What Fees will you Pay for Debt Settlement?

When you get involved with a company to settle your debt, you need to know what you are getting into. Do the research, because there is a big variance in what you will be charged to settle your case. Debt settlement companies can negotiate your debts for you and can save between 30-75% of the debt that you owe, but they will also charge you fees to do this. Make sure you know how the fees are being calculated, then shop your case around. There are no standard fee for the debt settlement industry. Some charge a percentage of the debt you owe, others charge a percentage of the amount they save you. Most companies also charge a setup fee and monthly. Be aware, before you sign anything.

A debt settlement company will usually charge you an upfront fee (from the 1st payments that you make), or  will take a percentage of the monthly fee that you pay each month. There also may be administration fees to set up the account. But, they will be negotiating a single reduced payment to you creditors in-exchange to settle your existing balance. When you are done, you will have a zero balance (this whole process will take 3-5 years) .

Debt settlement is a good option for people that are considering bankruptcy. If you are about to go bankrupt and are months behind on your payments, your creditors will have the motivation to reduce your balance. But, if you are caught up on your monthly payments, debt settlement may not be right for you. Settlement may be a good alternative to bankruptcy because it will spare your credit score from being severely penalized for 7 years. It may also allow you to keep you property, which may not be the case if you file for chapter 7.

With chapter 7 bankruptcy you have to liquidate your assets and property, excluding an “exempt property” which may differ depending on the state you reside in.

You will still be penalized for your late or defaulted payments, but not as severely. But, once you have settled your debt, it will show as a $0 balance on your credit report.