So you finally realize you have a real debt problem. Somehow, the constant ringing of your telephone with people looking for money, no, not the donations kind, is a dead giveaway. But, where to begin?

First of all, you need to evaluate if Debt Settlement is actually what you need in terms of debt relief. Making that decision is for another article, however, if you have determined that debt settlement is the program that you need, then by all means, keep reading.

5 years ago the FTC stepped in and regulated the settlement industry. Frankly, it was the best thing that could have happened. You could feel the breeze when the unscrupulous operators left the industry. This was a good thing for everyone.

So lets move on to the two types of settlement available. First, there is the simple non attorney settlement model. You establish a monthly payment you can afford, that payment goes into a third party bank account which you have control over. That means you can close it anytime and take the money that has built up. Note: There is really no reason to do this unless you plan on withdrawing from the program, because that money is what will be used to make the actual settlements when the time comes. During this build up time usually the original creditor sells the debt to a debt collector for much less than the present balance. The bank collects on an insurance policy that protects them from the default, And the debt collector who has purchased the debt is looking to just make a profit on the debt that they purchased for less than face value.

The settlement is negotiated by the settlement company, usually debts are negotiated down for about 35% of the original debt. Once the settlement is agreed to the settlement company concludes the deal by completing the paperwork, which releases the account and places a notation on your credit report that says that the account has been settled as agreed, thus lessening the effect of the negative notation on your credit report. The completion of the paperwork is very important. The settlement company charges a fee after each successful settlement, Fees can range anywhere from 12 percent to 20 percent. Debt Settlement, The Attorney Model Plus. Ok, yes this model looks to settle your debts at the same 35%, but I call it debt settlement on steroids! Not needed by everyone, but if you have
an income you do not want to have garnished, strongly consider it. In this model, yew the fees are higher but you will have an Attorney available should you be sued or subpoenaed by a creditor before the debt settles. For example, Discover is known to be very litigious and will serve a subpoena just to let the world know that they do not like settlement.

Additionally, some Attorney model programs have cleverly combined settlement with debt invalidation. This can be super powerful. In a nutshell, debt invalidation turns the tables on the creditors by forcing them to legally produce documents that are legally required for them to collect the debt. This can actually make you money if they have violated your consumer rights or easily force them into a settlement. The really good news is that this type of program with usually higher fees can be even cheaper than the conventional model, depending on how it is structured, so not to worry.

Well that is it. Hopefully enough information to guide you to the proper settlement program.

Yours Truly,

Steven Ciantro
Consumer Advocate
American Debt EndersRated 3rd Nationally
Certified Credit Counselor
TalkShoe Radio Host
Member National Association of Certified Credit Counselors
Debt Expert for Gail Kasper‘s Top 1% Club