If you’re buried under a mountain of debt, Debt Relief: Debt Settlement Services offers services that can help you reduce your credit card and other debt. The company specializes in negotiating with creditors to settle your debt for less than you actually owe. However, not all debt relief companies are created equal. It’s essential to research all of your options and make the decision that is best for you.
A legitimate debt relief company typically negotiates with your creditors on your behalf and only charges a fee once they successfully settle some or all of your debt. The fee may be a flat amount or a percentage of the total debt settled.
For-profit debt relief companies are generally regulated by state laws and the Federal Trade Commission Telemarketing Sales Rule. Nonprofit debt relief agencies and attorneys may also be able to offer help, but they are often more costly than for-profit companies.
Most debt relief companies require you to stop making payments to your credit cards and instead put a fixed monthly payment into an escrow account that they set up, which may come with a monthly fee. Once the company has enough money in escrow, they contact your creditors and attempt to get them to agree to accept a lump sum of money that is less than what you owe them.
The debt relief process can take months, or even years, to complete. Because you will be stopping payment to your creditors, a debt relief program can significantly hurt your credit score and make it difficult for you to borrow in the future. In addition, any portion of your debt that a creditor forgives may be considered income by the IRS, so you could face a steep income tax bill.
Although many of the most popular debt relief companies have high customer ratings, some have complaints on Trustpilot and BBB. Some of the negative reviews complain about a lack of results, lengthy debt settlement process and expensive fees. Other customers complain about being called too frequently or by multiple numbers.
A debt relief service should be transparent about the terms of its services and fees, allowing you to read them online before you enroll. A good debt relief company will tell you the average savings it achieves for its clients and how much you should expect to pay in fees, such as a one-time setup fee, monthly maintenance fees and a termination fee.
A good example is National Debt Relief, which states that it has helped its clients save an average of 50%. Its fees, which include the fee you pay when your debt is settled, range from 15% to 30% of your enrolled debt. The company requires a minimum of $10,000 in unsecured debt to qualify and can settle payday loans, business debts and some student loan debts. It is available in 46 states and Washington, D.C., but not in Connecticut, Oregon, Vermont and West Virginia due to state regulations.