Settling debts on your own may not be a big deal if you just have a few debts, e.g. one to three. However, debt settlement becomes a bigger task when you have several debts you need to settle. The task is probably even bigger when the debts are at different stages of delinquency, i.e. some current, some delinquent, some with a collection agency, etc.
If settling your own debts seems like a task that’s bigger than you can handle, hiring a debt settlement company to help you is a good option. The debt settlement firm, amongst other things, will act as a middleman between you and your creditors, help you accumulate the money for your settlements and negotiate and pay the settlements when the time comes. When you choose to work with a settlement company, make sure you get the answers to a few important questions.
How are you being charged?
Debt settlement companies generally charge fees as a percentage of your total debt. Settlement companies generally aren’t allowed to charge you a fee until they’ve actually settled a debt for you.
Is there a money-back guarantee?
You should be able to cancel your contract with the settlement company and get your money back – at least the money that’s been set aside for future settlements. If you cancel after the settlement firm has already provided the expected result, you shouldn’t expect to get a refund for services that have been performed. But you should get back any money that hasn’t been paid out to a creditor.
Where is your money going?
The money you’re paying toward a settlement should go in an FDIC-insured account. Your name should be the only name on the account unless you’re going through a joint settlement program with someone who’s cosigned debts with you. The debt settlement firm’s name shouldn’t be on the account.
How long until the first debt is settled?
Based on your debts and the amount you’re paying toward settlement each month, the settlement firm should be able to tell you roughly how soon you’ll be able to settle your first debt. They may not be able to give you the exact date since settlements also depend on the creditor’s agreement, but an estimate should be possible.
Not only do you want to know when you can expect to see the first result, it helps to have an estimate of when you’ll be finished settling all your debts. Again, this can only be an estimate since creditors’ willingness to settle also plays a factor in settling your accounts.
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