The number one problem is when a company attempts to 'sugar coat' the process of debt settlement
Chicago, IL (PRWEB) August 28, 2009
With on going multistate investigations being conducted by the Attorney General Offices on Debt Settlement Firms, what should a consumer do prior to enrolling into a debt settlement program?
Eric Avenaim, Compliance Director for Epic Debt Relief, a Chicago, IL based debt settlement company, says "when choosing a Debt Settlement Program, it is imperative for the consumer to have a strong understanding of all aspects of the program. Understanding the process is necessary for choosing an honest and reputable company that can offer you an effective solution for settling your debt."
Consumers enrolling in a debt settlement program should have two specific goals in mind. The first is to establish a realistic and affordable monthly budget that can be used to settle unsecured debt. The second goal should be to settle the debt in as little time as possible.
Debt settlement may not be for everyone. There are several independent decisions a consumer needs to decide as there are negative implications that must be understood prior to enrolling or even being eligible for a debt settlement program.
In order to settle on an unsecured consumer debt account, the first decision must be the realization that payments are no longer affordable. This is not a decision a debt settlement company can make. It's an independent decision. The decision must be based on a true financial hardship that has made the current debt obligations no longer affordable and if the payments are affordable one should seek an alternative service. Creditors will never settle on an account when their clients are current with their payments. Creditors are in the business of lending money with the sole purpose of accruing interest, for as long of a period as possible. If they feel a debtor has the ability to maintain their monthly minimum's, they have no need to settle their debt. It's called the "credit treadmill", and its a vicious cycle of minimum payments that often lasts twenty to thirty years, potentially costing the consumer tens of thousands of dollars in interest. This is exactly how these financial institutions make billions.
The second decision a consumer has to make is accepting the harassing phone calls and notices from creditors, collection companies and possibly law firms that have been retained by the creditor. There is also the possibility of legal action being taken which can result in a judgment and/or wage garnishment. So one must understand that during the debt settlement process, once payments stop, the debt is usually sold to a third party collection company for pennies on the dollar. During this process, the consumers credit scores are adversely impacted due to the non-payment, but is 100% necessary in achieving a true settlement. Remember, the decision to stop paying is made because it not financially feasible, not because one may feel they can reach a settlement with their creditors while having the financial means to make their usual payments as they are obligated to.
From the day of enrollment, the goal is to save as much money as possible with an affordable monthly program payment which is protected in a secure personal SBA trust account. As funds accumulate, a debt settlement company, like Epic Debt Relief, will negotiate with the creditors to reach an agreed settlement with a one-time payment to the creditor, closing out that particular account. This process is repeated with each creditor one at a time with the goal of settling all the accounts enrolled into the program.
It's crucial to be aware of certain red flags when choosing a debt settlement company. The majority of debt settlement companies are legitimate, but it only takes a few bad apples to spoil the bunch. The problems such companies have, is that they do not fully disclose to the potential client how debt settlement works. So how do you tell the good from the bad or a scam from a bona fide business?
"The number one problem is when a company attempts to 'sugar coat' the process of debt settlement," Eric stated. "It usually transpires when a client is explained all the benefits of the program without being informing of all the negative implications. Obviously, when you stop paying, your creditors will be calling to collect on the debt. This is only natural and the legal right of the creditor, since they did lend you the money. There really is no true rhyme or reason as to how many calls one will receive. Some clients receive quite a few collection calls, while others rarely receive any at all. There are measures that can be taken to help stop the calls for a period of a month at a time, but no company can guarantee that all calls will stop. So if a company claims that they can prevent all calling activity, be weary of whom you are working with," Eric said.
Another red flag is when companies are willing to enroll a client that is not eligible. Eric Avenaim, says, "One must have a true financial hardship to qualify. This is not a business of taking advantage of creditors. They offered you, the consumer, money with set terms that you agreed to. Just because the economy is in a recession does not allow a consumer to jump on the "debt settlement band wagon" and take advantage of them when they truly can afford it. Companies that operate this way, in my opinion, are illegitimate and their sole mission is to place as many people into the program so they can profit. Ethics must be a mandatory function of any business. We at Epic Debt Relief will analyze your entire financial situation, review all of your eligible unsecured credit card debts and require you to meet all our guidelines before we enroll you. We make sure your enrollment is in compliance with TASC (The Association of Settlement Companies) and our own internal policy. Many companies simply skip the compliance step and enroll consumers without any understanding of their financial situation."
In order to maximize the benefits of a debt settlement program one should opt for a program that is shorter in length but one you can still afford. A lot of companies will place people into lengthy payment programs that have statistically proven to fail due to cancellation. It is ideal to have this whole debt settlement process completed within three years or less. There are special circumstances in which a client can opt for a four year debt settlement program however the situation must be fully reviewed first to make sure the client is still going to receive the benefits they are expecting. Many debt settlement companies will enroll their clients into a 5 year program for the sole purpose of reducing the monthly payment amount. Most people want a low payment, but the reality is that they are more susceptible to legal action by creditors and statistics show they are more likely to cancel the program.
The BBB (Better Business Bureau), depending on the state, is not always the best option when you investigate a debt settlement company. As of recent, the BBB has rated debt settlement and credit repair companies as an automatic F. Ironically, it is not practiced the same way in each state. These BBB charters operate separately from one another and for some reason do not communicate with each other through a national database. The BBB is however a great resource to find out if a company has a proven track record with little to no complaints. Any complaints they do have should have been resolved.
With the help of a debt settlement company, consumers can quickly attain financial solvency. Epic Debt Relief, LLC is a recognized leader in the debt settlement industry and recently redesigned their website offering a wealth of information to help answer the many questions a consumer may have about debt settlement. They have been in the financial services industry for over 15 years and have helped thousands of consumers solve their financial problems. To learn more, please visit nhm1.com or call 1-877-971-3232.