A common question that comes across peoples mind when facing debt troubles often turns to; Is debt settlement risky? This question can be answered with help of another question – Would the government allow debt settlement companies to exist if such programs were too risky? However, there have been some instances where the government has been late to react to such fraudulent schemes that were practiced prior to 2008. Hence, one cannot really blame those suffering from the problem of excessive debt to worry whether this seemingly excellent remedy is too good to be true or not.
The association that looks at this and gathers data for the association, recently indicated that more than one million dollars worth of debt has been settled by settlement companies in the second half of 2014, the last time this date was available. We are not talking about those transactions where customers get cheated by fraudulent companies. Rather, we are talking about genuine companies like ours that offer quality service to those individuals or small businesses who prefer not to file for bankruptcy but instead take the time and effort to work with a debt reduction company to negotiate and settle their debt.
Another reason that proves that not all settlement programs available today are risky is the fact that the Federal Trade Commission along with many of the states attorney generals have censored about 25 companies this year alone. So these entities are fully aware of the companies that may be too risky to work with and have or plan to do something about it. We are excited about this step, as typically the “good” companies all know who the bad apples are; however before we had no way of assisting the government in going after these companies. That has all changed now.
Typically, the most fundamental problem that people face when dealing with debt settlement companies are the fees that some of these companies charge to “help’ people get out of debt. Many companies charging clients a percentage of their entire debt (usually between 12% and 18% of their total debt) before they did anything to help them. So, if you had $25,000 in credit card debt, there is a good chance that you could have paid anywhere from $3,000 to $4,500 in fees BEFORE anything was ever done to help you. I am happy to report that the government put a big Ka-bosh on that practice several years ago. Therefore, if you are or someone you know is ever contemplating getting help from a debt relief company, if they are told they would have to be paid a percentage of their debt, walk away!
The way our business model works, and how most of the debt settlement companies operate today, is that they the fees that are charged to you are formulated as a percentage of the amount of money you save through the negotiation process. For example, a client who owes one of their creditors $5,000. A negotiator is able to get that debt down to say $2,000. In this example, the client saved $3,000. Our company charges our clients 20% of the dollar amount they saved, or in this example $600 ($3,000 x 20%). The client would end up paying a total of $2,600. ($2,000 to the creditor and $600 to the negotiator). The client originally owed $5,000. So, $2,600 divided by $5,000 equals 52%. If I could get a 52% discount, with fees included, is debt settlement risky?
In order to help alleviate any concerns you may have, give us a call. There is a reason why, with over 14 years of experience in the debt reduction industry, helps us help others get out of debt for good!