How do debt settlement companies work?
The debt settlement companies offer the debtors with a debt settlement program where they have to enroll themselves with a debt settlement company. The debt consultant will assess his finances and take a look at his current financial state. After he gets a clear idea of his personal finances, he will negotiate with his creditors and make sure that the principal balance on your debt accounts are lowered.
As he starts negotiating with your creditors and they agree to a settlement, you will have to start making single monthly payments to the debt settlement companies. These payments will be disbursed among the creditors in due course of time to make you debt free.
Are you safe with the debt settlement companies?
Recently, the BBB has been receiving a number of complaints against the US debt settlement companies and therefore the debtors are quite hesitant about seeking help of such companies. The FTC or the Federal Trade Commission has enforced certain new rules that safeguard the rights of the consumers. If you are worried about how much safe you are with a debt settlement company, you need not worry.
According to the FTC rules, no debt settlement company can charge upfront fees from their consumers until it is agreed up on by the debtor and the creditor. The debt representatives cannot misrepresent their services if they’re selling them over the telephone. It needs no mention that debt settlement has a slight bad impact on a person’s credit score and therefore this needs to be informed to the debtor so that he can take an informed decision. The money that you pay to the debt settlement company will be accumulated in a trusted account and both the debtor and the creditor will have access to the account. The debtor can even withdraw money from the account whenever he wants.
Thus, as a debtor, you’re safe enough with the debt settlement companies after the FTC has enforced the new set of rules. You can now get debt settlement help and repay your creditors in single monthly payments. However, make sure you take certain steps to repair your credit and remain creditworthy in future.