Love them or hate them, Debt Settlement Companies have now pushed their way into the mainstream. This has of course caught the attention of the powers that be, and now there is a rush to regulate these programs. But what are these programs and what do they actually do for consumers? Are they the White Knights riding in to rescue the poor downtrodden consumer, as their commercials suggest? Or, are they they evil, modern day carpet baggers that the regulators claim are robbing consumers blind while making their financial situations worse?

For purposes of this Article, when I talk about Debt Settlement Companies, I am going to be specifically talking about 98% of the Debt Settlement Programs out there. Of course there are always exceptions to the rule and there are a few programs that actually do things very differently and focus on the consumers needs and circumstances.

Here is the typical sales pitch that you will hear from a debt settlement salesman hoping to sign you up into their program. It is your Lucky day Mr. Jones, we have a great solution to your financial troubles. Let me outline the benefits of becoming a client of ours.

1. We will negotiate with your creditors and cut your debt in half.

2. We will give you low, easy monthly payments that you can afford.

3. We will contact your creditors and tell them to stop contacting you.

That sounds like an answer to your prayers. Well not so fast. That is the sales pitch. Let me draw upon a few years of experience helping consumers out of tough financial situations to interpret what the salesman actually means.

1. We will automatically siphon money out of your account every month to cover our enormous fee (usually 15% of your debt).

2. If you are still sending us money after our fee is collected, we will start to set it aside to settle your Debts.

3. Your creditors will not get any money until after we get our fee (for doing what I am still not clear).

4. By making these low payments it will take years before you have enough money to settle the debt and you will likely be sued before you get there.

5. When we send these letters to have the creditors stop calling you it will really increase your chances of getting sued.

6. I only need to fool you for a few months because we will get our entire fee upfront.

These Debt Settlement Companies operate on volume and it is all about sales. In fact sometimes up to 80% of your fee is actually going to the person or group that sold you into the program, not to perform this excellent service that you are led to believe you are receiving.

The concept of Debt Settlement can make sense in certain situations but it is imperative that you educate yourself on the financial strategy of Debt Settlement before contacting a Debt Settlement Company for a free Consultation (Sales Pitch). Most of them earn their money when they sell you into the program not when they solve your problem. If that isn’t a huge red flag, I don’t know what is.

By: Damon Day

So, you’re in over your head and you’re considering a route known as debt settlement (debt negotiation), whereby your creditors will agree to accept less than the full balance owed on your accounts. You’ve probably heard or read about many different opinions relating to debt settlement and you’re not sure if this is the way you really want to go. You’re probably also questioning all that you’ve heard and are likely confused and unsure of what’s fact and what’s actually fiction. So, let’s attempt to clarify the process of debt settlement by starting with the “bad.”

Obviously, your creditors will not accept less than what you owe them without a little pain on your part. Unless your accounts are already delinquent, don’t even attempt to work out a settlement agreement with even one of your creditors because it simply won’t happen. Period. Unfortunately, your accounts must be at a certain stage of delinquency prior to negotiating a settlement. If you’d like to attempt to work something out while your accounts are current, or even 30-60 days delinquent, I urge you to do so because at the very least you’ll find out the truth and realize the end result won’t be pretty. So, yes this is one of the ugly components of debt settlement. Your accounts must go delinquent, and subsequently, your credit score will be reduced for a few months.

Perhaps you’ve also heard that you may have a tax liability as a result of debt settlement. True? Maybe. You see, creditors are required by the IRS to report all canceled debt over the amount of $600 on Form 1099. Now, you may or may not be liable for income taxes as a result of debt settlement due to the fact that an “insolvency” rule exists for individuals who are classified as insolvent at the time of their various settlements. In order to be considered insolvent your liabilities must exceed your assets. If you’re not sure where you stand, I recommend that you speak with your tax professional to find out if this is the case for you.

Well, we’ve covered the negative aspects of debt settlement; now let’s take a look at the good that can result from negotiating with your creditors.

Let’s face it – if you’re considering debt settlement, you’re struggling to meet your monthly financial obligations, or your accounts are already seriously delinquent and you’re even contemplating bankruptcy. Debt settlement is an excellent alternative to bankruptcy because it allows you to become free from debt without allowing your personal information to become a matter of public record, as would be the case with a bankruptcy filing.

