Debt settlement fees are typically charged in one of three ways:
1. A percentage of your total unsecured debt, payable upfront.
This percentage is usually 15%, but can go as high as 18%. For example, if your total unsecured debts are $25,000, the debt settlement fees you would have to pay under this fee structure (assuming 15%) would be $3,750. Most companies allow you to pay these fees through monthly payments, rather than having to pay it all up front.
2. A percentage of the debt savings that you realize once a debt is actually settled, plus a sign up fee and ongoing monthly charges.
The percentage that is used for this type of debt settling fee is usually 25%. But because it is only due after your debts are settled, the companies that offer this type of fee structure also require an upfront fee as well as ongoing monthly fees. Using our above example again ($25,000 in debts), if the final negotiated settlement was $10,000, (ie. a savings of $15,000), the final fee would be $3,750 (25% or $15,000).
3. A flat fee, charged monthly and continuing until all of your debts are settled.
Under this fee structure, the amount of the monthly fee is typically tied to the amount of your debt. In other words, the larger your debts, the larger the fees charged.
Now, although these are the "typical" fee structures that most debt settlement companies and debt settlement attorneys charge, there are likely endless variations as to fee structures. Therefore, it is extremely important to be crystal clear on how the fees will be paid and how they are calculated before you sign on to any debt settlement program.
The quick answer is, of course, the one that costs you the least amount of money. However, this is difficult to determine in the beginning given that some debt negotiation fee structures are based on the amount that you save in the end, which of course you don't know at this point.
Having said that however, I believe that it is best to try and choose a pay structure that rewards results. In other words, a settlement fee structure that motivates the company or attorney you are working with to settle your debts quickly and for the greatest discount. Option number 2 above fits this description the best.
Although option number 2 (paying a debt negotiation fee that is based on results) is preferable, unfortunately it is option number 1 that is by far the most common fee structure used in the debt settlement industry.
There is really only one way to avoid paying debt settlement fees to a company or lawyer, and that is to choose the do-it-yourself debt settlement option. Not only will you save on fees, instead of paying the debt settlement company money each month, you can use that money to settle your debts faster. And with speed often a critical variable in determining the success or failure of the negotiation process, this can be an added bonus.