Are Debt Relief Programs Legitimate?

Are Debt Relief Programs Legitimate?

Everyone asks when looking for a way to deal with their credit card debt, are debt relief programs legitimate? So, are they?

Like almost everything else in life, whether it be in business or in personal relationships, there are good and bad examples. This holds true for debt relief programs as well. There are plenty of examples of debt relief companies truly working hard for their clients, helping them get out of debt. Of course, then there are examples of companies looking to make a quick buck at their client’s expense. The fact of the matter is if you are considering entering a debt relief program you need to do your due diligence and research the company you are entertaining working with to help you get out from under your debt. There are plenty of legitimate debt relief programs; but just be aware that there can be some less than reputable programs out there as well.

What are the different types of debt relief programs?

As with most consumer products or services, there are quite the variety of programs to choose from. However, there are four basic types. In no order, firstly you can choose to enter into a debt settlement program. Debt settlement is when you or a company that you partner with work directly with your creditor(s) to payback a percentage of the total debt you owe and have your account(s) deemed as ‘paid in full’.

Or you can investigate debt consolidation. Debt consolidation is where you take out a personal loan from a bank or credit union in the amount of your combined debt. By doing this you use the loan money to pay off all your creditors leaving you with one monthly payment to the bank or credit union. Don’t forget that there are different debt consolidation programs for different types of debt, such as unsecured debt, student loans, and back taxes to name just a few.

Then you can always turn to bankruptcy, as a last resort hopefully. There are two common types of bankruptcy, Chapter 7 and Chapter 13. Chapter 7 is used mostly for unsecured debt, such as credit cards or personal loans, or medical bills. However, bear in mind that it may not eliminate all your debt. There are some requirements you may need to meet and some consequences that you need to be aware of if you decide to go this route. A consultation with a bankruptcy attorney is highly recommended and usually free for the initial consultation.

Chapter 13 bankruptcy has a different set of requirements to be met than Chapter 7 and is generally a longer process. Generally, this goes through a court where a payment plan is setup and if all the payments are made during the bankruptcy, generally 3 to 5 years, the remained of the debt is forgiven. Again, it is best to consult with a bankruptcy attorney to explore this option.

Do I need to use a debt relief company?

The short answer is no. However, let’s be honest, you probably want out from this situation as soon as possible. I’ve been there; I know just how stressful and frankly painful it is to live under a crushing amount of debt. Nobody likes worrying about how to make ends meet and pay all of the bills at the end of the month. It is also human nature to want to relieve that pain as soon as possible. You can, legally, reach out to your creditor(s) on your own and negotiate a lower interest rate, a lower payment amount, or a settlement amount. Reality check, most of us do not have the time, know-how, or inclination to tackle negotiating with credit card companies.

Therefore, you might want to work with a debt relief company. Simply put legitimate debt relief companies have more experience and the proprietary processes to successfully negotiate with your creditor(s). They know what questions to ask and how to work out the best plan on your behalf. They also have created specific proprietary processes that work. This means you as a consumer will have to go through trial and error which could end up being extremely costly.

How can I tell if a debt relief company is legitimate?

So, you’ve decided, like thousands of other people in the same situation, to partner up with a debt relief company. Now what? You want to make sure and have the peace of mind knowing that the company you are going to do business with is legitimate. Your first stop may be to the website of your local Better Business Bureau or the BBB.

The BBB is a nonprofit organization whose focus is primarily on consumer protection. How it works is businesses ‘join’ or affiliate themselves with the BBB and agree to adhere to the BBB’s standards via self-regulation.  In turn, the BBB vets businesses on 17 factors that produces a rank between F through A+ for that business. The BBB also allows consumers to file complaints against a company. The BBB then works with the consumer and the company to positively resolve the complaint. Keep in mind though, that membership or affiliation with the BBB is not a requirement for any company to conduct business.

Another avenue to see if the debt relief company that you are thinking of working with is legitimate is to contact the FTC of Federal Trade Commission, via their website, and ask if any complaints have been filed against the debt relief company. One final way is to contact your State’s Attorney General’s Office and inquire about any complaints filed against the debt relief company. The responsibility lies with you to thoroughly research the companies that you are considering helping you with your debt situation.

What are the costs associated with debt relief programs?

Costs will vary from company to company. Remember, the debt relief companies are in business to help you but also to make a profit. Usually the company will charge a percentage of the debt that you are placing with them eliminate. Be sure to ask if their fees are due upon starting the program in one lump sum or is it spread out over the term of the program. Fees can range between 15% to 25% of the debt you are enrolling into the program. So, ask questions first!

How does a debt relief program affect my credit score?

Debt relief programs can cause your credit scores. Some relief programs can cause your score to lose half as many points as filing bankruptcy would. I know that sounds bad but keep in mind that if you are only losing half the points, it would be easier to rebuild those points after going through a debt relief program than going through bankruptcy.

The most important thing to remember is to always ask questions. Do not be afraid or embarrassed about asking questions. Getting into a debt relief program is a major deal that comes with plenty of consequences. It’s your money and your credit on the line so do not be shy. If the professional that you are talking with seems annoyed or impatient with your questions, then it might be time to contact someone else. Do not let yourself get railroaded into a program that you do not fully understand and that may not be right for you.

If you still have some questions or concerns, let the guys over at Debt Reset US help you sort through them. They are a knowledgeable bunch that are truly invested in helping people get out from under their debt.