Additionally, while the reported delinquencies on your various accounts will have a temporary negative impact on your credit score, the effect won’t be nearly as severe as that of a bankruptcy filing. If you’ve managed to keep your accounts current, and your credit score is reduced during the process of debt settlement, your score will continually increase as your accounts reflect zero balances, which will occur with each final settlement payment. In most cases, individuals find that their credit score is back up between 600 and 700 within 6-9 months of completing the process of debt settlement.

Probably the most relevant benefit regarding debt settlement is that you’ll be free from debt. No more sleepless nights and constant worry, trying to figure out how you’ll get through the next month with a positive balance in your checking account.

Hopefully this piece has assisted you in figuring out if debt settlement is right for you. If you’re still not sure, and I have not successfully clarified “The bad, the good and the truth,” you can learn more about debt settlement by clicking here.

By: Marie Megge

Credit card debt has become one of the largest financial problems faced by a majority of people today. Many individuals struggle paying off this debt without realizing that there are debt relief grants available from Federal Financial Aid Programs, that have been set up with the specific purpose of helping the average citizen pay off their unsecured debts. While some people simply do not take advantage of these grants because they are unaware that they exist, many others don’t utilize them because the process seems too confusing for them to complete alone. Fortunately, there are programs and software available to help you get this money.

While debt relief grants are out there, finding them and applying for them is usually the most difficult part. Remember that while you may eventually be able to pay off your credit card debt by working hard and paying the minimum balance for years, or even decades, getting one of these grants will offer you immediate relief. One of the most positive aspects associated with this type of money is that unlike a traditional loan, you usually are not required to offer some sort of collateral, and will also avoid large amounts of interest.

The process of receiving debt relief grant money will require that you first apply. The individual or government group that handles this kind of relief program will want to know how you qualify, along with exactly how much money you will need. One of the main considerations will be your ability to repay the money that is currently owed by you to all of your creditors. The easier it is for you to prove that repaying this debt in a reasonable time frame without large amounts of interest is impossible, the more likely it is you will be approved for a grant.

Getting the money that you need to finally repay your debts can seem like a difficult process, but doesn’t have to be. Instead of refinancing your current debts or taking out another loan with a large interest rate, consider applying for debt relief grant money from one of the many Federal Financial Aid Programs that are available. Remember that there are many types of software and organizations available that can help you apply and simplify the entire process for you. The benefits of finally paying off your credit card debt once and for all should be incentive enough for you to start applying for these grants today.

By: H. Milla

A debt collection forum is beneficial if you are interested in finding out information pertaining to debt collection. Very few like to think about collections and most would like to say goodbye to it forever.

What topics are covered on a debt collection forum? If your telephone is constantly ringing every day from debt collectors calling, the forum is a place to discuss this occurrence and find out more relevant information. Find out what creditors are calling other people and how others are handling the same situation.

It is a vital place to visit if you are eager to find out what collection agencies are practicing habits which are unfair and even may be illegal. A debt collection forum can also be the place to go if you are looking to find out what collection agencies are willing to settle any debt you owe them for a lesser amount. Other posters provide insight into how they have dealt with collection agencies and post that information on the forum. For example, you may be trying to settle a debt with a collection agency but the agency has not been willing to work with you. You could post a question on the forum asking if anyone else has had any luck with the collection agency in regards to settling a debt?

Even though collection laws vary from state to state, there are general rules and regulations that all debt collectors must abide by. Forums are a valuable place when it comes to finding out rules and regulations.

Looking to stop collection harassment? Browse the forum to see how others have stopped the harassing collection calls, paid off their debt for less or how they removed collection accounts from their credit report.

Inaccuracies on your credit report regarding collections? The forum is a one stop place to go to find out how to go about removing old collections or wrongfully reported collections on your credit report.

Making use of a debt collection forum not only provides you with answers, it will save you time and energy by finding all of the information you need in one place time and time again.

By: Shayne Sherman

A debt management company is where an individual turns when they feel too overwhelmed by their debt. They are looking to debt management because they are hanging on by the skin of their teeth or they have already fallen off the wagon. They can’t make their payments with their current income, so they have to find something other than bankruptcy that can relieve the issue.

