What Every Consumer Should Know About Debt Forgiveness

Late night television is packed full of advertisements for debt settlement companies. Many people seeking debt relief options may be persuaded into using such services, some of which are not legitimate. In such cases many financially strapped people end up in worse financial condition.

The question is: is debt forgiveness legitimate? The short answer is: it depends.

Debt Forgiveness

The biggest problem to answering whether debt forgiveness or debt settlement is a legitimate process comes from the lack of definition. The industry lacks regulations that require a clear definition, which leaves room for companies to offer different types of services under its name. With so many different companies offering to settle your debts for "pennies on the dollar" or "erase debt overnight", it is hard to know whether these options will provide the financial relief you are looking for in a way that is best for your situation.

However, there are a few things to know when considering debt elimination options. First of all, bankruptcy is not the only way to financial freedom. Although it can be a valuable tool, bankruptcy is reserved for those that cannot afford to repay their debts or maintain their monthly payments. Secondly, debt settlement is possible, but finding the right company can be challenging.

Third Party Negotiations

A good rule of thumb when seeking debt relief options is to contact your creditor directly. Often, you can negotiation a debt settlement plan with your creditor directly. In many cases, negotiations involve changing the terms and conditions of the existing account, which means a new contract must be formed. Problems in debt settlement are often the result of using a third party mediator and not being able to ensure the new contract of modified conditions was approved by the creditor.

Many companies will offer to negotiate on your behalf in order to save you time and money. This problem is twofold (1) they will always charge you fees for their services and (2) it is difficult to know what you are agreeing to as they settlement contract may not present all of the fine print. Because debt forgiveness means that creditor is willing to absolve you of your debt liabilities, the arrangement should be clearly defined.

The Right Company

If you decide to use a debt settlement company, be sure you found a legitimate one by looking for the following:

The company has been in business for several years; or is rated by the Better Business Bureau.

They do not charge up-front fees for the services; or offers to rebate your money if no settlement is reached.

They offer a variety of services, such a credit counseling or debtor education courses.

They provide you an open line of communication with your creditor; and provide a copy of a negotiated settlement.