All owners of startups begin on a high buoyed by their concepts of changing the world with a brilliant idea. Sadly, lack of market potential and money are the top two reasons for business failure according to CbinSights website. If you are also a small business owner who has been financing the business with credit cards and ended up being smothered by a mountain of debt, debt settlement can be a viable strategy to bring things back to a level where you can think of focusing a new on your business. However, the market is riddled with unscrupulous companies who try to only create confusion and take advantage of entrepreneurs who are not too savvy with the process of debt settlement. Some of the top questions that you should ask when choosing a debt settlement company:
Will I Be Charged Any Fees Before Any Debt Is Reduced?
Debt settlement companies can only charge performance-based fees as per law. This means no company can charge customers any money until they have reduced the debt as mandated to them. The debt settlement business has acquired notoriety because of the many unscrupulous companies trying to scam customers by charging upfront fees without any intention of settling the debt. Never sign on with a company that charges any fee before they settle the debt irrespective of the name they give to the charge and however, plausible it may sound. Even today, there are some companies who try to justify upfront fees under the pretext of being an “Attorney Based Debt Settlement Company”. While the need to hire an attorney for settling debts depends on the circumstances of your case, you should always insist on not paying any upfront fees for settling the debt.
How Much Do Debt Settlement Companies Charge?
Even though the law prohibits debt settlement companies from charging upfront fees, there is no restriction on the amount of fees that the debt settlement company can charge you. Typically, they will charge on the basis of the debt due or the amount of debt reduced. It is best to do some shopping around to get the best rates. You can expect them to charge around 25% of the forgiven debt. While no monthly fees or maintenance fees are payable, you will need to pay a trust account fee that oversees the special account that is opened to create a fund to pay off the creditors with a lump sum. Check whether the company offers any guarantees of performance like a return of the service fees in case they are unable to get their customers the extent of debt reduction agreed upon with the customer.
Is the Debt Settlement Company Reputable?
It is very important that you choose a debt settlement company that is reputed. Check whether the company you are considering is a member of the American Fair Credit Council, which is an apex body established for the purpose of promoting good practices in the sector of debt settlement and to protect the interest of debtors. AFCC members are expected to abide by the strict guidelines governing business practices including proper disclosure of terms and conditions to customers and maintaining business practices that are aimed to maximize customer satisfaction and completion rates.
It is a big plus if the company is also a member of the International Association of Professional Debt Arbitrators because it ensures that it has undergone a stringent training and certification course pertaining to the Fair Debt Collection Practices Act, negotiation techniques, budgetary analysis, and communication with creditors. You should also check out on the website of the Better Business Bureau whether the company has many complaints by customers against its name. You can also check out the online debt settlement reviews to make a shortlist of the companies.
Does the Debt Settlement Company Offer A Right of Rescission and for How Long?
Debt settlement agreements can be quite long and complicated so it can be very difficult for customers to check them out thoroughly before signing the agreement. Debt settlement companies that follow ethical practices allow a period that allows customers to look over the documentation thoroughly and get any clarification that they want before the contract becomes legally binding. The right-of-rescission period, as it is known, permits customers to back out if they are not satisfied with the terms of the agreement. Remember, if you exercise the right of rescission, you are not expected to pay any fees or penalties. Don’t get rushed into finalizing agreements with companies with very short rescission periods.
Is the Company You Are Considering A Full-Service Debt Settlement Company?
Most people do not know it but a large number of companies projecting themselves as debt settlement companies are in fact just marketing companies responsible only for signing up customers. These companies then hand over the cases to another company that then takes up the process of negotiation and settlement with the creditors as also providing customer service. The problem with this kind of an arrangement is that most often the company signing up customers and the company undertaking the negotiation are separated by thousands of miles. As a customer who has enrolled ina company handling thousands of cases, you are reduced to just being a case file and cannot expect to get personalized service. You should check whether the company you are talking to is a full-service debt settlement company that will handle all aspects of your case from a single location that you can access easily.
Selecting a debt settlement company that will give you the best possible results is a tricky business in the best of times. You should always be alert to the possibility of scams and resist any move that forces you into a corner where you have to accept anything the company offers. Since settling debt properly is crucial to your continued financial wellbeing, it is very important that you deal only with a reputed company and sign on the agreement only after you have properly understood all the implications.