Q: What is a debt settlement company?
A: A debt settlement company offers to help you negotiate a settlement of your debts with your creditors (often credit card companies) or debt buyers. The company gathers information from you about your debts and your assets, and collects money from you and makes proposals to your creditors to resolve your debts.
Q: I received an unsolicited call from a debt settlement company. How did the company get my name?
A: If you have been sued for nonpayment of debts, the company likely found your name through court records, which are generally available online.
Q: What do debt settlement companies charge?
A: They often charge an upfront and/or a monthly fee in addition to the money you give them so they can negotiate with your creditors.
Q: What should I know before hiring a debt settlement company?
A: You should thoroughly investigate any debt settlement company before you sign on the dotted line. Be aware that, while your money is being held by the debt settlement company, interest will continue to be charged on the bills you owe your creditors, so any settlement the company makes with creditors on your behalf will be made on a larger debt balance. Signing up with a debt settlement company does not stop a creditor from filing suit or from reporting your account to the credit bureau as past due. Also, if you have already been sued, the debt settlement company cannot stop or help you settle your lawsuit. The lawsuit will continue, often leading to a judgment against you and garnishment of your wages. Debt settlement company advisors are not attorneys, so they cannot appear in court on your behalf.
Q: Are there any alternatives to hiring a debt settlement company?
A: There are several alternatives. First, you can negotiate with your creditors yourself. Or, if you would like assistance with these negotiations, you can seek help from a nonprofit consumer credit counseling organization. Finally, you can consult with an attorney to review all of your debt settlement options, which could include bankruptcy.
This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Terry D. Zimmerman of the Akron firm of Kaffen & Zimmerman.