Debt Negotiation Programs (Also known as Debt Settlement)

A debt negotiation firm attempts to convince your creditors to accept less than you owe as full payment of your unsecured debt. Unsecured debt is debt which is not secured by an asset such as a house.

Debt negotiation firms typically claim that they can arrange to pay off your unsecured debt at 10 to 50% of the balance owed. If you owe $10,000, the company may claim it can get rid of all your debt for $1,000. The company may also claim to be a good alternative to bankruptcy.

Debt negotiation firms usually tell you to stop making payments to your creditors. Instead, these companies want you to send payments to them. The firms promise to hold your funds in a special account and pay your creditors on your behalf.

Most debt negotiation companies charge consumers substantial fees for their services. Fees can include:

• A fee to establish the account with the debt negotiator.
• A fee equal to a percentage of the money the firm saves you.
• A monthly service fee.

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