California Debt Negotiation Myths and Facts

For those who may not know Debt settlement and Debt Negotiation are two terms commonly used to describe the same Debt Relief process.  Debt Negotiation is the action performed and the result is a Debt Settlement.

Myth:  Debt negotiation companies can put an end to collections calls?

Fact:    The reality is that a debt negotiation company doesn’t possess the legal capability to stop the creditors/collectors from calling.  Most companies will advise to mail out cease and desist letters but this is something that can be accomplished without the assistance of a debt negotiation company.  Only law firms have the legal power according to the FDCPA (Fair Debt Collections Practices Act) to stop the third party collectors from calling.

Myth:  Debt negotiation is legal to practice in all 50 states?

Fact:  This is actually true it is legal in all states; but the problem is most companies are not properly structured to be legally conducting business in all 50 states; thus making it very important to retain a law firm that can work within the legal jurisdiction of your state.   A law firm working in your state can offer you far more protection against creditors than a standard company, even if that company works in your state.

Myth:  Debt negotiation companies offer the same service as law firms?

Fact:   Absolutely not, there are crystal clear advantages that law firms have over debt negotiation companies.  One of the primary benefits is a law firm can legally still negotiate a past due account after a collector has issued a summons to court, a company cannot.  Some companies may say they can, but are not operating in accordance with the law, this could negatively affect the outcome of your situation.

Myth:  Debt negotiation will have no effect on your credit report?

Fact:  The truth is this process will hurt your credit if you are current.  The reason being is that the accounts must be in a past due status for the creditors to be in position to work out a settlement.  With that being said the debtors who are already behind on their monthly payments won’t have anymore further damage done to their credit report from this process, in fact after the settlements begin getting worked out and paid off the credit report will be positively affected.  For those who are up to date with their payments the early states of the debt settlement process will negatively affect their credit rating, but again once the settlements are being made it will have a positive rebounding effect on the credit.

Myth:  You can’t be sued once you have representation from a debt negotiation company?

Fact:  This is far from the truth, the reality is at any point in time a creditor can sue after you have discontinued paying them, whether you have employed a debt settlement company or retained the counsel of a debt negotiation law firm.  The difference is that the debt negotiation company has no legal standing to help you at this point, however a law firm can offer counsel and still negotiate the debt and keep you from ever going to court and getting a judgment against you.

Myth:  You can quite simply just do debt negotiation by yourself?

Fact:  Yes debt negotiation can be accomplished without the help from either a company or law firm.  But this is not a smart move for many reasons.   One is that each creditor is different in the way they handle negotiations and only an experienced organization will have the knowledge on how to properly deal with them.  Another reason is a creditor/collector treats debtors much differently then when doing business with a third party.  And last but not least you must have all the documentation recorded correctly to a T or run the chance of placing yourself into a much worse situation.

Myth:  The debt negotiation company with the cheapest service fees is typically the best?

Fact:  The tried and true cliché “You get what you pay for” applies enormously to this industry, a lot of debtors handle this process like purchasing a car and go for the cheapest possible company, which can be a big mistake.  Not all companies or law firms are the same just like any other service in any other industry.  You must judge a company based on its performance and history, not just the fees.

Myth:  The most ideal place to research a debt negotiation company is with the BBB (Better Business Bureau)?

Fact:  The BBB is an organization with no teeth; simply put they can’t do a thing to help out disgruntled client other than record on their website that the company is performing poorly.  However it is a positive indicator if the company has an "A" rating and if the company has an "F" rating this is a clear signal to not conduct business with that particular organization.

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