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Settle Your Debts in 2015!

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It’s the very last day of the year and 2015 is just around the corner. If you have put off cleaning up old collection accounts, or you’re facing a financial hardship and can’t continue making payments on your credit card debts, then you need to know that debt settlement will still be a viable solution in 2015.

In fact, next year may be a very good year for settling debts, especially because there has been strong pressure on the collection and debt purchasing industries to clean up their act. Some experts are predicting less creditor litigation in the coming years, as documentation standards for purchased debt continue to tighten.

There have also been numerous enforcement actions by the Federal Trade Commission and the Consumer Financial Protection Bureau against collection agencies that were routinely violating the law. And of course, just like every other year, many debt relief scams have also been shut down by Federal and state authorities. But no matter what happens in terms of regulation or enforcement, the basic financial math that drives banks to settle will still be in place.

Debt settlement will therefore remain a valid and viable alternative to bankruptcy (especially Chapter 13 bankruptcy) for the foreseeable future. However, the creditors will make adjustments to what they may accept for settlements, and changes are sure to happen.

That’s why it’s important not to rely solely on advice from reading the various debt relief forums on the Internet, as useful as those sites may be for overall information. A creditor settling for 35% today might only be willing to take 45% tomorrow, or perhaps become more lenient and start accepting 30%.

What I do here at ZipDebt is monitor the trends across a large number of settlements, so I can keep my “finger on the pulse” of what is happening and guide you to the best possible settlement for any given creditor. I take the guesswork out of the process, and hand you the playbook of the other team so your success is assured.

I should also mention that ZipDebt will still be going strong in 2015 when others in the debt relief field have come and gone. I’ve been at this since 1997, and 18 years later I’m still here when many others have exited the industry. As the financial crisis has wound down, there is far less delinquent debt and fewer people in trouble. But we’re still seeing hundreds of thousands of annual bankruptcy filings, and good paying jobs remain hard to find. So I know that people still need help out there and that’s what I’m here to do.

Long time readers of The ZipDebt Blog may have wondered about the lack of new posts for 2014. I do plan to resume regular posting in 2015, and some of what I will be writing about is the financial challenge I myself faced in 2013-2014. I made a very difficult decision to sell my “dream home” in order to solve my own debt problem before it spiraled out of control. As long as I’ve been in the financial sector, I’m still learning. I still make mistakes on occasion, and then try to learn from those mistakes. I hope to share this story soon, and perhaps inspire others to make the tough choices needed to regain a sound financial footing.

Best Wishes for a Very Happy New Year!

Debt Settlement Solutions: Slow Torture vs. Fast Relief!

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Consumers researching debt settlement solutions need to be aware that there are two very different approaches to the strategy: the Long-Term Method or Fast-Track Debt Settlement™ (pioneered by ZipDebt). We might also call these “Slow Torture” or “Fast Relief.”

The Long-Term Method is where you start the project with nothing to work with – no nest egg, no stocks or savings, no IRA, no family assistance, no assets to liquidate, and so on. You have hope and that’s about it. When your only financial resource is your paycheck, the source of settlement funds is limited to the stream of cash previously associated with the minimum monthly credit card payments, now diverted to a set-aside account for settlements.

Since the pace at which funds build is slow, it’s usually only possible to settle ONE ACCOUNT AT A TIME. This will go fine for a while, but eventually the ones you haven’t settled will escalate out of control. Once multiple lawsuits kick in, the project gets derailed and you’re right back to the bankruptcy conversation all over again.

Fast-Track Debt Settlement™ means starting the project with some financial resources, such as a 401k loan or a private loan from a family member. Supplementing lump-sum funds with additional monthly savings from the household budget allows you to take advantage of multiple settlement opportunities as the accounts reach their respective charge-off deadlines. The whole point of this approach is to SETTLE QUICKLY and AVOID LAWSUITS.

