How Much Does Debt Settlement Cost?
The best things in life may be free (at least according to the once-popular song), but debt settlement is not. Even if you choose to settle your debts by yourself, you will (obviously) need to pay any lump sum amount you agree to pay your creditors. If you enlist the assistance of an attorney or company to assist you in settling your debts, you may end up settling your debt for less than you would if you settled the debt by yourself; however, you can also expect to pay a fee for the services that are provided.
Here are some of the costs you may encounter during the debt settlement process, aside from the actual lump sum payment paid to your creditor(s):
The Federal Trade Commission recently enacted rules that banned some debt settlement companies from charging upfront fees for their services. But these rules mainly apply to for-profit debt settlement companies who sell their services over the telephone. A debt settlement company that sells its services through face-to-face contact with a representative, for instance, would not be covered under these rules.
Regardless of whether you are responsible for upfront fees, these fees should not be excessive given. Beware of debt settlement firms that require you to pay thousands of dollars in upfront fees before the firm will attempt to settle your debts. Many unwary debtors have been taken advantage of by these firms when the debtor pays these fees and the debt settlement company disappears without performing any services on behalf of the debtor.
Fees for Debt Settlement Services
If an attorney or business is helping you settle your debts, expect to pay fees in connection with the services you receive. Employees of debt settlement businesses will spend a sizeable amount of time communicating with your creditors and negotiating a lump sum payment that satisfies the creditor and works with your financial situation. To compensate them for the work of their employees, debt settlement professionals and companies may charge fees using one of the following three methods:
- A set or certain fee, in which the debtor pays a certain fee (either as a lump sum or as an hourly rate) for services performed, regardless of the ultimate outcome. For instance, a company may charge you $100 per hour for each hour spent working on your case.
- A fee contingent on money saved, in which your fee will be a percentage of the total amount of money the debt settlement firm saved you. For example, a company may charge you a fee totaling 20% of the total amount saved. If the company settles $100,000 for $40,000, your fee would be $12,000 ($60,000 saved x 20% fee).
- A fee contingent on what you owe, in which your fee is set at a percentage of the total amount of money the debt settlement company is attempting to settle for you. In the example above, the fee under this method of calculation would be $20,000 ($100,000 in total debt x 20% fee).
Does It Pay to Have Help Settling Your Debts?
Seeing the types of fees that can be charged may be a little disheartening for some. Some may believe it is better to settle their debts on their own and “save” by avoiding debt settlement fees. But creditors react differently when debtors attempt to settle their debts on their own, and some may end up requiring a much higher lump sum payment. This can negate any “savings” and, in some cases, leave you in a worse financial situation.
At Instant Settle Consultants, PLLC, we are committed to helping debtors resolve their debts and move on with their lives. This means helping you resolve your debts for a fraction of what you owe and keeping our fees and costs reasonable. Learn how our experienced debt settlement lawyers can help you today.