When they turn to debt management, they may find that there are a number of services that are offered. The first of those programs is debt consolidation. This involves taking out a loan that consolidates all unsecured debt into one payment. For example, unsecured personal loans and credit cards can be combined. The interest rate can be lower and the payment can be lower than what all of the separate payments were before.

However, you have to be careful because this can have an impact on your credit rating in a number of ways. It is true that the idea behind debt consolidation is to keep your credit rating in tact, but you have to keep some things in mind.

Your credit rating

When it comes to debt consolidation, some people make the mistake of closing their accounts. It is actually not wise to close accounts for the fact that this lowers the amount of available credit that you have to your name. One of the things that contribute to your credit score is how much of your available credit you are using. If you have open accounts with balances of $0, that will have a positive impact. However, if you close your accounts and you have a debt consolidation loan that has no available credit, this can be harmful to your credit score.

Even if you’re not using debt consolidation and you are using another type of debt management, there may be a negative impact on your credit score. For example, you may not be able to take out a debt consolidation loan, so you need a debt management company to negotiate lower interest rates and a lower payment with your creditors. They may also be able to lower the amount of the debt. When this is done, this can affect your credit score negatively.

How does it help?

However, the repercussions that come with debt management are much less than that of bankruptcy. The consequences of debt management may last a period of three years, but bankruptcy can last ten years or more. So this is something that you should weigh when looking for a way to get out of your financial situation.

As for the benefits that you will experience in the present time, you will find that you will have more money in your pocket. Better yet, you can take that money and deposit it within a savings account. That way when you get back on your feet after your debt management program, you are able to have money in the bank that can help you out of a tough situation later on.

Nevertheless, you will have to work on building your credit back up after a debt management program. This means you’ll have to use your credit and make on-time payments. This is one reason why you don’t want to close accounts. You can take an existing account, charge a little on it, and then pay it off before your due date each month. This will allow the creditor to report positive marks on your credit report. This will also raise your score. Most of all, having to go through a debt management program can help you learn a very valuable lesson. After that, you shouldn’t find yourself having credit problems again.

By: Amy Nutt

There are a number of non-profit debt consolidation companies available to help counsel you about your finances. One mistake consumers often make about non-profits is that the services are free. Non-profit companies can charge you for their assistance. They do provide help with debt consolidation by negotiating with your creditors. These negotiations lead to a revised payment plan based on your income and financial needs in order to help eliminate credit cards debts reasonably.

What To Expect

Non-profit debt consolidation companies provide financial assistance by scheduling a free debt counseling appointment to discuss your financial status. They will also work with you to prepare an income and expense sheet to help you budget more efficiently. The debt counselor will then figure out what amount of money you can reasonably pay each month based on your financial figures. They will take that amount back to the creditors to negotiate a revised payment plan. Often the interest rates will also be reduced and fees may be waived if the creditor agrees.

Non-Profit Benefits

Non-profit debt consolidation companies have a mission to help you lower your monthly debt payments to make it more feasible to eliminate debts. They may be instrumental in reducing interest rates and removing fees for late payments. Non-profits also aim to ensure that each consumer receives a financial education and creates a budgeting plan to keep them out of future debt problems.

Non-profit agencies may also be set apart from for-profit companies because of there allowance to accept one monthly payment for several creditors. The non-profit agency then will divide up and distribute the money amongst creditors based on previous negotiations. When accounts have begun to fall into collections, debt consolidation counselors will also handle collection calls and all communication with creditors on your behalf.

Why Are They Non-Profit?

Non-profit debt consolidation companies are considered non-profit because they operate from consumer donations, creditors, and other business entities. Creditors typically also offer up a percentage of monthly payments on each debtor’s account that goes back into the non-profit’s funding. Consumers can check company websites and look for the status of the agency. Look for terminology such as ‘IRS 501(c) (3) non profit charitable organization status which is granted by the IRS for tax exemption purposes. Non-profit organizations will not always be totally free but those that impose a service charge will generally be lower than other debt counseling agencies.

Buyer Beware

There are still potential for non-profits to scam unsuspecting consumers. It is essential that you read all information before committing to any debt consolidation program, non-profit or otherwise. It is always best to ask friends and family for referrals and check company reviews with the Better Business Bureau. Debt consolidation companies can really be an asset to your financial situation but can also be a detriment if you are scammed out of your money.

By: Seamus McKenzie