Debt settlement companies claim they will reduce very high percentages of your credit card, medical and other unsecured debts for combined initial and recurring monthly fees that can equal up to 20% of the amount owed. Although some debt settlement companies are certainly legitimate, many are not.

Initial monthly payments to debt settlement companies are generally used to pay their fees in advance before they contact any creditors. They cannot help a consumer until after an account is charged off and assigned, or sold, to a debt collector, which explains why most debt settlement companies advise their clients to stop making payments, and several banks will not discuss an unsecured account with any debt settlement company. During this time, interest and/or late charges continue to accrue, you can be sued, and a "late payment" or "account past due" status will appear on your credit reports.

If a debt settlement company should successfully negotiate a debt reduction, satisfaction of the debt may require a lump sum payment, or monthly payments higher than the minimum payment required for the original amount owed. Credit reports are almost always negatively affected for accounts settled with original creditors, and there are Federal, and possibly State, income tax liabilities incurred every time a debt greater than $600.00 is cancelled or forgiven by a creditor.

Attorneys General nationwide have successfully sued unscrupulous debt settlement companies, forcing them to discontinue operations, and many states now have regulations designed to protect consumers from other companies like them, including price and refund controls, and mandatory training, auditing and/or reporting requirements. Legislation at the Federal level has been introduced to control the unscrupulous activities of many companies in the debt settlement industry. 

Despite these activities and controls, their efforts have also resulted in a large number of newly created attorney managed debt resolution (settlement) firms. Since attorneys are exempt from state mandated debt settlement regulations because they can negotiate debt with creditors as part of their practice of law. An unintended consequence has been the increasing number of unscrupulous attorney managed debt settlement firms being sued, closed and having their assets seized.

The Debt Jurisprudence™ process is not debt settlement, even though many of our clients have accepted unsolicited debt reduction offers received from original creditors, and debt collectors representing original creditors.

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