Debt Settlement FAQs

Debt Negotiation Companies

Also a type of debt settlement firm, they offer a consumer a different way to get out of debt. These companies work with consumers who have no cash to make settlement offers with the credit card companies. Debt Negotiation companies set up "trust" for you - though they are not always a licensed bank entity under the Federal Reserve. They collect a monthly fee to maintain the account, with the idea being that you are saving enough money to settle the accounts at a future date. Companies like www.E-FinancialFreedom.com & www.DebtSettlement2010.com work with Debt Negotiation companies to get you the lowest settlement possible.  A portion of the monthly payment towards the "savings account", a part of the payment is taken as a fee for the debt negotiation company. Unlike consumer credit counseling services, they do not pay your creditors each month, they put money into your "trust". Your creditors are not told of your "arrangements" with the debt negotiation company. A legitimate company will use an FDIC insured company for the trust account and give you access to it online 24 hours per day. They should also provide you with access to the negotiation correspondence with the credit companies.

The drop out rate of consumers from debt negotiation companies is high. The debt negotiation companies do not handle calls from the credit card companies, nor the collection agencies. Credit card accounts typically go into collection after they are charged off, typically 180 days after the last payment on the account. The length of the program is often 3-5 years, and many consumers cannot keep up the payments for this period of time. Often, consumers wind up being sued or even more deeply in debt with added interest and fees piling up. This can be avoided by using companies with good standings and practices that protect consumers from these procedures.