In Part 1 of this discussion about what a debt negotiation firm must disclose to you when dealing with them over the telephone, we talked specifically about the fees they charge and how and when they can collect them. In Part 2 we talked about what they must disclose about the length of the program. In this part (Part 3), we will talk about how disclosures surrounding the topic of how much you as a consumer will have to save before an offer is made to a creditor.
Many people mistakenly believe that once they are enrolled in a debt negotiation program, the company representing them will begin negotiating and making offers to their creditors right away. This is not the case of course. You see, two things have to take place before an offer can be made to a creditor.
1. The creditor must be willing to negotiate. And until the creditor has noticed that you haven't made any payments the past few months, they won't be ready to "come to the table".
2. You must have saved up enough money so that if the debt negotiation firm makes an offer and it is accepted, you have the cash set aside to actually pay the settlement amount.
And it is up to the negotiator to tell you before you enroll in their program just how much you will have to save.
Let's say that you have three separate $5,000 credit card debts for a total of $15,000. A debt negotiation firm must disclose how much they estimate you (based on their data and experience with customers similar to you) will have to save before they make an offer to your creditors that has a strong likelihood of acceptance. This disclosure tells you two things...One, it gives you an idea of how much your debts will be reduced during the process. For example, if they estimate that it will require you to save $3,000 before they make an offer on your $5,000 credit card debt, you can "guesstimate" that you may save about 40% to 50%, depending on how the negotiations go.
Two, it makes you aware of the fact that each of your debts (assuming you enroll multiple debts in the debt relief program) will be settled on different timelines. For example, you must be aware that the debt negotiation firm cannot negotiate settlements on all of your debts until you save up enough money to actually pay the settlement amounts. So if they tell you that you are required to save $3,000 before offers are made on each of your three debts, you would have to save a total of $9,000. This of course takes time and is the reason why debt settlement programs can drag on for quite a while. It is typically not the debt negotiations that slow down the process but rather the inability of the client (you) to save the required amounts. But because the debt negotiation firm must disclose to you upfront how much money you will have to save, you will have a better chance of determining if this program is something that you can handle financially with fewer surprises once you start.