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

Debt settlement is a system where a settlement company “settles” or negotiates reduced payments to debtors on your behalf. People who are considering this or are already participating in it are usually facing serious credit problems, maybe even bankruptcy.

There can be negative consequences on your credit report for a while when you enter into such a program. There also will be positive effects from it a little later on.

Before most debt settlement companies will even begin to work with you, your debt should be in arrears by a few months. This means the accounts are marked past due etc. Naturally, this puts a black mark on your credit report, because of your payment history. This mark is not going to stay there for years and years though like a black mark from a bankruptcy will though. This is only going to be there a short while.

As you continue to work with the debt settlement company your credit, report will improve though. Now that you are working with the debt settlement company and they are working to pay off your debts one at a time at a lowered rate of interest, lowered balance, and no penalty charges your credit report will get better. Your score will start to go up. Do not close the accounts when they are paid off though as this will negatively impact your score. It lowers your debt to income ratio, which is not good. By keeping them open, you have more available credit (that you are using part of until all the cards are paid off). This looks better to credit companies. It will also raise your credit score because you have more available credit.

It takes the average client of one of these companies between two and five years to pay off all their debts. Your credit report will not suffer for that whole period. The period where it does suffer that small amount is worth it to soon be debt free.

By: Hector Milla

Once you have made the decision that you need help managing your debt, the question that arises is where to get this needed help. How do you get the help you need without being ripped off? The fact of the matter is that there are a lot of agencies out there who can charge outrageous fees just for managing your debts – and then you will find yourself having bigger problems than before you let them handle your debt!

Keeping this in mind you have to be very careful about which company to cooperate with in order to get rid of your debt. You have to research different companies in order to make the right choice. It pays to investigate the company history, the service background and most importantly the testimonials of former clients. These first hand experiences will tell you whether or not the company delivers the results they have promised, and if there are any catches to the services they offer.

Once you have reduced the number of companies based on your initial research, you can make an appointment with every company and see what they have to offer. If there still seem to be too many candidates, choose a sample (perhaps 5, say) who seem to be worth further investigation.

Before you attend the meeting, write down for yourself what you expect from the company and what you want to ask them. (This will help you to keep the important things in mind without being sidetracked by smooth talk.) You should get something in writing from them setting out the different kinds of programs they have to offer, and whether or not they charge you for it – and if so, how much for each program.

Once you have obtained all this information you can sit down and see which company best meets your needs. While you may not be able to compare apples with apples (ie not all companies will necessarily offer identical services), simply go with the one that has the best fit for your situation. It may be a program where you go completely back to basics, and everything is paid off within a short amount of time.

Or perhaps a program where you still have some extra’s and the pay off period takes a little longer. Different organizations may have their own “style” of debt management, and this is something that you can educate yourself about when meeting with their representative.

Another factor to take into account is whether or not the company takes it all out of your hands, negotiates with the creditors and executes the plan for you, or do they just balance it out and let you do the rest yourself, still leaving you a bit in the dark. You may rather pay a little fee for a company that really sticks its neck out for you and follows through on everything.

This may be an especially appealing option if you have experienced personal aggravation from creditors in relation to the debts. You may even find a company that can provide you with education around managing your money into the future, past execution of the plan, to ensure that you don’t find yourself in a similar situation again.

Debt management companies can be helpful in getting out from under the burden of debt. However, if you do decide to go down that path, it is wise to do your homework and find the debt reduction plan that is going to work for you. Trusted friends or family can be helpful in assisting you to choose from a range of companies and options for reducing your debt.

By: Amy Myer

With the recession that hit the nation in the past few months, the ability to clear debts had hit an all time low. The economy is picking up but there are situations where recovery is taking place slower than hoped. This is where Debt Relief Government Grants come in handy. Not many people know what these are and for those that do, believe that it is some kind of myth.

So what are debt relief government grants? These are the billions of dollars set aside for the purpose of debt relief for the common citizen. The main problem is that not many people that need it are aware of it but it is easy to get one. These debt relief government grants are offered to those that do not have the ability to settle their debts for one reason or the other.

One would most definitely wish to know how they can benefit from the government grants. One can hand in a proposal for a business or income-making ideas that will get the government’s interest. The idea is to give money to the public to begin income-generating projects that will enable one to settle their bills and debts. It is also given to those that need to settle such bills as medical and hospital bills. It also helps in avoiding home foreclosures or even the need to declare bankruptcy. It is important to write a proposal that will benefit you. Be sure to train or research on the best kinds of proposals to write and in that way be assured of debt relief approval

The advantage with government grants for debt management is that it is NOT a loan. This means that collateral does not have to be placed against the amount taken, one does not have to pay it back and most importantly be able to prove without any reasonable doubt that they cannot settle their outstanding bills and debts.

Debt relief companies come in many shapes and forms. The way to know the best is that they are mostly non-governmental organizations. They also should do a thorough background check of your financial past and should have a successful history of debt settlement and relief. These companies charge for their services so it is important to choose a credible one or else one can lose a lot more than the initial debt situation. There are also different tools to make the application for a grant a easy task.

By: H. Milla

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

Debt forgiveness can either be partial or total. Forgiving a debt can also be termed as debt relief. Debt relief has at times been a source of controversy with some people opposed to it. Some people have termed it as a blank cheque to governments. The main concern has always been that the savings will never reach the poor in countries where governments are corrupt. The opponents also argue that countries that have been given the relief normally take advantage and go ahead to contract other debts with the hope that the same debts will be forgiven.

Corrupt officials in various governments use debt forgiveness to amass wealth for themselves as well invest in rich countries denying the common man, the trickle-down effect. According to the proponents, the money would rather be spent on aid projects in the various countries. Others also detest the conditions that come with the relief.

Heavily Indebted Poor Countries (HIPC) program was set up to provide relief to the poorest countries while at the same time trying to ensure that the money is spent on poverty reduction in these very countries.

HIPC initiative provides debt relief to poor countries under conditions similar to those attached to IMF and World Bank loans. Some of the conditions include structural adjustments reforms. The reforms can involve the privatization of public utilities for example water and electricity. For a country to qualify for an irrevocable HIPC debt forgiveness, it must maintain economic stability as well as satisfactorily implement a Poverty Reduction Strategy.

By: Mercy Maranga