Why Do-It-Yourself Debt Settlement Is Better
Than Hiring a Settlement Company (Part 2)

In Part 1 of this article, we examined the two common fee structures used in the debt settlement industry and concluded that $1,000s can be saved using the do-it-yourself approach. Further, we saw that the savings in money also translates to a big savings in TIME. Simply put, when you don't have to pay $1,000s in fees, you can get out of debt much faster, even if you don't settle your debts for percentages as low as professional companies might achieve (which is questionable anyway, as you'll see below). Also, we saw that the DIY approach to debt settlement restores the built-in flexibility in the month-to-month funding level for the program. Now let's look at three more excellent reasons why the do-it-yourself approach is safer than hiring a third-party debt company.

CREDITOR PHONE CALLS

One of the main reasons that people hire settlement companies (when they could otherwise successfully negotiate their own debts) is because they don't want to deal with collection phone calls. After all, it seems easier to just agree on a monthly amount, send in a check once per month, and have the settlement company deal with all the phone calls, right?

Wrong! Here's the reality: You will receive just as many phone calls from creditors when you hire a settlement company as you will handling your own negotiations. The exception is when the settlement company uses a "cease communication" letter. In order to block creditor harassment, many settlement companies send out letters to your creditors demanding that they make no further attempt to contact you by telephone. This is an OBSOLETE and DANGEROUS technique. It is obsolete because it has been over-used, to the point where many collectors routinely ignore such letters. It is dangerous because many creditors react harshly and negatively to such letters, to the point where they ACCELERATE the collection process by sending the account to an attorney for litigation. End result: A lawsuit that stresses out the client and often forces them into bankruptcy court. The best settlement companies no longer use this technique. Instead, they simply encourage customers to change their phone number, or use a combination of caller ID and call screening to cut down on the collection activity.

Conclusion: There is nothing that a settlement company can do to block creditor harassment that you cannot do for yourself, with less risk and less expense.

AUTOMATIC SETTLEMENT OFFERS

One big fear that consumers have as they try to tackle their own debt negotiation program is that they won't get creditors to settle. "I'm not a professional negotiator," they say. "Why would a creditor settle with me?"

The truth is that many of the big credit card banks AUTOMATICALLY send out settlement offer letters or make verbal settlement offers right before charge-off and also during the collection process. More and more, creditors see the logic of settlement, and they frequently extend these offers when the account reaches a certain stage.

In many cases, all that is necessary to obtain a 50% settlement (or less) is to accept the letter that comes in the mail automatically! (Here is an example of an automatic offer letter.)

Guess what? When the settlement company gets the same offer, all they're going to do is take it on your behalf. When I was running a large settlement company operation, one of the toughest questions to answer was when clients asked, "What did you do to earn your big fee? All you did was take the offer that came in the mail anyway!"

Conclusion: Why should you pay $1,000s in fees just to accomplish something that's going to happen anyway?

CREDITOR BACKLASH

While there are thousands of banks across the country that issue credit cards, all but a very small percentage are issued by the top 10 major credit card banks. One of those top 10 banks absolutely REFUSES to deal with settlement companies. They have instructed all collection agencies and all collection attorneys that work on their debt assignments to REFUSE settlement offers from third-party settlement companies. This bank HATES settlement companies. Right or wrong, they believe that settlement companies are actually encouraging people to default on their obligations. Knowing what I do about settlement companies, I totally disagree with this bank's position. However, the practical effect is that no settlement company can truthfully say that they do settlements with this bank, and yet EVERY settlement company takes on clients that have accounts with this company.

Here's the interesting part. This bank WILL settle directly with their customers, usually at 50% or less before charge-off. They just won't accept settlements from professional negotiators. In fact, if they find out a professional is on the job, they often immediately sue the client. So what do the negotiators do? They coach the client on how to settle this one on their own, then charge their negotiation fee anyway. This is nuts! Why should you pay out hard-earned cash to a settlement company for a job you're actually doing on your own? It makes no sense. A similar situation now exists with two more of the major credit card banks. They make it VERY tough on customers of settlement companies, yet clients dealing directly with these banks on their own often receive settlements for 50%, 40%, 35%, and so on.

Conclusion: It's safer to negotiate directly on your own with your creditors.

Let's summarize the advantages of do-it-yourself debt settlement versus hiring a professional company. By handling the negotiations yourself, you will:

1. SAVE $1,000s in unnecessary fees.
   
   
2. GET OUT OF DEBT FASTER, since all your money goes toward settlements.
   
   
3. Enjoy the FLEXIBILITY and RELIEF that you need in your monthly budget.
   
   
4. SAFELY HANDLE CREDITOR CALLS without the use of obsolete and dangerous techniques.
   
   
5. LOWER YOUR RISK by dealing directly with your creditors without an intervening third-party.
   
   

When you add it all up, debt settlement is a great strategy for dealing with problem debt, but it's far better to tackle the job on your own than use a third-party debt company. You know the old saying, "If you want the job done right, do it yourself!"

Charles J. Phelan has been helping people become debt-free without bankruptcy since 1997. A former executive in the debt settlement industry, he teaches the do-it-yourself method of debt negotiation. Audio-CD material plus expert personal coaching helps consumers achieve professional results at a fraction of the cost.