Planning to use a debt settlement company? It’s important to understand what debt settlement companies don’t tell you. Before we look at what’s not commonly known about debt settlement companies, let’s look at what debt settlement companies do.

Debt settlement companies charge hundreds of dollars for an initial administrative fee to setup your account. Plus, they charge a monthly service fee. Fees will vary depending on the amount of your debts and the settlement company you’re using. Debt settlement companies charge you a fee every month, but don’t make payments to your creditors each month. Instead, they put all the money in a trust account and negotiate your debts with your creditors. When there’s enough in your trust account to pay a creditor, your debt settlement company will pay your creditor in full. This can take many years, depending on the amount of debt you have with each creditor.

In the meantime, you can be sued by creditors..Such companies take your money every month, but don’t make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there’s enough in your account to pay a creditor in full. Unfortunately, debt settlement companies don’t ask your creditors to stop all interest, over-limit fees, and late fees from being added to your account. This means that while debt negotiations are in process, your bills will continue to increase. So, if you’re sued and a judgment is issued, you’ll owe even more debt than you did previously!

There are a lot of untrustworthy debt settlement companies, so be careful who you sign up with. A lot of debt settlement companies claim to be non-profit – however, not all of them are. Before signing up for any debt settlement service, be sure to fully investigate the company. If you’re already working with a debt settlement company and you’re unhappy, most companies will let you cancel your account and get a refund of what you’ve paid them (minus their non refundable administrative fee and monthly service fees).