A simple Google search on “debt settlement feedback” reveals that people either love or hate their debt settlement company.
Before you enroll in a debt settlement program, you need to find out whether this debt relief program is indeed the right one for your financial situation. Talk to a ClearOne Certified Debt Specialist to learn about your debt relief options and have your questions answered.
Here is a list of nine questions you should ask debt relief companies. Based on how you want to settle your debts, your credit report, the answers you receive, and the explanations you hear, you should be able to make an informed decision.
All debt settlement companies are federally regulated, and there are local consumer protection requirements and other licenses (such as telemarketing licenses) needed in many states. Verify that the company is registered with relevant regulatory bodies and review the terms of service to be sure the company is transparent on how it handles your personal information. Also, look for membership with the Consumer Debt Relief Initiative and reviews and ratings from or the Better Business Bureau to confirm its reputation.
Beyond those common legal requirements, the requirements vary greatly among the states. For instance, some US states (such as Alabama and Alaska) allow debt settlement companies to operate without additional legal restrictions like bonds.
In states like Missouri, debt settlement companies need to file a blanket bond worth $100,000 to receive a license. In other states, like West Virginia, it may be forbidden for debt settlement companies to operate under any circumstances.
If the company cannot adequately answer this question, you should not do business with it. Make sure that you understand the debt settlement statutes of your state.
You need the company to demonstrate its experience. An experienced operator has a reputation that you can verify online. Also, some companies don’t settle much or, indeed, any type of debt. If that is the case with your settlement or debt company, consider that a red flag.
This is a trick question. Debt settlement is an adversarial approach to debt resolution. Your creditors may or may not agree to the offers your debt settlement company makes. They can continue their debt collection efforts or sue you for not making monthly payments.
If your company says it can silence your creditors, can settle all debt effortlessly and you will not get sued, exercise caution. They probably don’t know how to tackle the risks of debt. Though some debt settlement companies offer legal advice and legal insurance programs and others employ lawyers to work with creditors on your behalf, that is not always the case. Be sure to read and understand exactly what legal protections your debt settlement company offers, if any. If you have more questions, double-check any legal matter with a consumer protection agency.
Federal law forbids debt settlement companies to charge you upfront fees. If that is what your company tries to do, drop it. Your debt settlement plan should only charge you after it negotiates a settlement for your account, you authorize the settlement, and payment is made towards the settlement. Make sure you understand the total amount of any fees before proceeding.
Also, your Certified Debt Specialist should be clear about any additional cost of services.
Your Debt Settlement company will have you establish a dedicated savings account to accumulate your funds and eventually make your creditors an offer that will be paid out by funds accumulated in that account.
You need this account to be:
If your debt settlement provider fails to meet these conditions, look for another one immediately.
Although it can offer you no guarantees in this regard, your debt settlement company should give you an estimate. It could take three to six months or more to settle your first account, depending on your contributions and other factors. Beware of debt settlement companies that promise very fast results, as those companies may not be painting an accurate picture of the debt settlement process.
Because most creditors will not negotiate favorable settlements with accounts that are current, debt settlement does inflict a hit on your credit score that may last up to seven years. Though that is the case, getting out of debt can ultimately improve your credit score over time as you rebuild good credit once you are debt-free.
Your debt relief program saves you money by getting creditors to help settle your debts, often by having a portion of the debt forgiven. From the perspective of the IRS, such savings represent income and are, therefore, subject to taxation.
Consider it a red flag if your debt settlement company tells you otherwise without offering specifics regarding legal ways of having your taxes waived.
This is another trick question. Your debt settlement professional can’t offer such information. While it is impossible for your debt settlement provider to tell you exactly how much you will save, depending on the debt settlement plan you choose it can give you an educated estimate.
Asking the right questions is the key to finding a provider that will work for your specific needs. Keep in mind that the debt settlement company not only negotiates your debt results but will tell you everything you need to know about potential outcomes and risks as well.
Speak with a ClearOne Advantage Certified Debt Specialist at 866-481-1597 to discuss your debt relief options and get a free savings estimate.