Debt settlement programs abound. But how do you know what kind of program is right for you? There are literally thousands of companies that have sprung up all over the country in the last few years. Some of these companies are operated by attorneys schooled in bankruptcy while others are debt management, credit counseling or debt settlement program companies. Each may call themselves a debt settlement company but they will tend to specialize in one product or service and most have a limited geographic area of service.
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Choosing the right program for you requires an understanding of the various kinds of services available. This article is geared towards giving you a thorough understanding of the various services available.
Many bankruptcy lawyers have come up with debt settlement services. This is because many people in economic need may opt for bankruptcy in lieu of traditional credit counseling or debt settlement programs. This is not to say that bankruptcy attorneys that operate debt settlement or debt negotiation firms are not to be trusted. However, you should ask if the debt settlement company provides more bankruptcy services than debt settlement services. This is a good indication of whether or not their clientele is "funneled" in to one or another type of service.
Debt Management firms offer consumers the ability to mange a client's finances for them. According to the Federal Trade Commission, "In a DMP, you deposit money each month with a credit counseling organization. The organization uses these deposits to pay your credit card bills, student loans, medical bills, or other unsecured debts according to a payment schedule they've worked out with you and your creditors. Creditors may agree to lower interest rates or waive certain fees if you are repaying through a DMP." The FTC provides a great deal of important tips on their website to avoid fraud as some debt management companies can take your money and run. Tips to avoid fraud include background research and acquiring testimonials.
Consumer Credit Counseling Services, often referred to as CCC's, provide a consumer's with a comprehensive income and expense analysis, give the consumer a monthly budget plan based on their income and expenses and may engage in negotiating with creditors to make payments at reduced interest rates. CCC's do not typically reduce the principal balance of a consumer's debt significantly, there are credit implications as the consumer's credit profile show's they are in CCC's and there is still interest to be paid.
Debt settlement programs offer the consumer the ability to both drastically cut principal balances and eliminate interest while paying off most unsecured debts in a specific timeframe. There are credit implications like CCC's as the consumer's credit profile indicates that the debt was negotiated for less than the original balance. However, the main upshot is that principal balances are often cut to 50% of the original balance, there is typically no interest paid and consumers get out of debt between 12-48 months.
Whatever program you think is best for you always do your homework.
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