Make up your mind to act decidedly and take the consequences. No good is ever done in this world by hesitation.“
– Thomas H. Huxley
I have heard some bad things about debt settlement, also known as debt negotiation. The problem as I see it comes from misinformation and half truths from those that complain about it the most, usually a consumer credit counseling company.
A debt settlement company’s competition.
Truth be told, the CCC does near equivalent damage to a person’s credit file as a bankruptcy, as attested by countless consumers that I as debt settlement clients. It is humorously called “bankruptcy’s brother” in the financial service industry.
Now, let’s get something straight; any form of debt relief does damage to your credit file, including debt settlement. The degree of damage is different based on the type of relief program. The possibility exists that a creditor will take you to court but it is highly unlikely. The cost of money and time is not considered worth it. There are other things a creditor can do to recoup their losses by using tax write off’s and selling the debt to a collection agency for anywhere between 8 and 12 cents on the dollar.
A debt negotiation company will use this knowledge in settling your debt.
In debt settlement there are two different approaches to negotiating consumer debt. This article will focus on debt already in collection. Your first step would be to check the age of the debt. Check the statute of limitations. Collection agencies have a window of time to take any action against you, normally 7 years; however the collector has deceptive tactics that it uses to extend this time. However, any excessive age on a person’s debt is, at times, considered in creditor determination.
Prioritize the debt that you have and determine who should be paid off first. Some factors to consider are who your creditors are, how aggressive they are becoming and the amount of debt owed. However, remember that time is on your side. As the debt nears expiration the settlement offers will get better.
Next, a debt settlement company will want to validate the debt with the creditor to document what the collector claims to be owed. One thing to also look for would be if more than one collection agency purchased your debt. Send the collection agency a debt validation letter. This will ask the collector to show proof that this debt exists and for what. Any of the final billing statements from the original creditor would be helpful to compare the information collected. The collection agency will add interest and fees to pad their profits. Also, the debt settlement consultant may want a recent credit bureau report.
Any communication should be through email or mailed correspondence that will leave a paper trail and all telephone conversations should be recorded, of course with the collector’s permission, which they seldom grant.
The initial offer made by the settlement agent will be for around 20% of the original debt, keeping in mind that the collection agency purchased this debt for pennies on the dollar. The settlement officer will speak with high level manager or owner of the collection agency, developing a rapport with the contact, because of future settlement arrangements.
Maintain accurate and comprehensive records and document any correspondence with the collector. Always get the terms of the settlement in writing before the consumers pays anything out of pocket. This agreement will outline all the specific conditions of the settlement and should state that they will show the debt “paid as agreed” on your credit report within a period not to exceed 90 days.
One of the keys to success of the debt settlement company over a consumer settling the debt on their own is hat a professional settlement agent will never appear eager to settle the debt. They disarm the collector by stripping away the fear factor, leaving the collection agent with little ammunition against the debtor.
One further point a collection agency must consider is that anyone seeking a debt relief option, their next step, could be bankruptcy. Then they’ll get nothing at all.