If you’ve shopped debt settlement solutions, you know that most of these companies still talk in terms of 36-48-month programs – “Slow Torture,” in other words! This is pretty crazy from my perspective, since I’m the person who invented the 36-month settlement program in the first place! I abandoned it long ago as no longer effective.

Things change. Debt settlement companies, apparently, do not, so they still quote 3-year programs knowing full well that most of their clients will see multiple lawsuits if they take that long to settle. The odds of litigation climb sharply in the second year of collections. There is also risk during the initial 12-months, but it’s typically a risk that can be MANAGED, compared to risk that is OUT OF CONTROL.

Fast-Track Debt Settlement™, or “How to Get Out of Dodge Before the Shooting Starts!”

Here are the key reasons why you want to settle inside the 180-day charge-off deadline (or shortly thereafter) whenever possible:

1. Mechanical settlements – Most of the major credit card banks have automated processes in place that are designed to present settlement offers to customers. These processes are in operation through the charge-off deadline and beyond.

2. Improving offers – The settlement offers presented by bank collection reps tend to improve (i.e., decrease in required settlement percentage) as the account winds its way toward charge-off.

3. Fewer collection agencies – The fewer collection agencies involved, the easier the project becomes for the average consumer. While there may be third-party collection agencies involved in this early phase, most creditors work their accounts using internal reps up to the charge-off deadline.

4. Limited lawsuit risk – Risk of getting sued before charge-off is limited to certain specific creditors on larger balances. The risk of lawsuits is therefore much more manageable during the initial 6-month period.

5. Better predictability – Most of the major credit card bank settlement practices are pretty well established, and therefore predictable within certain limits. After charge-off, things get much less predictable, and virtually ANY account is at potential risk of litigation if enough time lapses without settlement.

6. Better settlements – Settlements negotiated directly with the creditors before charge-off are nearly always at or below 50%, with this being an upper boundary. In 2012-2013, we saw most of the major creditors settling in the 30-40% range, and one or two down in the 25% bracket. These are simply better deals (negotiated with less hassle) than are usually available via many collection agencies – especially when aggressive attorney collections are taken into account.

When you settle your debts on a Fast-Track™ basis, all the negotiations are conducted in parallel and as many of the settlements as possible concluded before the charge-off deadline. (Bear in mind that settlements often involve installment payments that extend 1-2 months beyond the deadline.)

There can be one or two very stubborn creditors who choose not to offer a reasonable settlement figure before charge-off, so the above guidelines do not apply 100% of the time. However, any accounts not resolved before the deadline can usually be settled within 3-6 months after charge-off, putting the whole project within a 6-12 month timeframe depending on the specific creditors involved.

OK, let’s review:

* You can file Chapter 13 bankruptcy and restructure the debt under a 5-year court-supervised plan where you pay monthly on a fixed pace.

* You can take the Long-Term Method and stretch out your settlements over 3-4 years, and get sued into Chapter 13 bankruptcy anyway.

* You can adopt the Fast-Track Debt Settlement™ strategy and be debt-free in 12 months or less.

Rather a “no-brainer,” isn’t it?

ZipDebt Clients Enjoy Great Results! Success Tracking Update, 2006 through 2012

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In July 2010, I published “Debt Settlement Done Right,” which included ZipDebt’s success tracking statistics for the period 2006-2009. As far as I know, I was one of the first in this industry to publish actual data on my results. Today, it’s still quite rare to see a debt settlement firm publish transparent information about actual performance results vs. the claims made in their marketing materials and sales pitches. There is a reason for this. Their data would show they do a poor job, get their clients sued on a regular basis, and fail to settle most of the accounts for most of their clients.

This is the latest update to my published success tracking statistics, and the data include the pool of clients who purchased one of my programs from 2006 through 2012. The updated stats demonstrate a track record I am very proud of. I’ve achieved excellent results in coaching consumers how to settle their debts quickly and safely on their own, with no need for professional negotiators or the sky-high fees they charge.

