4 Debt Settlement Tricks and Traps You Must Know

This is a guest post written by Jason Holmes of Debt Consolidation Care.

Consumer groups have issued a new set of warnings regarding debt settlement companies. Debt settlement companies help individuals solve their debt problems for a fee. However, it is imperative to remember that not all debt settlement companies are reliable. There are some settlement companies that might be able to reduce your debt load. But using a settlement firm/company can also be a trap, and you may find yourself deeper in debt than when you started.

Debt settlement tricks and traps

Here are some of the debt settlement tricks and traps you must know:

1. No immediate relief: You’ll be required to deposit a specific amount of cash in the trust account opened by the settlement company. The representatives of the settlement company won’t even negotiate with your creditors until you have collected 50% of the debt amount. When you are trying your best to save that amount of money, the debt settlement company is deducting the fee from the trust account.

It will be more difficult for you to save that amount of money. If you have single debt, then the whole settlement process can take one year. However, if you want to settle multiple debts, then the entire process can take several years. Hence, you should ask the representatives of the settlement company about the amount of time it will take to save 50% of the debt amount after deduction of fees.

2. Extraordinarily high fees: Some of the settlement companies charge excessively high fees for their services. They might even ask you to pay an upfront fee. Normally, they should charge a fee on the forgiven debt amount. Therefore, before hiring a settlement company, you should check the fee structure. If the settlement company asks you to pay an upfront fee, then refuse it.

3. Debt collection: When you enroll in the debt settlement program, it doesn’t imply that the debt collectors won’t haunt you. When you enroll in the debt settlement program, you are asked to stop all kinds of communication with the creditors. The representatives of the debt settlement firms often don’t speak to the creditors for months and creditors are not bound to contact them. The creditors get paranoid and hire debt collectors. The creditors can even sue the debtors.

Also, the individual’s debt amount increases because of interest and penalties. This will ruin their credit score further. Therefore, you should ask the representatives whether they are keeping in touch with the creditors. Also, you can ask them whether you’ll get any kind of legal help in case you’re sued.

4. Scams: A lot of debt settlement scams are happening nowadays. Many fraud companies have emerged in the market. They will take the money from you and then vanish. This will make your debt situation worse. Therefore, before hiring a settlement company, you should check whether it is recognized by Better Business Bureau.

Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like ‘Credit Score The Quintessential Therapy for a Happy Pocket’, Take Creditors and Collection Agencies to Small Claims Court’ and, My Story- From Depression To a Smile’.

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