Debt Settlement Firms and War share at least one thing in common:  Both are good for absolutely nothing!  “Say It Again!”

I said Debt Settlement Firms, “Huh…What are they good for?” Absolutely Nothing!

“Listen to me now!”THE BUSINESS MODEL

The Debt Settlement Firm’s business model is flawed and not in your best interest.  The Debt Settlement Firm’s business model is based on an assumption that the creditors will eventually take less money to settle your debt if the debt continues to go unpaid for a long enough period of time.

THE FLAWS IN THE BUSINESS MODEL

First, the Debt Settlement Firm operates by building a “war chest” of funds that you pay to the Debt Settlement Firm.

Second, while the war chest is being filled with your money, the Debt Settlement Firm does nothing other than collect monthly fees from you.  During this time your bills remain unpaid, you continue to receive threatening calls and letters from your creditors, and your credit rating continues to worsen.

Third, the Debt Settlement Firms are unregulated businesses.  I see clients that have frequently sent money to these firms, only to learn that the firm (and the client’s money) have disappeared.

Forth, even if the Debt Settlement Firm does manage to settle the debt for less than you owed, the debt that has been forgiven by the creditor is considered income for tax purposes.

Missouri Bankruptcy Attorney, Wendell Sherk, has written an informative article, “Nine Questions To Ask A Debt Negotiation Company” that you should consider reading if you are still considering the services of a Debt Settlement Firm.

Before committing to a debt settlement firm consider consulting with an experienced bankruptcy attorney.