Please note that these figures pertain to clients who settled unsecured debts (primarily credit card debt). I’m not including data for clients who required assistance with settlement of second mortgages or HELOCs, a phenomenon that is unique to the past few years of the financial crisis. The process of settlement is different for mortgages, so it would not be appropriate to mix the data together. This will be especially important in the reporting of the amount of debt settled by clients, and the overall percentage achieved, since mortgage balances are usually much larger and the settlement percentages lower than for credit card debt. But it’s also important to recognize that the timeline for mortgage settlements is not the same as for credit card debts or other unsecured accounts. In general, mortgages require a longer timeframe before settlement can be reached.

Here is the hard data on ZipDebt Success Rates for clients who did DIY debt settlement on credit cards and other unsecured accounts. For the exact methodology employed, please see the original July 2010 post.

ZipDebt SUCCESS RATES (Cumulative) 2006-2012

1. Total Number of Clients @ 2,232
2. Number of Refunds @ 62
3. % Refunds/Total @ 2.8%
4. Coaching Not Included (Basic) @ 306
5. Insufficient Contact to Determine Results @ 722
6. In Progress @ 32
7. Pool of Coached Clients @ 1,092

8. RESULT A_ COMPLETED @ 501
9. RESULT B_ 80% Finished @ 294
10. RESULT C_ 50% Finished @ 82
11. RESULT D_At least 1+ Settlements @ 148
12. RESULT E_Filed Bankruptcy @ 67

13. BASE SUCCESS RATE (= RESULT A + B) @ 73%
14. 50%+ SUCCESS RATE (=A+B+C) @ 80%
15. SUBSCRIPTION SUCCESS RATE (A+B+C+D) @ 94%

BASE SUCCESS RATE – This is the most conservative definition of “SUCCESS” relative to my program. The group of “Completed” plus “80% Finished” clients are all success stories. These are people who made the program work and achieved the desired outcome. They settled all their debts, or had settled 80% or more of the starting balances by the time their coaching subscription ended. I am proud to announce that based on this simple criteria of “getting the job done right,” ZipDebt has a base success rate of 73%.

This is an inversion of the normal success rate for a traditional debt settlement company. Most of them have a FAILURE rate higher than 73%! It is also common knowledge that Chapter 13 and credit counseling programs have a high failure rate as well. I am quite proud of the excellent results achieved by ZipDebt clients. This 73% figure for my base success rate represents HUNDREDS of success stories – these are ordinary people who cleared out their credit card debts via self-negotiated settlements.

50%+ SUCCESS RATE—It’s important to remember that this is a do-it-yourself (with coaching) program. Clients often learn enough in their first 6-12 months with me to keep going on their own after their coaching subscription has expired. Some people choose to renew to extend their coaching service, while others really take the DIY-spirit to heart and finish out on their own. Including clients who were approximately half finished with their settlements upon expiration of the coaching subscription, the success rate climbs to 80%.

SUBSCRIPTION SUCCESS RATE—Considering that 94% of clients reported at least one successful settlement during their coaching subscription period, virtually every one of these customers received full value in return for the cost of their subscription fee, and most would say their savings on the first settlement alone paid for the program cost many times over.

BOTTOM LINE: My data clearly shows that consumers are capable of negotiating settlements on their own and achieving BETTER results than those obtained by third-party debt settlement firms.

To consumers considering debt settlement: It’s not for everyone. It’s imperative that you be a good fit for this approach in terms of your financial situation, and that includes having access to sufficient resources to negotiate your settlements quickly. ZipDebt clients are so successful because they move FAST – the majority of our settlements are negotiated before charge-off, or shortly thereafter. To learn more about this very successful approach to debt settlement, please read my Free 32-page report, How to Eliminate Your Debts Quickly and Safely Without Filing Bankruptcy.

Why Consumers Should Hire A Debt Coach Before Negotiating With Collection Agencies

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I’ve been involved with debt settlement since 1997, far longer than most people working in this industry. Yet I still have to shake my head in amazement at some of the idiotic stuff debt collectors say.

