Every business owner who hands their debt to a settlement firm eventually asks some version of the same question: Why isn’t this working? Why am I paying more money, but my debt isn’t going down?
Debt is the engine that powers the world economy, for better or worse. It’s an awesome thing when used correctly, but over your head, it’s a miserable place to be: it puts a target on your back that attracts scammers, and it ties up the future. Here’s one trick scammers use - the scam does not look like a scam. Instead, it looks like some professional-sounding debt settlement or debt relief company. They contact you, and offer to help settle your debt. When this happens, you’re vulnerable. You’re likely experiencing some amount of overwhelm, especially under the pressure from creditors. And when you’re stressed, it’s easier to make bad decisions. It doesn’t matter if you’re smart - don’t think you won’t fall for this.
Once you sign, the negotiating happens out of your sight. On the surface, that means you get to leave the stress of talking to creditors alone. Most of the work is done for you. But it also means you are operating almost entirely on faith. Too often, the owner hasn’t realized that the debt settlement company is running a scam until it’s too late. The debt settlement company took their client’s money and stopped returning their calls. And at this point, they have no idea what happened.
Tell a Firm That Is Negotiating from One That Is Only Stalling
So how do you tell a firm that is negotiating from one that is only stalling? Start with the simplest test there is: look at your debt. Is it going down? Debt settlement is supposed to be the method by which the debt goes down. If it isn’t going down, the firm has some explaining to do. It can’t be complicated to measure that. But it is difficult to do, and that’s why you hire a firm to do it for you.
The second test is even simpler. Call them. I’m not kidding. Call. Ask them to tell you how they are settling your debt. Is there a person on the other end of the phone? Are they responding at all? What are they saying? If there’s no one there, or if the person at the other end of the phone can’t give you any updates, you should be concerned. The firms that leave owners stranded tend to be the ones that simply stop answering.
Sometimes the signs were there, even before you signed on. When you sign up with a legitimate company, it typically starts by taking a close look at your paperwork to make sure it understands your situation. If it’s a scam they won’t need to do that as they never intended to help you in the first place. Be wary, too, of any firm that guarantees a result. Many firms can make big claims but actually have no method of getting to the promises they are making. They can’t guarantee that, because a firm cannot know in advance what a creditor will or won’t accept. If you are asked to cut off all contact with your creditors, run. Firms that spin tales of legal loopholes and “government programs” are concentrating on smoke. And legitimate firms almost never cold-call.
Fees deserve the same scrutiny. A good firm also won’t ask for a fee before it’s done anything for you; the ones that do sometimes disguise it as payment to your creditors. At Delancey Street, our fee is a single percentage of the total enrolled debt, quoted in writing before any work begins.
Even an Honest Firm Carries Risks
Still, a lack of progress is not necessarily a sign that your firm is not working for you. Even an honest firm carries risks. You’re instructed to stop making creditor payments while negotiations are underway, which gets reported as missed payments and chips away at your credit. Settlements can take years to complete. Accounts might be charged off, and some creditors may file lawsuits. You should enter this process with your eyes open. If a creditor does sue, that becomes a legal matter. We are not a law firm; when litigation is the right call, we refer owners to a vetted independent attorney.
Shopping for Help
If you’re still shopping for help, type the company’s name into a search engine. If there are multiple bad reviews, or none at all, choose another provider. But settlement isn’t the only option. A debt consolidation loan can combine multiple debts into a single loan with a fixed interest rate and monthly payment. Note that if your credit is not great, this may end up costing you a lot in interest charges. You can also call your creditors yourself. No need for a middleman; with a little luck, you might be able to strike a deal. An arrangement is not guaranteed. You won’t know until you ask. You could also consider a non-profit credit counselor. They may be able to set up a debt management plan. You make one payment to them and they pay your creditors on your behalf. That kind of plan is likely to be gentler on your credit than settlement.
So you hired a debt settlement company, but now you’re second-guessing whether it’s the right choice. Do the tests above, and see if you can determine whether you’re dealing with a pro or a con. It’s a tricky world out there. Carrying this much debt over your head is bad for the bottom line, and bad for your peace of mind. It is important to know when the company you hired is not living up to your expectations, and is dragging out the process or not giving you answers. If you want a second opinion, a first consultation with Delancey Street is free and confidential, and if your case can’t be won or a cheaper option exists, we will tell you so on that first call.
