Debt Negotiation |
By Kenneth Long on May 26, 2010
.jpg.aspx?width=75&height=75) It is hard to ignore the messages telling you that you can settle your debts for less than half what you owe. These appear to be well-established companies that cite government or legislative backing.
Despite what you might expect, debt negotiation companies are ineffective on their best day and fraudulent on their worst. Local Better Business Bureau offices handle so many complaints from credit card debt negotiation companies that they rarely rate any debt negotiation company better than an "F" rating.
Many states' Attorneys General have also gone after some of the biggest players in the debt negotiation industry. New York Attorney General Andrew Cuomo went as far as to label the business of debt negotiation as a "rogue industry."
Almost everyone that deals with debt negotiation companies find out that the plans rarely work, exceed the cost estimates and do not prevent legal action. The trouble is that most of their clients find out after they have shelled out thousands of dollars in upfront fees and have nothing to show for it other than legal actions and ruined credit.
Many debt negotiation companies advertise that they have attorneys working on your behalf. The truth is that their attorneys are solely focused on averting legal action against the firm. They do not work on your behalf and they will not represent you if your creditors sue you.
Sometimes, it may make sense to hire a reputable attorney directly who will help you draft letters to send to your creditors. You can pay them based on their time, of which an hour or two should be sufficient.
If you are more of a do-it-yourself type person, then you may find that you can draft your own letters to negotiate debt. By using templates, you may be able to negotiate debt settlement on your own. After all, those companies that you see advertising debt negotiation services charge thousands of dollars to simply send out form letters on your behalf. This is something that you can easily do for yourself with minimal guidance.
Most importantly, understand that debt negotiation is very different from debt management through credit counseling. Credit counseling works by negotiating improved repayment terms on your existing credit card accounts so that you can afford the payments and see your balances drop faster. Your credit can be rebuilt through credit counseling, whereas debt negotiation is more of a desperate attempt to resolve defaulted debt balances before legal action results.
Tread carefully if you pursue negotiation of your debt balances. Weigh the pros and cons of debt negotiation before you act so that you can avoid the many traps that await.
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