All too often, debt settlement is a scam. Companies ask for high fees and make grand claims that they can not meet. No one can eliminate all of your debt. The Federal Trade Commissionv (FTC) has banned debt settlement companies from collecting fees upfront, but these companies are finding ways around the rules, such as hiring attorneys to meet with clients and charging ”attorney fees”. Here are five questions that you should ask a debt settlement company before using their services.
- Ask if they charge a flat rate or if their fees are based on performance. If they charge a flat rate, avoid their services.
- Ask how long they have been in the debt settlement business and how much debt do they usually settle per client. Avoid new companies or those that admit to settling less than 50% of a client’s debt.
- Ask when they will settle the first debt for you. The first settlement should occur within a few months and never more than 12 months. If so, your case is being handled poorly.
- Ask if there are tax implications with debt settlement. If the company says no, they are lying to you. The IRS often considers settled or forgiven debt as taxable income.
- Ask if debt settlement will negatively affect your credit. It always does and you should not be told otherwise.
After asking these questions, call you local Better Business Bureau and the FTC to inquire about the company that you have spoken to. Even though you feel like your debt has put you in a desperate situation, you need to be cautious with SC debt settlement companies.