Debt Relief is where you hire a third party to help you renegotiate your outstanding debt. The normal process is that you put together a list of your creditors. The company then takes the amount of debt and creates a payment plan for you. You then pay that company a payment each month instead of paying your credit cards.

They then use that money to eventually settle your debts. Their goal is to negotiate and reduce the total debt which will save you money. The problem is, the industry is filled with unscrupulous companies and people who prey on your fear.

The big debt relief companies operate nationwide and usually operate out of California, New York or Florida. They spend a lot of money on marketing and sign up thousands of clients a year. They make money whether they help you or not and the worst part is, you never know how much they are charging you. There is not a clear price involved.

What they don’t tell you is that your creditors are going to still report missed/late payments on your credit. In addition, your creditors can still sue you, even though you are paying the debt relief company.

Most people quit within a year and waste thousands of dollars and end up worse off than where they started. Debt Relief can work if you find the right company. I want to provide some rules to help you decide on how to vet a company.

Rule 1: Don’t choose a nationwide company. Pick a company that operates in YOUR STATE. This is crucial. Every state has different consumer protection laws. If a company is in California, and you live in Texas. They are not going to be well versed on your state’s law and they won’t be as effective. In addition, if you get sued in your state, this company is not going to be able to help you with the lawsuit.

Rule 2: Make sure the company has a lawyer who is responsible for your file. A lawyer is going to be able to hold debt collectors accountable if they violate collection laws. This could lead to huge savings for you. In addition, if you are sued, the lawyer can file an answer and help defend the lawsuit.

Rule 3: How much is it going to cost you to hire them? If they cannot say it simply and provide an exact amount, then don’t hire them. It means you have no idea what you will end up paying them.

Rule 4: Ask them what their average results are for clients. They should be able to provide data on what they are able to accomplish for clients. If they don’t have specific or clear numbers to show what their average saving is, then don’t hire them. If they provide broad numbers or generic numbers, then don’t hire them.

Rule 5: Ask them what percentage of clients who sign up actually complete the program. This is a big one. The companies make money whether you complete the program or not. If only 20% of the people complete the program, then 80% fail. If they cannot tell you this or provide generic answers, then DON’T HIRE THEM.