We continue to get questions about Debt Settlement as people look for ways to save money during this economic turmoil.  We have written two articles in the past month with information on doing your own debt negotiation with your creditors.  The first one included links to the information our clients have used to save thousands of dollars by doing their own debt settlement.  The second one provided additional info on taxes and credit rebuilding after the process.

Now, there is an update from one of the sites we linked to, the Credit Info Center. 

Dated June 16, 2009, it says:
“With the current economy, more and more credit card companies are willing to take 35%-50% of the balance as payment in full. I’ve had some people tell me the credit card companies have called THEM with offers below 50%. If you don’t have lump sum cash, some lenders are willing to spread out the payments over several months. Just don’t look for a payment spread out over more than 6 months. All the more reason NOT to hire a debt settlement company.”

Our research also found a Chase spokesperson quoted as saying Chase will negotiate with some debt-settlement companies at a cardholder’s request, but will not offer more favorable terms than the customer would receive by negotiating directly with the bank.

The New York Times also had an article this week about major credit card companies that are accepting half of the account balance to settle the credit card debt.   Some of them are even contacting consumers with offers.

So it makes sense, and money savings, to do it yourself.

TIPS TO DO YOUR OWN DEBT NEGOTIATION

NOTE: You can also negotiate for your credit rating and the previous articles listed above have more information on that.  However, if settling your credit card accounts means saving money to be able to keep your home and support your family, don’t let the way it gets reported on your credit stop you from making a smart financial agreement with the credit card company.

ABOUT DEBT SETTLEMENT COMPANIES
Before you pay money to a company whose goal is to make money from your attempts to reduce your debts, do your research.  Make sure they are legitimate, check their standing with the Better Business Bureau, and get everything in writing before you pay them any money.

The CBS Early Show recently spotlighted debt settlement companies and the increasing number of complaints about some of them.  Because so many people are looking for a way to get out of debt, there are more and more shady companies ready to take advantage of the situation. 

Some red flags to watch and listen for when researching debt settlement or debt consolidation companies include:

• They request your account numbers, social security number, and/or bank account numbers before you even sign up with them.
• They quote unusually low monthly payments which often are higher once you actually sign up and they add in their fees.
• They demand you include ALL of your debts in their program.
• They charge high up-front fees, often thousands of dollars before doing anything for the consumer.
• They offer other services, such as credit repair, to increase their fees.

And the Federal Trade Commission cautions that many of the ads for debt relief are actually for bankruptcy.

FINAL THOUGHTS
Try to do it yourself first.  The thousands of dollars that you are not paying to an outside company can be applied toward reducing your debt.  It really can work, just decide to do it. 

Be sure to send us your success stories and let us know about any challenges you found in your negotiations.

NOTE: This information is intended for educational purposes only and should not be taken as legal or financial advice.  Contact your lawyer and CPA or financial advisor for information specific to your situation.