Top 5 Questions Asked to Debt Settlement Companies
In recent years, debt settlement companies have been cast in a somewhat negative light, and it is easy to understand why. During the economic collapse of the early to mid-2000s, American consumers became overwhelmed with debt, and this made for a potentially huge audience for debt settlement companies as Americans wanted to try everything to keep from declaring bankruptcy.
As a result, this caused a very large number of illegitimate debt settlement companies to flood the market. A lot of these companies were scams, designed to either take customers’ money, or to sell their information to other unscrupulous companies. So, it makes sense that customers might be hesitant to work with a debt settlement company.
However, the truth remains that there are still a lot of legitimate companies out there wanting to help their customers get out of debt. So, here is how to address the top five customer concerns about debt settlement companies.
Will Debt Settlement Ruin My Credit?
If a customer is current on their payments, a creditor will refuse to negotiate a settlement. Most creditors tend to only negotiate with customers who are already in a hardship situation. Because of this, the customer’s credit is already going to be suffering as a result of missed payments before they choose to learn about debt settlement.
That said, having debt settlement on a credit profile will cause the customer’s credit rating to drop a little further. But, during the debt settlement program, the customer’s total balances are being lowered gradually as the payments are made, and this will gradually start to improve their credit.
Can I Pick and Choose Which Debts to Settle?
When a debt settlement company contacts a creditor to negotiate a settlement on a customer’s behalf, the first thing the creditor is going to do is review the customer’s credit report. If the creditor sees that they are the only one being negotiated with or other creditors are getting paid larger percentages of the customer’s debt, then that creditor may not be willing to negotiate.
For this reason, in most cases, a customer should be advised to settle all of their delinquent unsecured debt instead of picking and choosing certain debts.
How Can I Tell If Your Agency Is Legitimate?
You should explain to the customer that your company is a member of The American Fair Credit Council (AFCC), the largest trade association serving the debt settlement industry. This proves that your company complies with the AFCC’s strict industry standards. You should also offer the customer proof that your company is licensed by your state to legally provide debt settlement services.
Will I Pay My Creditors Less Than I Owe With Debt Settlement?
When a customer works with a debt settlement company, their debt is negotiated down to a reduced amount, and the agreed-on amount is paid off in a lump sum. Typically, customers can expect their debts to be settled on average within the range of about 15 to 75 cents on the dollar.
For customers with outstanding debt, this can be a good opportunity to regain control of their finances because they simply have to pay one monthly payment for the duration of the program and their debts will be settled once the program is completed. Creditors are usually very willing to settle for lower amounts when a customer is in hardship because they want to avoid the customer filing bankruptcy or simply stop paying.
Will Debt Settlement Affect My Taxes?
The IRS considers forgiven debt as income. So, if a customer has $10,000 worth of debt on their credit cards and your negotiators get the debt down to $6,000, then the forgiven amount ($4,000) is considered taxable as income. But, you should explain to your customer that the IRS will usually waive this tax liability if they are able to show that they were insolvent during the time in which the debt settlement took place.
A debt settlement company has distinct responsibilities when dealing with a customer’s debt. However, by providing your customer with peace of mind by answering all of their questions and concerns in a clear and precise way, you will be able to help solve their debt problems so they can regain control over their finances, their credit, and their lives.
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