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Brief Background

How Do You Choose A Debt Settlement Company?

Here’s a check list of questions to ask a Debt Settlement Company:

  1. Do they have an attorney who helps analyze all of your options?Many times Debt Negotiators will tout that they have ‘Certified Debt Negotiators’ and ‘Certified Debt Consultants’. If they have Certified Debt Negotiators’, they obtained this designation by taking a simple one hour quiz which no one can possibly fail. The quiz is administered by an organization that you have never heard about and exists solely for the purpose of pinning ‘merit badges’ on anyone who applies. They have no professionals actively supervising a debt settlement program.

    Some times there’s a law firm that offers debt settlement but they are usually out-of-state and to really have a law firm which is accountable to you, they MUST have a physical office in your state.

  2. Do they analyze clearly and simply all of your options and fully disclose all the negatives and positives of any option?I have not found one website which analyzes and presents all the positive aspects of all your ‘Informal’ and ‘Formal’ Options. I have seen some websites which present a ‘debt calculator’ which supposedly compares your options. But upon simply scrutiny, you’ll find that not all of the 4 Major Options are presented. The 4 Major Options are: Debt Management which is a 100% repayment on your credit card debt; Debt Settlement which is a 50% repayment on all your credit card debt; Debt Cancellation or Chapter 7 Bankruptcy where you don’t repay on your credit card debt; and A Formal Debt Management Plan called a Chapter 13 Bankruptcy Petition where you could pay a percentage of your credit card debt. All 4 Options have to be presented!! AND THEY DON’T PRESENT THE 4 OPTIONS.

    One of the reasons that they don’t present all 4 MAJOR OPTIONS is because they simply DO NOT UNDERSTAND THE DETAIL WORKINGS OF THE 4 MAJOR OPTIONS. They haven’t even been involved in the 4 Major Options, yet they are pontificating based on false information (some would say deliberate lies) and no experience.

    Another point that should be made is that when they attempt to do any type of financial analysis and present it to you in the form of a chart, their analysis is usually flagrantly defective because again they really don’t know what they are doing. They guess at the analysis and make it skewered in their favor.

    If they are supposed to be ‘certified debt counselors’, shouldn’t they be able to substantially and accurately tell you what any option will cost? They can’t and this goes to the heart of the matter.

  3. Are they BSI Accredited?There are various companies who for a fee will come to your office and check your business and determine whether or not you have certain forms and procedures in place. These certifying companies such as www.iso.org and British Standards International (BSI) and there are others, do not pass judgment on the accuracy of your counseling. They only pass judgment on having in-place business procedures to process business.

    If these certifying agencies had real teeth, they could and would suspend a company’s license to practice their trade or profession. This does not happen. However, a Debt Settlement Company will tout their certification as if they have been anointed into sainthood. Nothing could be further from the truth.

  4. Are they regulated by the Bar Grievance Committee?Doctors are licensed by the Department of Health; CPA’s are licensed by the Department of Consumer Protection; Attorneys are licensed by the Judicial Department and the attorneys are subject to random audits and the Bar Grievance Committee. You can lose your license to practice law when you violate the ethical obligations of your profession. Debt Settlement Companies have no license to lose because at the present moment, they aren’t licensed or regulated by the Department of Banking.
  5. Is the Debt Settlement Company regulated the State Banking Department?As of this writing, they aren’t regulated by the State Banking Department. However, on their websites many claim that they follow ‘Best Practices’ which means they have high ethical standards. Really? Then why are many of the Debt Settlement Companies opposing and lobbying against the Uniform Debt Management Services Act. Presently, Debt Settlement Companies claim that they aren’t ‘debt adjusters’ within the meaning of the law. They use this as a means to get-around or claim a loophole in the law and; therefore, they can’t be regulated by the State Banking Department. If they have nothing to fear and if they aren’t embarrassed by all the fraud found in many debt settlement companies (see the Federal Trade Commission), then why are they opposed to the ‘Uniform Debt Management Services Act’ which seeks to close their supposed loophole and stop all the fraud committed by Debt Settlement Companies?

    In Connecticut, there’s not one Debt Settlement Company which is licensed by the Connecticut Banking Department and they aren’t accountable to any state agency for their actions. We have seen on Wall St what happens when the regulators are asleep at the switch and this is a situation where there are regulators!! There are no state regulators for the debt settlement companies.

  6. Does the Debt Settlement Company make proper disclosures? And what are those disclosures:
    1. You can be sued while you are enrolled in a Debt Settlement Plan. Yes, creditors can still sue you and attach your wages, your banking accounts and file judgment liens against your home.
    2. Do they fully disclose that your credit score will be terrible during the entire time you are trying to do debt settlement? Or do they couch it in terms that it will ‘adversely affect your credit’. The ones which try to have some semblance of honesty will tell you that debt settlement will ‘adversely affect’ your credit score. They don’t say that your credit score will absolutely terrible.
    3. Some debt settlement companies will tell you that while you are enrolled in Debt Settlement, interest will continue to accumulate on your debt but many don’t tell you this.
    4. Some debt settlement companies will tell you that the cancellation of debt can be considered income to you but I haven’t seen on any debt settlement website IRS Publication 908 which explains in detail about this issue. If the Debt Settlement Company doesn’t have a CPA on staff, and I don’t know of any that do, they should advise you to consult with a CPA before starting a debt settlement plan.
    5. Does the Debt Settlement Company advise you as to their ‘Completion Rate’?Out of 100 clients, how many of them actually complete their debt settlement plan? Do they discuss this issue with you? If they do honestly tell you their completion rate which they should advise you since they are certified under BSI or ISO, the completion rate is about 5 out of 100 clients complete their Debt Settlement Plan. And why is the rate so low? They aren’t properly screening and qualifying their clients and they don’t explain clearly and simply all of their options.
  7. Does the Debt Settlement Company have a physical office which you can visit for a consultation?In Connecticut, since there are no in-state licensed debt settlement companies, they are all on the Internet or the telephone. And they are located predominately in California, Texas and Florida. Why don’t they have a physical office where you can have a private and confidential consultation? The reason being is that ‘debt settlement companies’ are the latest ‘get rich quick scam’ in the United States. They are ‘fly by night’ companies because they are ‘here today and gone tomorrow’.
  8. Do they fully disclose who they are on their Web Site?When you go to their website and pull-down the menu for ‘Who we are?’, does it fully identify who is the person in charge of the Debt Settlement Service? Are the actual people who offer you’re a debt settlement service listed and shown on the website? Do they have an actual address or just a Post Office Box and you can’t determine who is in charge of the offering the service? When you check on www.whois.com to determine the owner of the website, do you get an out-of-state company which has no meaning to you? Why are they hiding? Who is the company president or the owner? What are their professional credentials? And if they are an attorney (there are some Debt Settlement Companies which are operated by attorneys) but this isn’t disclosed. Why? Why are they not disclosing that they are attorneys who are operating the debt settlement company?