Now, just to be 100% clear, I have nothing against creditors hiring agencies to collect on their delinquent accounts, and I view the collection industry as an essential part of our economy. The business of granting credit always entails some risk people won’t repay, which creates an opportunity for an industry that helps lenders enforce their contractual agreements. I’m also totally willing to acknowledge that many, if not most, debt collectors do a good job and play by the rules. Where I draw the line is with collectors who flat-out lie to people, break the rules, or make malicious statements intended to bully consumers who are suffering from legitimate financial hardships.

Just the other day, a debt collector with nothing better to do stopped by the ZipDebt Blog and submitted comments against an article I published about two years ago, titled Consumers Should Still Be Wary of the New “FTC Compliant” Debt Settlement Companies.

Normally, when a debt collector posts a snide remark on my blog, I just delete the comment and don’t bother to respond. But these particular posts provide a pretty good X-ray of the mindset of a debt collection “manager,” someone who was apparently good enough at the intimidation game to get promoted to a higher level. I always tell consumers they CAN settle debts on their own, but should get a good COACH on board to help them through the process. And this particular set of comments illustrates why. You’re dealing with people who are taught to repeat the same falsehoods many times daily, to the point where they become very convincing and even start to believe their own propaganda.

In his first comment, the collector focused on a statement I made within the article where I noted, “We have recently had instances where one major creditor routinely refused to accept the final installment on settlements negotiated by third-party firms, and clients were experiencing problems with those settlements.”

What you are saying here is the creditor accepted a structured settlement then refused to accept the final payment to settle the debt? That would be an illegal collection practice by the creditor and in no way a reflection of who negotiated the debt. Once a settlement is accepted the creditor cannot back out of it once both parties agree. That would mean they could promise settlements as a way of getting monthly payments. Maybe you should check your facts or stop lying to your readers.

Nice tone, eh? Note that I’ve never once heard from this individual before he posted this. The language tells me this is a person who is prepared to *start* from the assumed position that I am lying to my readers. He doesn’t actually know anything about me at all, has not taken the time to fully digest what ZipDebt is all about, yet is fully prepared to dismiss what I’ve written. This arrogant and condescending tone is sadly typical of many debt collectors and managers. It’s too bad, really, because I firmly believe collectors would recover far more for their clients if they displayed a little respect and compassion once in a while.

The truth is that in the months before I published that article there had been multiple instances of a specific creditor welshing on documented settlements that had been negotiated by debt settlement firms on behalf of consumer clients. I did not say it was something that always happened, or that it was happening with all creditors, merely that we had “recently had instances” where this occurred. The practice of reneging on documented settlements went on for quite some time. Here is one example that was discussed publicly on Steve Rhode’s blog, about a year after my article mentioned this.

Yes, Mr. Debt Collection Manager, of course this is illegal. Are you asking us to believe that major credit card banks and/or collection agencies never do anything illegal? Seriously? If that is the case, why did the new Consumer Financial Protection Bureau recently fine Capital One $140 million and American Express $85 million, both for multiple violations of numerous laws pertaining to collection of delinquent accounts? Why is your industry always the #1 source of complaints to the FTC, year after year after year? After everything we have seen in the past half-decade, from the subprime mortgage meltdown and credit default swaps, to the robo-signing scandal, is there anyone who still thinks the big banks won’t break the rules if it means billions in profits?

Moving to the collector’s second comment, we have the following masterpiece:

I’ve worked in debt collections for the past 5 years, 3 of them as a manager of a debt collections law firm. Some of the statements I’m seeing on here make no sense, for example; Rodney, why would you have $133k in debt when you are telling us you had the ability to pay $7,000 a month to settle. In addition to that most credit card companies are not willing to extend a low settlement 30%-40% on the dollar without the charge-off. Why would the credit card companies forgive that much debt before they get their tax write-off (charge-off). In addition to these funny statements of settling over 100k in debt in 6-10 months (which would be wealthy people taking advantage of the credit card system) thanks for raising my taxes while you have money to pay your debts.

