Do Debt Negotiation Companies offer any Value?

Debt negotiation companies offer to help those who are heavily in debt find a way out of their financial quagmire without having to file for bankruptcy.  These debt negotiation companies promise to:

• Get creditors off your back and stop the harrowing calls from lenders and collection agencies
• Pay off your debts for thousands less than you owe
• Do the heavy lifting for you, to free you from the weight of having to manage multiple debt accounts
• Help you get out of debt faster

Are Debt Negotiation Companies Legitimate?

While these promises sound like music to a debtor’s ears, they are often too good to be true.  In fact, there are very few, if any, truly reputable debt negotiation companies.  Most, if not all, have been reported for fraud and have terrible ratings with the Better Business Bureau (BBB).  In some cases, they are even being sued by various states’ attorneys general! 

What to Do Before Hiring Debt Negotiation Companies

Here are some specific things to do as you examine various debt negotiation companies and their claims: 

• Ask questions.  What fees are you being charged for these services?  What are the terms of the services you are being offered?  How will negotiations with your creditors be handled specifically?  Is the company willing to let you speak to other “satisfied” customers for references?
• Avoid the fees.  Many of these companies charge outrageous fees, either when you sign up or each month after, to help you get out of debt.  These fees could be better spent simply paying off your creditors directly, so BEWARE!!
• Read the fine print.  These companies are very good at what they do, and they can truly make even well-educated, well-meaning individuals believe that they are actually saving money by work with this firm.  So be sure to read the fine print before signing any agreements. 
• Beware of lures.  Many times debt negotiation companies will offer free resources and information, but then refuse to provide that information without requiring that you offer them your personal financial information.  This is known as a “lure,” and is simply a fraudulent tactic used to hook you for services you may not want or need.
• Watch out for enrollment tactics.  Many of these companies will try to enroll you in plans where you pay them, and they pay your creditors.  You must not sign up for such arrangements without first having a complete review of your financial situation, learning budgeting and money management, etc.  Do not sign up to give these companies any money whatsoever without completely understanding what you are getting in return.

Getting Help

If you need help dealing with debt or negotiating with creditors, it may be in your best interests to work with an experienced attorney who specializes in debt settlement and negotiation, instead of working with a debt negotiation company. Such attorneys have established relationships with the creditors, but unlike debt negotiation companies, the ethics code of the legal profession mandates that they charge you only fair fees and that your interests are put first throughout the relationship.