What Credit Card Debt Settlement Company Should I Hire?

Debt settlement is when a creditor agrees to settle a debt for less than the full remaining balance. For example, say you owe $15,000 to your credit card company. If they agree to take $7,500 as payment in full, that's debt settlement. A key point about debt settlement is that it's voluntary: the creditor does not have to offer it. When they do, it's because it's in their interest--the debtor or his/her representative makes a compelling case that there's only so much the debtor can pay, and that if the creditor holds out for more, the debtor will file for bankruptcy or default. The creditor may agree to take what it can get (especially if it's paid up front) rather than fight for money it will never see.

If It Sounds Too Good To Be True, It Is

Since debt settlement is voluntary, be very wary of anyone who promises or guarantees it. Since no one can make this promise, someone who does so is either lying or doesn't know what they're doing.

There's No Right to Violate Legal Obligations

A common strategy is for the debt settlement company to ask you to pay them, not your creditors. The settlement company accumulates and holds on to your money until there is enough to make a credible offer to settle the debt. (Remember: creditors want to see money up front to settle a debt.) However, there is no legal right to avoid payments; if the debt settlement company does this, YOU will be in default, and could be faced with collections, lawsuits, and damage to your credit rating.

**Do the Math--How Much Are You Really Saving?**

How much is the debt settlement company charging "all in"--that is, taking into account all charges and fees, including those you'd pay on successful settlement. Make sure that based on what you realistically might save off the debt, it's still worth it. If even by the debt settlement company's estimates of what you can save--which will be optimistic--you're losing money, run, don't walk, for the exit.

Recommendations Are the Best Way to Find a Good Debt Settlement Company

Has anyone you know and whose judgment you trust used a debt settlement company? If so, what were their experiences? Recommendations from personally trusted sources--including attorneys--are the best research tool.

Better Business Bureau and Internet Searches

Don't forget to contact the Better Business Bureau (you can do so online)--you want to find out whether there have been complaints made against the company. Also, do an Internet search on the company--you'd be surprised at how much you can find out.

How an Attorney Can Help

A lawyer is, as mentioned, a good source of referrals to reputable companies. In addition, a lawyer can advise you as to other options that may make sense for you, such as bankruptcy.

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