There are so many false statements and misrepresentations in the above paragraph, I’ll have to break it down sentence by sentence:

Bogus Remark #1: “Rodney, why would you have $133k in debt when you are telling us you had the ability to pay $7,000 a month to settle.”

This refers to a comment posted by a client who had settled all his debts using my ZipDebt program. The full comment can be read here, but this is the relevant portion:

I just achieved my last settlement agreement using Charles’ program. My wife and I had 10 credit card accounts and original balances of $133k when we started the program just back in September 2010. So less than 7 months later we’ve settled (or have made settlement agreements with payments due over the next 2 months) of just under $49k.

Here we see the old-school debt collector mindset at work. If the client paid out $49,000 over seven months to settle their $133,000 of credit card debt, the immediate assumption is that the client had *cash flow* of $7,000/month to work with. Mr. Debt Collection Manager applied the standard “deadbeat” assumption to Rodney’s comment, implying he had plenty of income to pay his bills with, but chose not to. Yet the reality was that the client had experienced a huge pay cut and was forced to rely on his credit cards to survive, then burnt through his liquid savings in a futile attempt to remain current with his creditors. The total minimum payments for Rodney’s $133k were more than $3,000 per month, yet he could barely cover $500/month due to his loss of income. The $49,000 for settlements came from a LOAN against his 401(k) account, another loan from his FAMILY, and the $500/month he was able to set aside in lieu of regular payments.

The problem here is that Mr. Debt Collection Manager does not understand a very basic principle of financial accounting: Income and assets are not the same thing! Rodney could simply have filed bankruptcy instead, but chose to borrow from his retirement account and from family so he could settle instead of file bankruptcy. Mr. Manager also apparently doesn’t grasp the fact that some of his fellow debt collectors *made money* from Rodney’s decision, via commissions earned from those settlements!

Bogus Remark #2: “In addition to that most credit card companies are not willing to extend a low settlement 30%-40% on the dollar without the charge-off.”

I have to scratch my head on this one. All major creditors, with perhaps one exception, prefer to reduce the loss declared at time of charge-off by offering settlements prior to that deadline. During the financial crisis, the banks cleared out hundreds of billions of dollars in credit card receivables through the process of offering direct settlements to distressed consumers. I have thousands of such letters in my database, and about 80-90% of my clients’ settlements are negotiated before the charge-off date. The collector is totally wrong about this statement, but perhaps what he’s actually mad about is that most of this direct settlement activity (before charge-off) did not involve third-party agencies. Translation: If consumers can actually settle on their own with the banks before charge-off, that means a lot less commissions will get paid to collection agencies.

Also, a settlement *is* a charge-off, of that portion of the balance that gets forgiven via the settlement. A “manager” working at a major law firm should be well aware of these very basic accounting facts, but as you may have guessed, one doesn’t need to be a genius to manage a collection agency.

Bogus Remark #3: “Why would the credit card companies forgive that much debt before they get their tax write-off (charge-off).”

What tax write-off? There is no “tax write-off” associated with charge-off. Charge-off equals a loss to the creditor, which means lower profits, which means a lower bill for taxes. Reduced profit is not a tax benefit! It’s a loss, period. Anyone who believes otherwise is welcome to cite the relevant tax code.

Bogus Remarks #4 & 5: “In addition to these funny statements of settling over 100k in debt in 6-10 months (which would be wealthy people taking advantage of the credit card system) thanks for raising my taxes while you have money to pay your debts.”

“Wealthy people taking advantage of the credit card system”? This is completely absurd. As I noted above, the client in question was in desperate straits financially, did not have the income to make his minimum payments, and used his few remaining resources to take the responsible path of negotiating settlements with his creditors.

This type of mean-spirited debt collector cannot allow himself to think for one minute that the debtor might really have a financial problem. Nope. If you cannot “just pay your bills,” it must automatically mean you are a lowlife deadbeat, or a wealthy person trying to scam those poor credit card banks – you know, those same banks that almost brought down the entire world economy. Yep, those poor bankers are being taken advantage of and really need protection from us big bad consumers (aka ZipDebt clients :-)).

