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Debt Consolidation Facts

1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.

Debt Settlement Agreement

As in all walks of life, there is good and evil in the debt settlement agreement arena.  There are reputable debt settlement agreements and there are those created for the sole purpose of ripping you off.  You’ll need to know what to look for and be able to identify a scam when you see one.  You don’t want to be counted in their carnage.

Good One

 What constitutes a good debt settlement agreement?  For starters, the agreement must be tailored to fit your own personal debt settlement needs.  In other words, it must reflect exactly what you discussed with your creditor when you and your creditor agreed on the terms.  Nothing more, nothing less.

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Bad One

There are many suspicious items to look for in a debt settlement agreement.  You may find that the terms have changed, the amount due is changed or there is verbiage missing that should be there to reflect what you agreed to.  If you find anything amiss or anything added that should not be there, take out a pen and start making amendments. 

  • Scratch out any verbiage that contradicts what you agreed to.
  • Scratch out any added requirements that you did not agree to. 
  • Add the verbiage that should be there. 
  • Create a new document with all the correct language.
  • Always make copies of any written exchanges with your creditor.  Make a copy of the creditor’s original document you modified and the new one you created.  Send the originals to the creditor with a cover letter explaining all of the changes.  Mail it Certified Mail Return Receipt Requested.
  • Do not sign or pay anything until you receive a correct copy of the debt settlement agreement with the creditor’s signature already on it.

Another item to note is that your creditor may send you a complicated agreement.  There is nothing wrong with your creating your own agreement to ensure its accuracy.  Use your creditor’s original format, but modify the confusing language to reflect common terms that you understand.  Again, copy everything for your records and mail the originals to the creditor for signature.

Specific Content

There are certain standard items that should be included in every debt settlement agreement.  Make sure all these are present on your debt settlement agreement before you sign:

  • Name of creditor.
  • Your name.
  • Specific amount you agreed to pay.
  • Date by which you agreed to pay the debt.
  •  If you agreed to make payments – include specific amount of payments, frequency of payments and lifetime (duration – e.g., number of months, years) of payments.
  • The creditor agrees that the settled amount constitutes the debt as paid in full.
  • Specific language stating that the creditor agrees to remove all negative information, and agrees to never place negative information on your credit report in the future.
  • Signature of creditor.  Don’t sign unless the creditor has already signed.  Send it back for creditor’s signature.

Payment – Legal Loopholes

Depending on the state, you may run into some unavoidable legal loopholes when it comes to your payment.  Of course, you will always want to write paid in full in the memo line of your check/money order when you submit payment to the creditor for payment.  For extra measure you should also write on the back of the check, “The cashing of this check warrants that this account is paid in full.”

Note that if you DO NOT, collection agencies can hire out the forgiven part of your debt to be collected by another agency.

There are 19 states that enforce this; however, 13 states have modified this rule.  For these states, all the creditor has to do is write in the specific language under protest or without prejudice near his signature. This retains the creditor’s right to collect from or sue you for the remainder of the balance due, but the creditor has to use that exact language.

In California, creditors have the right to cross out the "paid in full" language and pursue you to collect the difference.  Coincidentally, this state also provides a process for the debtor to get around that.

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Debt Settlement Companies

Have you come to the point where trying to work out a debt settlement with your creditors is just not working?  If so, you may want to consider enlisting the assistance of a debt settlement company.  There are a few things you’ll want to check for when considering a debt settlement company. 

Company Address

When visiting a debt settlement company’s site, make sure you can find their physical street address somewhere on the site.  If it’s not found on the homepage, you can typically find it when you click on the Contact Us tab/button.  If you do not find it anywhere on the site, move on to another company.  The only exception would be if you find the Better Business Bureau seal on the site.

Better Business Bureau

Did you see the seal of the Better Business Bureau (BBB) placed on the debt settlement company’s website?  If so, this is a good “sign.”  In order for a business to be BBB certified, they must meet fairly stringent qualifications and adhere firmly to established BBB rules.  If you see the BBB seal, this means that the company meets rigorous BBB’s requirements. 

The Internet is littered with debt settlement companies.  Several found by a quick search are as follows:

Heritage Debt Relief
105 S. Canyonwood Dr.
Suite D2
Dripping Springs, TX  78620
(866) 852-2273

Internext Technologies
Debt Consolidation Care
711 S. Carson St.
Suite 4
Carson City, NV  89701
(800) 601-1579

Trident Debt Solutions, Inc.
1444 Stuart St.
Denver, CO  80204
(303) 520-3414

Debt Relief America
3100 S. Harbor Blvd.
Suite 250
Santa Ana, CA  92704
(800) 470-8155

American Debt Foundation, Inc.
4491 S. State Rd. 7
Suite 213
Ft. Lauderdale, FL  33314
(866) 626-4718 or
(866) 411-3328

Option One Financial Group, Inc.
4631 NW. 31st Ave.
Suite 144
Ft. Lauderdale, FL  33309
(800) 797-7813

Turning Point Debt Settlement
3450 Wilshire Blvd.
#1124
Los Angeles, CA  90010
(888) 900-9225

Christian Debt Counselors
201 SE. 15th Terr.
Suite 206
Deerfield Beach, FL  33441
(866) 958-3328

US Financial Management, Inc.
3131 Camino Del Rio N.
Suite 1500
San Diego, CA  92108
800-738-5351

American Financial Service
9530 Hageman Rd.
Bakersfield, CA  93312
(800) 931-4237

Nationwide Debt Settlement
3819 N. 3rd St.
Suite E26
Phoenix, AZ  85012
(866) 654-6937

Professional Debt Consultants
4400 Northcorp Pkwy.
Palm Beach Gardens, FL  33410
(800) 209-6428