Debt Settlement:

Instead of making payments to creditors, payments are made to a Debt Settlement company who deposits your money into a trust bank account. They negotiate the balance of your debts with your creditors, and make lump-sum payments when sufficient funds are available in your account. (NOTE: Debt Settlement is often referred to as “Debt Negotiation”)

Most Debt Settlement companies charge a flat fee based on a percentage of your debt amount. Their fees are collected in the beginning months of the program and are collected even if no settlements are completed.

We are opposed to this fee structure for two reasons. First of all, paying all of the fees upfront extends the time it takes for your settlement money to build up, which prolongs settlements, thus increasing the likelihood of lawsuits.

Secondly, what incentive do Debt Settlement companies have to negotiate big savings for you if they are fully compensated prior to settling your debts? Wouldn’t they be more motivated toward highly discounted settlements if they were compensated based on performance and results, in other words, they were compensated based on how much money they save you? The more money they save you, the more they profit. If they don’t save you anything, you don’t pay them anything. The only exceptions, in our opinion, are to pay a small fee upfront, and/or small monthly fees to cover the Settlement Company’s expenses until settlements are completed.

Also, please be advised that some of your creditors will make significant offers (as much as fifty cents on the dollar) prior to any serious negotiations. For this reason, it is advantageous to do business with a Debt Settlement company who is willing to assist you in negotiating settlements prior to their negotiating on your behalf. It has been my experience that five or six out of 10 credit card banks aspire to settle with cardholders to avoid lengthy and costly negotiations with a professional.

Most Debt Settlement companies will tell you the trust bank accounts that hold your settlement funds are in their client’s names. But a “trust account” has a trustee. Guess who is trustee of your account? That’s right, someone from the Debt Settlement Company. Since they are trustee, you are unable to make decisions relative to the funds in the account without their consent. This includes withdrawing funds from the account if you become dissatisfied with the service.

Principles of Debt Settlement companies often oppose my opinion concerning their trust bank accounts. But my discussions with them end abruptly when I ask them about their money back guarantee. There would be no need for a money back guarantee if you had unrestricted access to the money in the trust bank account!

Don’t get caught in this trap! Make sure the bank account holding your settlement funds is in your name only! This restricts other people from having control of your money.

Realistically, if you want large settlements I suggest you locate a Debt Settlement Company that is able to impart simple, legal strategies to protect your wages from garnishments, your property from liens, and your bank accounts from levies? Also, find a Company that is proficient in minimizing creditor calls or making collectors pay you for their violations of the collection laws!

Did you know that when your creditors can no longer harass you, and they can no longer motivate you by threatening to sue you, your account is transferred from collections to a department within the bank that works only to negotiate debts?

At this point, you have taken the power away from them. You are now the one in control. They will realize that they will get nothing from you unless they agree to your terms.

We are often asked about using attorneys for Debt Settlement. My response is that attorneys are good to provide leverage when you are on the right side of the law, maybe when you are trying to intimidate someone with a lawsuit. But if you are delinquent in paying your debts, your creditors are not intimidated by potential lawsuits. Therefore, in our opinion, attorneys are no more effective for Debt Settlement than someone who is not an attorney. And they usually require much larger fees than non-attorneys.