Sarah Edwards | January 24, 2023
Summary: Debt settlement allows consumers to negotiate their outstanding debt with creditors. In a successful debt settlement, the person in debt makes a reduced lump sum payment in exchange for a full release from the obligation. How do I know if a debt settlement company is legitimate? SoloSuit explains below.
If you’re embarking on a debt settlement journey, you’ll want to find a company that isn’t looking to scam you out of your money. After all, you’re probably going through the process because you need financial help — you don’t want to worsen the situation.
Are you wondering, “How do I know if a debt settlement company is legitimate?” Here are a few of the things you’ll want to look at.
One indicator of a scam company is lots of hefty upfront fees. If you’re trying to settle your debts, you don’t want to incur a heap of added expenses. The additional costs will eat into any savings from your settlements. And you definitely don’t want to pay a company up front when it hasn’t proven it can help you.
Instead, search for a company that doesn’t charge fees until after it settles your first debt. Make sure you understand the fee arrangement; most companies charge between 15% and 25% of the total debt for their services. If your organization charges more, it’s worth taking another look to see what’s out there.
Another indication of a bad debt settlement company is over-the-top guarantees. For instance, if the organization claims it can settle your debt for 5% of its total value, be very wary. A more realistic settlement is between 40% and 80% of the debt.
Other red-flag promises include a company that declares it has access to a particular program for debt settlement through the government or a secret formula it uses to eliminate debts.
Occasionally, scammy debt settlement agents will assume the role of a debt collector. They’ll tell you that you’ll face legal consequences for not paying your obligations, like a lawsuit or jail time.
While it’s possible that your creditors may start a lawsuit against you for not paying your debts, it’s doubtful they can put you in jail. There is no debtor’s prison in the US. Run like the wind if a debt settlement agency tells you otherwise.
Most states require debt settlement agencies to carry some form of licensure, such as business licenses or specific certifications that allow them to help consumers settle their debts.
Before enrolling in any debt settlement program, ask about the company's accreditations. It should be able to tell you whether it has a license from your state or other certifications, such as with the Better Business Bureau (BBB) or American Fair Credit Council (AFCC).
Are you facing a debt lawsuit? SoloSettle can help you settle your debt before your court date.
When working with a debt settlement company or its representatives, you might sense when it’s not all it claims to be. If your gut is telling you that something isn’t right, pay attention.
Let’s consider an example.
Example: Anna has $10,000 in credit card debt she wants to settle with three creditors. She contacts Sneaky Pete’s Debt Settlement Service after seeing an ad for its services online. Sneaky Pete tells Anna he can settle her debt for $1,000. He tells her to transfer the money directly to him, and he’ll use it to pay off her creditors. Sneaky Pete doesn’t provide any contract for his services nor ask her which companies she owes money to. He tells her not to worry about her debts anymore; she’ll have perfect credit after he does his magic. Anna’s on the fence. She feels this might be a scam (it is), and she decides to look at other debt settlement companies. She tells Sneaky Pete thanks, but no thanks. Anna made the right decision. Sneaky Pete’s services had a lot of red flags, such as big promises and a request for upfront payment. Anna can find another service that isn’t so sneaky.
Make sure you understand the tax consequences of debt settlement by watching this video:
Debt settlement can be a fruitful way to move on from a bad financial situation, but you don’t want to cast your net with a company that isn’t legitimate. Learn all you can about a settlement agency before agreeing to accept its help.
Unlike most debt settlement companies, SoloSettle uses a tech-based approach to help you settle the debt yourself.
Most debt settlement companies use a passive approach to negotiate a debt settlement for you. SoloSettle assertively reaches out to debt collectors on your behalf by sending and receiving settlement offers. You will stay in the loop with each stage of the process, and as soon as a debt settlement is reached, SoloSettle manages the agreement documentation and payment.
SoloSetlle is also powered by SoloSuit, which means if you are sued at any stage of the settlement process, you have a legal defense built in when you use SoloSuit to respond to your case.
Let’s take a look at an example of how a real SoloSettle customer settled his debt.
Example: Dan’s credit card company sold his debt account to Midland Credit Management who sued him for the $1,700 debt. He used SoloSettle to send a settlement offer of $300. Starting low gave him plenty of room to grow as Midland sent him a counteroffer. After a few rounds of negotiations, they were able to reach a debt settlement of $1,100. Dan saved hundreds of dollars, got the case dismissed, and gave himself a financial rest.
Check out Dan’s experience in his own words:
“I'm very thankful for SoloSettle.. Having a third party negotiate the settlement was instrumental in resolving this case and saved me from two giant headaches: 1) I didn't have to deal with the plaintiff's lawyer and 2) I didn't have to go to court. I also love that the payment was processed through SoloSettle. I was nervous about sharing my personal financial data with the other side, but SoloSettle protected that for me. I hope I never get sued again, but if I do, I would use SoloSettle again in a heartbeat.”
SoloSuit makes it easy to fight debt collectors.
You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.
SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.
Here's a list of guides for other states.
Being sued by a different debt collector? Were making guides on how to beat each one.
You can ask your questions on the SoloSuit forum and the community will help you out. Whether you need help now are are just look for support, we're here for you.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.
Out Debt Validation Letter is the best way to respond to a collection letter. Many debt collectors will simply give up after receiving it.
"Finding yourself on the wrong side of the law unexpectedly is kinda scary. I started researching on YouTube and found SoloSuit's channel. The videos were so helpful, easy to understand and encouraging. When I reached out to SoloSuit they were on it. Very professional, impeccably prompt. Thanks for the service!" - Heather