How to Choose the Right Debt Settlement Program

How to Choose the Right Debt Settlement Program

Enrolling in a debt settlement program means that your creditor has agreed to accept less than the amount you owe. Also, it means that debt collectors will not be coming after you for the money, and you won’t be sued over the debt. You will be paying less than the amount you owe to your debt settlement company, which will take over the debt. The debt settlement process sounds like a pretty good deal, but it can also be risky if you don’t do it the right way and with the right debt settlement company. If you don’t take the proper precautions, it can destroy your credit, be costly, or take too long to accomplish (typically 2-4 years).

However, it’s 2020, and the whole world is experiencing economic problems. Many people lost their jobs, others have had their pays cut, and research shows that more than half of US citizens have enough money to survive the next 5-6 weeks. If you’re looking for other ways to pay off your debt, but you’ve used all the aces up your sleeve, then perhaps it’s time to look for a good debt settlement company. According to the Federal Reserve, Americans have almost $14 trillion in consumer debt. Those who don’t address it on time and in the proper fashion may fall into a hole that they may never be able to dig themselves out of.

Let’s take a look at the most important things to consider when it’s time to choose the best debt settlement program.

Debt Settlement: How It Works

When you have several skipped payments, are on the verge of default, or have failed to meet the minimum monthly payment, you find yourself in default, and that’s when credit card companies and debt collectors start hounding you. This is when a good debt settlement plan comes into play. A collector or creditor isn’t going to accept less than the amount you owe if there is a solid reason to believe you could pay the full amount. In that case, your income won’t be enough to keep up with your debt payments, you will get more and more behind with your payments as late fees add up, and your credit score will be negatively affected.

To reduce what you owe (mostly on unsecured debt, like credit cards), a debt settlement company will step in to negotiate. Debt settlement is not an option for some types of debt, such as a car that can be repossessed or a house that can be foreclosed. Typically, these companies don’t settle federal student loans, so if you’re struggling with those loans, you should consider an income-based repayment plan.

Debt settlement works only if you stopped making payments or are on the verge of doing so, and it seems that you won’t pay at all. Instead, open a savings account and put monthly payments there. When the debt settlement company determines that you have enough for a settlement, whether on a payment plan or lump-sum offer, it will negotiate with the creditor to accept a smaller amount.

How to Choose the Right Debt Settlement Company

Before you choose a settlement company, you should check with your local consumer protection agency the BBB to find out if there are any consumer complaints about the company you chose. Furthermore, many highly-rated debt settlement companies will not work with you if you have less than a certain amount of unsecured debt.

When choosing a debt settlement company, there are certain red flags to watch out for. Stay alert if a debt settlement company:

  • Have been in business for less than five years
  • Claims they can settle secured debt such as a mortgage or car loan
  • Doesn’t spend time getting information on your near-term financial goals or your full financial situation.
  • Doesn’t explain the consequences of suspending payment and communication with your creditor.
  • Charges you a fee before they settle your debts.
  • Tells you that there’s a new government program to help you eliminate your credit card debt or that they represent the government is some way

Reputable vs. Disreputable Debt Settlement Companies: How to Tell the Difference

The debt settlement ecosystem is packed with disreputable, black hat companies that will take all your money without doing anything to fix your debt. On the other hand, there are also many white shoe, legitimate debt settlement companies, such as Churchill Credit Solutions, that can provide valuable services. Here is how to be sure that you’ve come across a legitimate debt settlement firm.

  1. End-to-end service. Certain firms that present themselves as debt settlement firms are just sales groups who will then pass off or sell your account to another company to handle your issues. It means that your sensitive financial data is being passed around, and the person you’ve talked to has no interest or control over how your debt is settled. Find a company that will handle your debt settlement program from beginning to end and will include services like negotiating with your creditors.
  2. No upfront fees. In case a firm tries to charge consultation fees, signing fees, administrative fees, or any other fee – they are trying to get around the law to get your money. A debt settlement firm should only charge fees once they settle your debt, as that’s the only legal way to charge fees.
  3. Experienced financial team. You don’t want to choose a company that doesn’t have relationships and experience that lead to the best settlement deals. Unfortunately, many new debt settlement firms appeared after the crash of the sub-prime mortgage industry (led by prior mortgage industry professionals). Look for a company that’s been around long enough to build a good settlement track record.
  4. Good turnaround time. It rarely happens, but some debt settlement cases can take up to 5 years to reach closure. A good settlement firm has a track record of reaching settlements in a timely manner because they’ve established solid relationships with all the major financial institutions. Without these connections, a company may take longer to bring about the settlement offer.

To verify that a debt settlement company is legitimate and has a good reputation, you should ask the Consumer Financial Protection Bureau (CFPB) if there are any complaints against a specific company, and how the complaints were managed. If there are multiple unhandled complaints on record with the CFPB, it means that the company doesn’t take good care of their customers. Next, reach out to your state’s attorney general and ask if any actions have been taken against the company in question. Also, don’t forget to check the Internet for company reviews from reputable third-party sources. These websites will allow you to check testimonials from the company’s past customers and see what their experiences were.

What’s the Best Outcome of a Debt Settlement?

Is debt settlement a smart move to make? Even the best debt settlement programs come with certain risks. First of all, your creditors are not required to agree to settle your debt. In case you stop paying your bills altogether, they may choose to send a collections company after you or sue you, which will add a heavier burden to your financial problems. And even if your debt settlement offer gets accepted, you will have to pay fees to the debt settlement firm and pay taxes on the amount of debt forgiven.

If you are not at risk of bankruptcy and want to lower your credit card burdens while improving your debt to income ratio, you should reach out to Churchill Credit Solutions to find out more about our debt management services.

Conclusion

Debt settlement may be the least expensive way for you to get out of debt. It all depends on how much money you owe, how much time it will take to reach a debt settlement closure, and how stressful this option might be when compared to other alternatives. If you’re struggling with debt, you should talk to a debt settlement expert, or credit counseling agency. That will help you understand all debt solution options available and make an informed decision.

If you think debt settlement could be your best option, feel free to call Churchill Credit Solutions. Our caring, certified debt professionals are ready to answer all your questions. When you call us, we will discuss our program as well as all your debt relief options. If it turns out that debt settlement is your best bet, we will help you customize a program that fits your current financial situation. Call us to request a debt consultation and find out whether we could help you get out of debt faster and for much less than you owe.