What Secrets to Debt Settlement Should You Share With Your Clients?

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November 9, 2017 | By RGR Marketing Blog

The Importance of Being Honest With Your Clients

The debt settlement industry is unfortunately one that has had its reputation tarnished due the large number of illegitimate companies working within the field. Things have certainly improved in recent years thanks to stronger legislation and legal crack-downs, but it is still an industry where it’s not uncommon for clients to be extremely wary when shopping for a debt settlement company to help them eliminate their debt.

Because of the industry’s soiled reputation, it is more important than ever for legitimate companies to be completely honest and forthcoming with their clients. You should answer all of your client’s questions honestly, even if it means the answer isn’t something they particularly want to hear.

Failing to answer or diverting from a single question will make the client think you might be trying to hide something unpleasant. Their mind automatically starts thinking of things like hidden fees, higher debt, and fraudulent business practices. So, it is impertinent to be open and honest with your customers, even if it means sharing debt settlement secrets.

Top Client Questions and the Right Answers

Debt is a serious problem in the United States, so it’s no wonder why so many people seek professional help to get it under control. And, these people all tend to ask very similar questions. Here are some of the most commonly asked questions and the honest answers you should be providing clients with.

Q: What Is Debt Settlement?

A: Debt Settlement is the name given to the process of negotiating one’s debt down to a reduced amount. The lower amount is then paid off in one lump sum per creditor. In most cases, the client’s debts are settled within the range of about 15 to 75 cents on the dollar.

Q: Is Debt Settlement Better Than Bankruptcy?

A: Chapter 7 Bankruptcy is a debt elimination process that eliminates most of the client’s debts quickly and they aren’t required to pay anything back. But, due to recent legislation changes, it is now more difficult than ever for someone to be approved for this type of debt forgiveness.

More common is Chapter 13 Bankruptcy, which eliminates the debts while requiring the client to pay back a percentage of the total amount over five years through monthly payments to a trustee; in some cases, the client may even have to forfeit some of their assets to creditors.

One of the advantages of Bankruptcy is that it offers legal protection under the court so creditors can no longer harass or sue the individual as long as they are completing the Bankruptcy terms as agreed. With debt settlement, firms will work to reduce creditor calls and harassment, but debt settlement does not provide the legal protection that bankruptcy does.

The advantage of debt settlement over Bankruptcy is the fact that the client’s accounts will be listed as “paid” or “settled in full,” whereas a Bankruptcy will remain on a credit score for ten years, and all of the accounts will be listed as “in Bankruptcy.”

Q: Will Debt Settlement Hurt My Credit Score?

A: People who are in control of their debt don’t need debt settlement services. And, even if they tried to settle their debts, no creditor will negotiate with them because they are paying their bills on time every month. In other words, the client needs to be delinquent before a creditor will negotiate on a settlement. So, this means that in the vast majority of cases, the client’s credit score is already going to be severely damaged due to missed payments and credit line overages.

Debt settlement may cause an initial drop in a client’s credit score simply because they aren’t making payments to the creditor on a regular basis. But, once the debts start getting paid off, the client’s credit score will start bouncing back much, much quicker when compared with Bankruptcy.

Q: Can’t I Negotiate With My Creditors on My Own?

A: Yes, a client can try to negotiate settlements with their creditors and there is a lot of information available in libraries and online that can help. But, this is easiest done when the overall debt is under $10,000 and only a couple of accounts are involved. If the debt is more than $10,000 or the client has multiple credit accounts, then they will be better served by having an experienced negotiator work with their creditors.

Additionally, if the client handles the negotiations on their own, then they will have to directly deal with any phone calls or harassing letters from their creditors. But, when they use a reputable debt settlement firm, all they have to do is direct the phone calls and letters to the firm for the professionals to handle.

Q: With Debt Settlement, How Are My Creditors Paid?

A: Every month, the client deposits their agreed-upon amount into an account that’s set up specifically for settling their debts. The client has complete control over this account. Once enough money is deposited, the client will be able to pay a creditor in full the amount that they agreed to settle for with the debt settlement company.

The client will continue to make monthly deposits for the duration of the program with their creditors being paid off periodically over the course of the program. In most cases, the first creditor can be paid off within the first four to six months as long as the client makes timely payments to their account.

Of course, this duration ultimately depends on how much the debt is and how much the creditor agrees to settle on.

Q: How Do Debt Settlement Companies Make Money?

A: Legitimate debt settlement companies will never ask for money upfront. Instead, they only get paid at the end of the program. A portion of the money that is deposited every month by the client is set apart for the debt settlement company fees, so once the program is completed, they take what they are owed out of the remaining funds in the account.

In most cases, the amount a debt settlement company gets paid tends to be between 20 and 24 percent of the debt balance that is settled.

Q: Can a Creditor Sue Me While I Am in a Debt Settlement Program?

A: It is still possible for a creditor to pursue legal action against a client while they are in a debt settlement program, but this isn’t a common occurrence. In fact, this is why no legitimate debt settlement company will put a client in a program lasting longer than 48 months. In most cases, the creditor understands that they will be getting their money at some point within that time frame.

As stated earlier, honesty is the best policy when it comes to questions about debt settlement. It helps build trust with your clients, and lets them know that you’re not just in the business to make a quick buck but that you really want to help them get out of debt. And, this is exactly what will help them make the decision to use your company.

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