Many consumers who struggle with unpaid bills have come across an offer that seems too good to be true. The offer comes in the form of Debt Management Plans (“DMP”) from a debt settlement company and it may go something like this:
“For a fee, a professional debt management company will help you get rid of your debt for as little as half the amount of debt you owe.”
Most people will admit that offer of debt management plans to settle all your debt for half of what is owed is a tempting offer to consider. This is especially true when facing financial distress.
Sound Like a scam? The answer is that DMPs are legal solutions for consumers. However, hiring a debt settlement company is fraught with risk and there are things that consumers should know before entering into an agreement with a debt settlement company.
Debt Management Plan Services
In theory debt settlement companies are supposed to help you negotiate your debts. In practice, however, that really does not happen.
No action by debt settlement companies
During the first couple of years that you’re saving money, the debt settlement company does nothing but withdraw fees from an escrow account that they have access to. More than 90% of consumers who have chosen a Debt Management Plans think they’ve taken care of the problem after contacting the debt settlement company, but the reality is the company hasn’t settled anything in the beginning.
Calls from creditors
Most debt settlement companies will claim to help you dodge collections calls. This is not true. As a matter of fact many creditors will escalate an account once they determine that you are working with a debt settlement company.
Dropped accounts
Most debt settlement companies fail to disclose that once a creditor takes legal action your account will be dropped. The reason they drop your account is that they cannot give legal advice or represent you in court.
Fees
The most discouraging thing about debt settlement and DMP providers is that there is no standard fee. The fee and fee structure is very inconsistent and most companies will not commit to giving you a set fee. Some companies charge a percentage of the total debt — typically 15% or 18% — which is paid before you start accumulating savings. Others will typically charge 25% of the debt savings – once you settle – plus an initial sign-up fee and monthly service charges.
Many consumers shrug off the ridiculous fees because they are fearful of filing for bankruptcy. However, before you hire a debt management company out of desperation, you should consider the success rate of debt management and debt consolidation cases.
Did you know that when you fall further behind on your debts, creditors are more likely to enter settlement negotiations than face the risk of bankruptcy? As such, the general rule is that creditors will not negotiate with consumers who are current on their payments.
Get Help Now
Don’t face the risk of a DMP with a debt settlement company. Stop annoying creditor calls and eliminate your debt by filing for bankruptcy. Call Dantzman & Danztman today to learn how we can HELP you solve your problems, not add to them.