How to Compare Good and Bad Debt Settlement Companies.
I am filming a segment on the differences between good and bad debt settlement agencies. If you have any short and sweet sound bites you would like me to consider please feel free to send along. Christopher
What are some differences between good and bad debt settlement companies?
—Christopher
I received the above question about comparing debt settlement companies in an email from an associate in the debt relief industry today. I felt I should share my reply as an addition to the debt relief question and answer section of our site. Below is my email reply with some additional points that would mostly only relate to CRN.
A good debt settlement company will first use well defined parameters for whether someone is a good fit for settling accounts.
There are other options than debt settlement that are more suited to a persons situation and financial goals. This kind of suitability test can be identified during the initial consultation. A good debt relief company will ask not only what lead to your financial hardship, but will want to know the following:
- Can your monthly cash flow support all of your other monthly bills and overhead were you to have no credit card debt?
- Can you confidently come up with 2 to 2.5 percent of your overall unsecured debt balances on a monthly basis?
- What future credit needs do you have i.e. need to upgrade to more dependable transportation, need to refinance a mortgage etc…
A bad debt settlement company will find out what your minimum payments are now and simply chop that amount roughly by half and say “You qualify for their settlement plan”.
A good debt negotiation company will provide a myriad of required disclosures about engaging in debt settlement and do so in writing through their contract for services and also in a separate one page disclosure page so that the risks associated with settlement are prominent and in plain language. A good settlement company will want to discuss these risks openly and honestly with the consumer.
A bad debt settlement company will rattle off the disclosures as part of a recorded 3rd party verification (3PV) done over the phone. Their written disclosures are set in amongst “legalese” in their contracts. When speaking about risks, a bad settlement company glosses over the disclosures often adding less than truthful spin in order to make them seem less relevant, or less likely to occur.
A good negotiation company does not charge a fee for direct negotiation services they provide until they complete each debt settlement.
A bad debt resolution company will charge advance fees often under the guise of some attorney relationship you are signing up for, but where you are unlikely to be working directly with an actual attorney for the services being offered. A clear tip off of a company like this is when they require a face to face meeting to sign you up.
A good settlement company rep will want you to take the necessary time to think about enrolling in their program and encourage you to continue your research into all of your options.
A bad company wants your commitment to sign up in their debt settlement program right then, on the first call or within 24-48 hours.
A good debt settlement company will provide you a good faith estimate in writing, not just over the phone. The estimate will be based on their experience working with your specific creditors and will include an outline of:
- the amount of money it will take to complete all settlements inclusive of their fee
- The amount of time expected to complete the program
- The earliest you can expect your settlements to be achieved
- What amount of money you will need to have saved prior to engaging in a specific settlement with your creditors
Bad debt negotiation companies do not typically want to provide these estimates in writing.
Some more comparisons that are generally unique to Consumer Recovery Network – even when compared to fair and ethical debt settlement service providers are:
A Good Company Does Not:
- We do not send out Cease Communication letters
- We do not send out Limited Power of Attorney (POA) letters
- We do not change your address with your creditors
- We do nothing that would prevent your creditors from reaching you directly in order to make direct offers to you
- Escrow your funds in any way
A Good Debt Negotiation Service Will:
- Fully educate, train, support and encourage you to get deals on your own following our guidance so that we do not have to calculate our 15% performance fee when we do the negotiations
- Encourage settlement with your original creditors whenever possible
- Limit enrollment to people who can complete a settlement program in 24 months or less
- Discuss creditor sponsored hardship and balance liquidation plans with our members and encourage participation in them when it makes sense strategically
When engaging any debt settlement service provider, weigh ALL of the above. If settling as a means to get relief from debt is a good option for you, accept nothing less than these standards. Working with companies who have these good attributes will increase the likelihood you are a success!
If you have a question or comment about a debt settlement company you have hired, or are considering hiring, post it in the comment section below in order to get some experienced feedback.
About Michael BoveeMichael 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. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
I got a phone call today and was told that I had a judgement against me for about $5500. This was for a default on a credit card in the mid 90’s. I was never served a summons or notified about this by mail. What can you tell me.
It could be a debt collection scam Steve. Read that article and let me know what you think about your experience.
You can also do a search for your name in your local court to see if you were sued all those years ago and did not know about it, as that has been known to happen.
Hello Mike,
I have a judgment from chase for one of my old credit cards. I need to take care of this judgment ASAP..what is your advice. The judgment is from 2011 for $3200.00
What is the reason to take care of this with Chase ASAP? Your debt fits a demographic where they are not actively trying to collect.
is it possible to have a judement against you when you have already paid 300 of the 900 dollars you owe……on a verbal agreement?
tony – What are the details of your situation? Your comment is too limited for me to respond with meaningful feedback.
Yes I am, but I haven’t heard from him in over 3 years and I’ve not been able to find him. How will they handle it seeing as how my aunt has been dead for over 30 years?
I cannot say how they will handle that, but talk to them about documenting the identity theft in a manner that will help you address the collection in the court. This is now time sensitive in that you need to file a response with the court etc. It would be a good idea to talk with an experienced consumer attorney about how you approach this from here.
I recently received a summons for court because I am being sued by an attorney firm which I guess purchased my debt. The account I am being sued for was one that was established by an old boyfriend in my name, without my knowledge until after the fact, but under an incorrect social security number. When he first stopped making payments on the account, I continued to do so until I found out they had the wrong social security number. He found the social security number while going through some old papers I had lying around in the attic. The old papers were concerning my long ago deceased aunt, whom I am named after. What do I do in this situation?
Jennifer – Are you willing to file a police report about identity theft?
The garnishment has stop and judgement has been paid off. Now the judgment has a interest attached to it and I think the company is giving me the run around now toward the interest, I have left a message to contact me so we close this judgement and no response as of yet. How can I end this judgment now? Need to clear this judgement because it has a lien on my house and can affect my opportunity to ref my house. I was wondering is California a state uses a default interest governed by credit card contract? Plus the judgement seems to be a sold credit card contract to lawyer company and they pursued the credit debt.
Clifton – Did you pay the judgment off with a settlement for less than what was owed, or did you make payment arrangements for the full amount paid off over time? Because this page is about debt settlement companies, I should ask if you worked with a debt negotiation company to settle the debt?
Judgment interest on credit card debt in California is capped at 10%. There may be a provision for the interest rate to be set at an otherwise contracted rate in CA, but I have not worked a file that exceeded the cap. Your best resource for something like this would be an attorney in CA with experience defending consumers against creditors and debt collectors. That type of attorney would have seen something like excessive interest being charged.
When the debt is paid, either through settlement or payments, a satisfaction of judgment would need to be filed with the court.
Billions of dollars of credit card debts get sold off to debt buyers. These debt buyers hire attorneys to collect, often through the courts. I am not clear from your comment whether you believe your credit card debt was purchased by the law firm that sued you. That type of this is not common.
How you can end the judgment?
Determine if all of your required payments have been met and get the attorney to file a satisfaction of judgment with the court. If they will not, you can instigate a filing with the court. If you want to be certain that it is handled correctly, consider contacting an attorney to work with you on this and insure your refinancing goes off without a hitch.
After a judgement can interest be charge and does it stop after judgement has been paid through wage garnishment?
There is an interest rate that is set by each state for judgment debts. Most of them are about 10%. There are a couple of states where the default interest rate governed by your credit card contract is allowed to accumulate after a judgment. The interest can continue to add to the debt even when payments are being made through a garnishment.
Are you considering hiring a debt settlement company to assist you with this situation?