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You are here: Home / consumer rights / Debt Settlement Estimates of Savings, Fees, and Time to Complete

Debt Settlement Estimates of Savings, Fees, and Time to Complete

July 28, 2021 by Michael Bovee 2 Comments

Debt Settlement is a very real option for consumers who are trying to avoid bankruptcy. Unfortunately, the decision to try it is too often made from an emotional perspective. This has, is, and will forever be; the wrong perspective to use in your decision making regarding this particular debt solution.

Many people are understandably unsure, scared, and overwhelmed by what to do about credit card debt.

Those promoting debt settlement for high paid commissions have been able to capitalize on the emotional appeal of avoiding bankruptcy, even when the math would clearly show settlement to be an unwise choice in your particular circumstance.

Knowing What to Expect From Debt Settlement.

One of the more dynamic requirements found in the recently announced FTC rules that will govern the for profit debt relief industry, is the requirement for Good Faith Estimates. There are several estimates that will be required, such as:

  • Total fee for service
  • When an offer to creditors will be made
  • How much money a consumer must set aside before an offer will be made
  • How long it may take to achieve represented savings results and thereby complete your settlement program

These estimates, combined with; savings claims having to be backed up by the actual experience of the service provider (more on how HUGE this is in future posts), account balance increases, estimate of the service providers fees and a few other whammy’s – make for fantastic features for consumers evaluating a debt settlement service!

These fact-based estimates of total savings, fees and program lengths must be provided along with key disclosures prior to consent to pay. In other words, before you sign up for a service. Now you get to see the numbers! Your decision to attempt settlement should always be factored on a very clear understanding of:

How it costs and how long it will take.

When all costs are considered, it may not be worth it. If a program would take too long due to your limited resources, you expose yourself to increased risks of creditors using the courts in order to collect.

CRN, for years now, has broken this down in detail during our initial consult with you prior to even suggesting working with us. We do not take a file if we cannot settle one or more accounts within 180 days of membership, nor do we accept a person into a program unless we can see clearly prior to enrollment that you can complete your work with us in 18 months or less (except in rare circumstances).

The required compliance with these new FTC rules will show consumers considering settlement that the program length of 36 months (even longer) hyped by the industry are so problematic, they should avoid debt settlement all together.

Companies and sales people have inappropriately signed up the wrong people in order to make huge commissions.

WARNING:

  • Get any company you are thinking of hiring after 9/27/10 to put estimates in writing prior to hiring them. If they are unwilling to do so, I would suggest finding someone who will.
  • Companies whose front-end sales people lack sufficient negotiation experience (pretty much all sales people) will likely have to use blanket percentages and timing estimates that may not accurately reflect the reality of your situation. This may cause you to conclude settlement is not a good option.
  • Companies whose fees are set too high may cause you to conclude settlement is not a good option. Look for credible companies with low fees.

If you have questions about any of the elements above, you are welcome to post in the comments below for feedback.

Filed Under: consumer rights, debt settlement

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About Michael Bovee

Michael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry, and is a regular contributor to several personal finance websites.

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Comments

  1. Katia says

    September 22, 2014 at 12:51 am

    Michael, National Debt Relief, a debt settlement firm has recommended a debt settlement that covers a period of 48 months and charges 21% of the balance of the debt. They have estimated that they can negotiate agreements with creditors at 50% of the debt amount. The only figure that isn’t an estimate’ is their fee! How does a consumer know if any of their estimates are realistic?

    Reply
    • Michael Bovee says

      September 22, 2014 at 3:06 pm

      It is not difficult to estimate settlement amounts when you have been negotiating with banks, debt collectors, and debt buyers for a good amount of time. 50 percent settlements are used as a broad savings measurement, but federal laws require companies like National Debt Relief to base those estimates, when used to make claims, to be substantiated in their own customer settlement history.

      If you would like to post your list of creditors, and the balances owed today, I can offer you my own estimate of savings.

      Reply

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