Traits of Legitimate Debt Relief Companies

3 min

“Are you plagued with debt that just won’t go away? We can help you resolve those debts for pennies on the dollar—guaranteed,” said no legitimate debt relief company—ever.

This line is but one of several common debt relief scams bad actors in the debt relief space employ to try to hook people seeking workable solutions to outsized debt issues. Here, we’ll take a look at some of the traits of legitimate debt relief companies to help you separate the wheat from the chaff.

But First, You Should Know—

You can negotiate debt settlements on your own. However, it is a process requiring time, patience and good negotiating skills. Many creditors will not take you seriously until it looks like you’re about to file for bankruptcy protection. They will ask for all sorts of documentation, run you around in circles and shuffle you from person to person before you begin to get traction. Meanwhile, creditors respond immediately when a legitimate debt settlement company contacts them.

Other Things to Know

Upfront settlement fees are not a thing at debt relief companies operating on the up-and-up. In fact, it’s illegal for a debt relief company to request a settlement payment from you before they’ve negotiated a payoff agreement you’ve approved and authorized to be funded. In other words, they’re operating outside the law if they’re trying to get debt settlement fees out of you before they’ve provided the service.

Guarantees do not fly in the debt settlement world. Every situation is different and each person’s circumstances are different. Therefore no legitimate debt relief company will guarantee you’ll get a settlement offer.

This is true even if a debt settlement agent and a creditor’s representative just reached a similar agreement for another client. Settlements are decided on a case-by-case basis. What might work for others might not be right for you.

Complete transparency about the fees they charge, the types of debts they settle, the consequences of settlement agreements and those of the process itself is a good sign.

A number of the aspects of the debt settlement process might be off-putting at first glance. Legitimate companies address those concerns right away, rather than keeping mum about them until you’ve signed a contract. You can learn more about this at

Simply put though, the best debt relief companies want well-informed customers who are completely aware of the following aspects of the process:

1. Collections Activity – You may still receive calls from collections agents while your debt is in a settlement program—until you send them a formal request to refrain from contacting you. A legitimate agency will tell you this as part of the onboarding process, and help you draft the letter.

2. Fees – In most cases, fees range from 15% to 25% of the amount of debt you bring to the program. Honest companies will tell you this up front as well, rather than glossing over the costs you’ll encounter.  Customers also typically encounter a one-time set up fee and a monthly account-servicing fee. These usually run approximately $9.95 each and are legitimate charges.

3. Credit Scores – The debt settlement process can exact a toll on your credit score. After all, your debts will be listed on your report as unpaid until they are settled and paid per the negotiated agreement. Frankly though, your credit score has already declined dramatically if you’re in a situation in which debt settlement is your best option.

However, once all of your debts are cleared, you can begin rebuilding your credit history.

4. Timing – The amount of time required to complete the process will vary. Determining factors include the total sum of the debts in question, how much money you can afford to put toward your settlement fund each month and the number of debts with which you have to deal. Generally, the process takes anywhere from two to five years.

5. Tax Considerations – Some creditors report forgiven amounts to the IRS, which will then look upon them as income on your part. This could mean paying income tax on the forgiven portions of your debts. The best debt relief companies will make sure you understand that as well.

Long story short, when it comes to the traits of the best debt relief companies, the overriding one to seek is honesty. They should be forthcoming about everything you must do to reach settlement agreements, employing their services. Refuse to do business with anyone who fails to answer all of your questions openly and honestly.

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