And what’s this laughable nonsense about “raising my taxes”? Talk about apples and oranges! There is no relationship whatsoever between the personal income tax rate set by Uncle Sam and losses incurred by the credit card industry. Last time I checked, Congress and the IRS were not too concerned with increasing Federal taxes every time Citibank posts a quarterly loss.

Now, if you are a consumer trying to settle a credit card debt, imagine running into this particular debt collector on the telephone. Here is an individual prepared to rattle off a string of lies with enough confidence to make his pronouncements sound like Holy Writ, who is willing to bully and browbeat a distressed consumer into making payments no matter what. Should consumers expect compassion, mercy, or even honesty and plain dealing from such a collector? Absolutely not. Arrogance, condescension, accusation, and flat-out lying are what you can expect.

Again, when you repeat the same lies hundreds of times per week, you start to believe those lies yourself and become very convincing at telling them to the next person on the list. For consumers to successfully negotiate with this type of collector, training and ongoing coaching is required. Collectors like this one are actually quite easy to handle when you know the ground rules, understand how the collection process actually works, and have some training on how to respond to these tactics. That’s what I do here at ZipDebt. I arm consumers with the tool kit needed to successfully negotiate settlements with original creditors, collection agencies, collection law firms, and debt purchasers.

It’s pretty funny, actually. Whenever I post the results achieved by ZipDebt clients proving that DIY debt settlement is a far more effective solution than hiring a debt settlement company, I’ve been attacked by people working inside the debt settlement industry. I’ve been accused of helping people “game the system,” and told my results were “too good to be true.” Based on the comments posted by Mr. Debt Collection Manager, it seems debt collectors don’t believe me either. I’m fine with that though. If they are mad at me too, I take it as a good sign that what I do works very well for consumers. 🙂

DIY Debt Settlement Myth #10: My Credit Score Will Be Better If I Hire A Company To Settle My Debts

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This is the tenth and final post in a series discussing the most common myths about do-it-yourself debt settlement, as compared to hiring a third-party company. In this article, I’ll discuss the myth that settlements negotiated by professional debt relief firms carry less credit damage than self-negotiated settlements.

Before the FTC really started to crack down on the industry a couple of years ago, the entire subject of credit damage from settlements was downplayed to avoid scaring off potential clients. But if the credit objection was raised, sales reps would often claim that their company would negotiate a more favorable credit rating than the client could on their own. This myth doesn’t come up as often as it did a few years ago, but it’s still sometimes repeated online in debt-related articles, on landing pages for debt relief lead-generation sites, and during sales presentations.

Unfortunately, it’s a fact of life that settlements are damaging to your credit score. There really is no way around this, and there is no magic solution for this problem. Remember – debt settlement is best viewed as an alternative to Chapter 13 bankruptcy, so credit damage is already part of the overall financial picture anyway. The simple reality is that settlements get reported as settlements, period. The reporting language may say, “account settled for less than full balance,” or some variation on that theme, and the code attached to the entry is definitely negative compared to an account held in current standing. There is literally nothing that any company or individual negotiator can do to change this. All of the major banks have existing language in their settlement agreement letters that specifies how they will report, and these policies in turn are subject to the Fair Credit Reporting Act. Even if they wished to – which they most certainly do not! – creditors are not going to forgive a chunk of money AND do extra work to help you clean up your credit in the process. Why should they?

The above notwithstanding, I certainly have no objection to consumers making the effort at requesting a more favorable reporting on their settlements. It’s just that one should never give up a good settlement over this minor detail. When I do see exceptions, typically they pertain to debts that have been sold to a debt purchaser and are also beyond the legal Statute of Limitations. Under those conditions, it’s possible to get the purchaser to remove their separate derogatory entry upon settlement. However, the charge-off entry by the original creditor will usually still be there anyway, so the improvement will be incremental at best.

