How Do You Choose a Debt Settlement Company in Seven Steps?


Quick Answer

Before choosing a debt settlement company to use, check the reputation of each of the companies being considered. Find out which has the best reputation for helping its clients pay off debt; avoid companies that are known to make unrealistic promises such as total debt forgiveness. Stay away from companies who charge fees for service upfront or have multiple complaints reported to the Better Business Bureau or state consumer protection departments.

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Full Answer

  1. Research potential debt settlement companies

    Conduct online research to learn how specific companies help clients repay debt. Review client testimonials and complaints filed with the Better Business Bureau or state consumer protection department. Avoid companies that practice in various states, have multiple complaints files against them or those facing lawsuits by the state or former clients.

  2. Interview debt settlement companies

    Contact settlement companies, and ask specific questions about the services offered, fees for service and how debt negotiations are handled. Avoid companies who suggest clients stop paying minimum monthly payments on credit cards and other loans. Failure to pay minimum payments result in late fees and lawsuits.

  3. Learn more about services offered

    Ask specific questions concerning debt negotiation and repayment. Debt settlement companies cannot erase credit card and loan debts. Reputable companies are able to negotiate lower monthly payments or longer payment terms.

  4. Determine how debt settlement payment plans work

    Determine how debt settlement companies pay creditors and lenders. Many companies require clients to open FDIC-insured bank accounts for repayment purposes. Each month, clients add funds to the account. The debt settlement company withdraws the amount to pay creditors. In some cases, clients have to send funds directly to settlement companies. The companies then pay creditors and lenders.

  5. Determine how often companies send payoff reports

    Determine how often settlement companies send payoff reports to clients. These reports track how much debt has been paid, and how much is left.

  6. Determine when debt settlement companies expect payment for services

    Determine how debt settlement companies receive payment for services. Some companies ask for payment upfront, while others send a final bill after clients pay off all debts owed.

  7. Choose a debt settlement company

    Review all the information gathered about specific debt settlement companies. Make a decision based on services offered, debt negotiation and repayment methods, fee structure and communication style.

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