Protect Your Finances: 8 Tips to Avoid Debt Settlement Scams

Posted on March 21, 2023 in Debt

Debt settlement can be a useful tool for people who are struggling with overwhelming debt, but it’s important to be aware of potential scams. In this eight step guide we’ll look at how to avoid debt settlement scams by recognizing warning signs, verifying company legitimacy, and protecting yourself from fraud. If you follow these tips, you can be more confident that you’re making an informed decision on a legitimate debt settlement company.

How To Avoid Debt Settlement Scams

Not all companies have great intentions. Some companies may scam you in the name of giving service, which can leave you in a worse financial situation than when you started.  

In the eight steps below, we will discuss how to avoid debt settlement scams so that you know exactly how to dodge them when you face this situation.

1. Do Your Research

Before you sign up for a contract with a debt settlement company, make sure you do your research. Also, make sure to check their reviews and ratings from reputable sources and check if any complaints have been filed against the company. 

Checking if the company is licensed and accredited by appropriate agencies can also help to assess if the company is legit or not. You should also speak with previous clients of the company to better understand the service the company provides.

Make sure you consider other options too before taking this path so that you can provide yourself the chance to choose a better option than this if there is one. You should also consider the outcomes of choosing the path of debt settlement, for example, how it will affect your taxes or credit score.

2. Watch Out for Red Flags

Be wary of debt settlement companies that make unrealistic promises. No company can guarantee that they will be able to settle all of your debts. Avoid companies that charge upfront fees or require you to make payments before any settlement is reached. 

Legitimate companies only charge you fees after a settlement has been reached. Be wary of any company that demands payment upfront. Additionally, be cautious of companies that pressure you into signing up for their services or make it difficult to cancel.

3. Understand the Process

Understanding the debt settlement process properly may help you to detect scams easily. A legitimate company will work with your creditors to negotiate on your behalf and require you to stop paying them. Instead, the company will tell you to make payments to a separate account. This account is used to pay off the settlement once it has been reached.

4. Read the Fine Print

Before you sign any agreements, make sure you read the fine print. Look for hidden fees and understand the cancellation policy in case you suspect something halfway and change your mind. It is also a good idea to ask for a written agreement detailing the terms of the settlement to be on the safe side.

5. Don’t Give Up Control

Make sure you never agree to sign over power of attorney or give access to your bank details to debt settlement companies. Legitimate companies will work with you to negotiate a settlement, but they will never ask you for control over your finances. 

6. Protect Yourself

It is important for you to be proactive in managing your finances yourself if you want to protect yourself from debt settlement scams. If you are considering this option, make sure you understand the benefits and risks and also make sure you are working with a reputable company.

7. Know Your Rights

Knowing your rights can be extremely helpful in avoiding debt settlement scams. You can utilize them in your favor if you suspect any scam by having them in the knowledge. 

The Federal Trade Commission (FTC) has established rules to protect consumers from such deceptive and unfair practices. For instance, your debt settlement company is obligated to disclose the amount of money it will take throughout the process, and they can’t keep increasing the amount as they, please.

8. Stay Vigilant

Even if your debt settlement company has settled your debts, staying vigilant is still a good idea. Monitoring your bank statements and credit reports is essential to ensure no unauthorized charges are being made. 

Avoid Debt Settlement Scams and Get Legitimate Relief

If you encounter any of these signs, it’s best to be cautious and conduct additional research before enrolling in any debt settlement services. Before providing personal information or making any payments, always check the legitimacy of a company.

The best way to avoid debt settlement scams is to stay informed and educated about your options. If something seems too good to be true, it probably is – these are the wisest words you would hear in life, and it is so true in the situation also.

Even though numerous scammers are waiting outside for you to fall prey to their trap, these bullets can be easily dodged. With a bit of caution and the right approach, debt settlement can  be worth it for getting your finances back on track.

Get Relief From Debt Settlement Now


How do I know if a debt settlement company is legitimate?

There are several ways to determine the legitimacy of a debt settlement company. Here are some things you can do to help ensure you choose a legit company:

  1. Check for accreditations online
  2. Look for positive reviews and ratings on sites like the Better Business Bureau (BBB), Trustpilot, and Google
  3. Verify their state license if possible
  4. Ask for references to see if other satisfied customers have used their services
  5. Fully understand their fees – A legitimate debt settlement company will typically only charge fees after they have successfully negotiated a settlement on your behalf
  6. Be wary of promises – because debt settlement involves a negotiation process, there are no guarantees of success

Author Bio: Attorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for an online debt relief forum. Please connect with her on LinkedIn for further information.

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