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Being deeply in debt can feel as if you were being water-boarded. You know it won’t kill you, but it can make you feel as if you were about to drown. You may have heard about the options available for dealing with your debts such as a debt consolidation loan or consumer credit counseling. And you may have heard the term "debt settlement" but are not sure what this really involves.
How a debt settlement program works
If you choose to enroll in a debt settlement program, you will send monthly payments to the debt settlement company. These will be placed in a trust account for a specific number of months. Your debt will be consolidated in that you will no longer be required to make payments to your creditors. Once enough money has accrued in your trust account, the settlement company will begin negotiating with your creditors.
When you should go for debt settlement
You should think strongly about debt settlement if you have a large number of unsecured outstanding balances. You should also be behind on your payments for 5 to 6 months and not in a position to repay your bills. You should be able to repay your debts if their balances are reduced. And finally, you should consider debt settlement as an alternative to filing for bankruptcy.
Is debt settlement legal?
Debt settlement is a perfectly legal way for you to pay your debts. In fact, it is one of the most popular legal solutions for paying off debts. There are several ethical debt settlement companies who together have helped literally thousands of American families deal with their debts and become debt free.
DIY debt settlement
Should you hire a debt settlement company or try to do it yourself? While this a question that only you can answer, there are some things to think about before making a decision. First, do you have good negotiating skills so you could get your credit card companies to settle for less than you owe? Second, are you comfortable signing a bunch of legal documents? Third, do you have enough money to pay for the settlements you would negotiate? If you answered yes to all these questions, you could certainly tackle debt settlement on a DIY basis. On the other hand, if you answered no to all or at least two of these questions, your best option might be to hire a debt settlement company.
How to tell a scam debt settlement company
Unfortunately, there are some scam artists in the debt settlement business. You can usually identify them by the fact that they will call you too many times and will try too hard to convince you to hire their services. A scam company may try to not give you its name and address and will ask for payment up front, which is illegal. Another red flag is if the company claims it can get you out of debt no matter how much money you owe.
Identifying a trustworthy debt settlement company
A trustworthy and ethical debt settlement company will require no payments up front. It will collect its fees only when it has successfully settled your debts. It will provide you with a written agreement so that you will know exactly what in when you will be charged. An ethical debt settlement company will belong to organizations such as the US Chamber of Commerce and the Better Business Bureau (BBB). It should have a rating of at least A- from the BBB and should belong to the American Fair Credit Council and the International Association of Professional Debt Arbitrators. Finally and very important