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Friday, February 20, 2009

The Truth with Debt Negotiation Companies

By Paul J. Easton

Some debt negotiation companies describe itself as a nonprofit organization. However, with over hyped marketing world today there is no guarantee that their services are always legitimate.

Debt negotiation is a way to settle your debt with only paying a percentage through a debt negotiation company. There is definitely no guarantee that a creditor will just accept partial payment of a legitimate debt. In most cases, if you stop making payments on your credit card, late fees and interest are still added to the debt each month. If you also exceed your credit limit, another set of additional fees can also be added. And this can cause your original debt to double if not triple. The worst part is that debt negotiation companies can charge you considerable amount as fees for their services. This usually includes a fee to establish the account with the debt negotiator. It even charges you a monthly service fee and, sometimes, a percentage of the money you supposedly have saved.

It might be true that creditors have no commitment to really agree to negotiate the amount a consumer be indebted; they still have a legal responsibility to provide accurate information to the credit reporting agencies. This includes your failure to make monthly payments too. This, unfortunately, can impact negatively on your credit report.

And in worst situations, creditors may have the right to sue you just to recover that money you have a loan from. When creditors win a lawsuit, they have the right to put a lien on your home. Lastly, the Internal Revenue Service always takes into account any amount of forgiven debt and this is treated as taxable income.

If you just make a decision to work with a debt negotiation company, make sure to check it out with your state Attorney General or the local consumer protection agency. They can be a good source for any consumer complaints on file about the firm you are considering. Also ask if the company is licensed to work in your state.

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