front-load payments.

The Impact on Credit Score Is Far Less than Bankruptcy

It goes without saying that debt settlement firms can negotiate your debts with your creditors; however, you should not think that the procedure of debt settlement will not have any impact on your credit score. As the process encourages you to cease making monthly payments to your creditors, the debt keeps on going delinquent. This leads to a poor show on your credit report, but the overall impact is far less when compared to that of other debt resolving alternatives. For example, if you file for bankruptcy after unable to keep up with your rising business debts, it will stay on your credit report for the coming seven to ten years. It is important to work with a professional debt settlement firm that has positive debt settlement feedback which will guide you throughout the procedure and help you manage your credit score from taking a great fall.

Debt Settlement Works Well with Unsecured Loans

Debt Settlement Works Well with Unsecured Loans

Debt settlement companies are generally well versed with unsecured debts that mostly cover credit card bills, unsecured personal loans, and medical bills. Most of the organization generally does not deal with debt secured by collateral that usually consists of auto loans and mortgages. Apart from that, there is no assurance that your debt settlement company will be able to settle your secured debt completely. This happens due to the creditors who are under no obligation to cooperate with the debt settlement agencies.

You Can Settle Debts on Your Own

It is possible to settle your debts on your own and negotiate with the creditors. A reputable debt settlement firm will inform you of this in the very first meeting; however, you will need their assistance as the settlement proposition needs to be reasonable. All you need to do is simply going to each collector, creditors or lender with your offer and see if you are able to reach an agreement or not.

Concluding Thoughts

Finally, these are some of the hard-wearing truths that circulate around debt settlement, which you need to know before deciding to work with a debt settlement firm. Keep these points in mind and choose the best option that meets your needs the best.