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.
- 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.