I have also seen techniques promoted that are very risky, just to give a potential customer the impression that the company has a “better” system for handling credit reporting on settled accounts. For example, some outfits claim they can have language inserted into the settlement letter that classifies the written-off balance as a disputed amount. Supposedly, this results in avoiding a 1099-C on the forgiven debt, and also gets the account reported under disputed status (and potentially even deleted outright). The problem with this approach is that it totally negates the value of the settlement agreement letter, leaving the consumer exposed to further collection activity – a far worse outcome than simply dealing with the expected credit impact of a reported settlement.

The bottom line is that there is nothing special a debt settlement company can do to reduce the damage to your credit score associated with reported settlements, so there is no credit-related advantage to be gained by paying someone else to do the negotiating. Further, it’s not all that difficult to restore your credit after completing the settlement process anyway. So there is very little reason to be concerned about this issue in the first place.

Myth busted. Settlement companies have zero influence on the manner in which settlements are reported on your credit file. Self-negotiated settlements will be reported in exactly the same fashion as professionally-negotiated settlements, and you can restore your own credit later on anyway.

DIY Debt Settlement Myth #9: I Just Make One Monthly Payment And They Will Take Care Of Everything For Me

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This is the ninth in a series of posts discussing the most common myths about do-it-yourself debt settlement. In this post, I’ll discuss the myth that a traditional debt settlement approach provides peace-of-mind for consumers who enroll in such programs. What many consumers want is to be able to make a single monthly payment into their debt program, with the expectation that the debt company will handle everything smoothly from there, with little to no involvement required by the client. Consequently, the sales pitch for traditional debt settlement is built around this important need.

In theory, you make a single monthly payment into an “escrow” account to build up funds for settlement, and the company is supposed to handle all contact with your creditors. However, out here in the real world there is a big problem with this approach. I’m referring to the initial 6-month period that leads to charge-off status for your accounts. With most major creditors, the account is worked by an in-house team of collectors up to the point of charge-off, although there are exceptions where pre-charge-off accounts are outsourced to a third-party collection agency. Either way, your creditors do NOT want to hear from a debt settlement negotiator. They want to talk to YOU instead.

How does your debt relief firm handle this problem? The short answer is: They do nothing for the first six months! Needless to say, making payments into the program for six months when literally nothing beneficial is happening is hardly conducive to peace-of-mind! For many people, it represents some of the most intense stress they have ever experienced.

This is a real dilemma for the traditional debt settlement company. If they send out a Power-of-Attorney or a cease communication notice during this initial 6-month phase, it could prompt the creditor to escalate early and place the account with a law firm in the client’s home state. This almost automatically creates a pressure-cooker situation and results in high percentage settlements at 70-85%, or payment programs for the full balance all over again. So a savvy negotiation company won’t send out such triggering documents, and instead they will coach you to lay low and just let the accounts go past charge-off, after which they will intercede with the assigned third-party agencies and try to negotiate settlements on your behalf.

Meanwhile, you will continue to receive a barrage of collection phone calls and scary-sounding notices. As anyone who has ever been on the receiving end will tell you, peace-of-mind goes out the window when the collection bombardment kicks into gear.

To make matters worse, by going the route of traditional debt settlement, you cost yourself six precious months of inactivity, a period in which some of the best settlements become available (at less risk to you legally). So virtually nothing gets “taken care of” during that very important initial period. After that, creditor contact on the part of a debt settlement company is still minimal – they generally wait until you have enough money built up in your account for them to start making offers.

Myth busted. The “just make one payment per month and we’ll handle everything” approach sounds great in theory, but it only adds to your stress rather than reducing it. Little or no creditor contact takes place for the first six months, and after that, usually only when you have money to settle with. Meanwhile, it’s open season on you, with all the usual collection actions taking place, including potential legal action. Instead of waiting six months to start, it’s far more effective to tackle the project on your own, so you can take advantage of the settlement opportunities offered directly to consumers on accounts approaching charge-off.