Is the Debt Settlement Company being Inquisitive about your Recent Account Activity?

There are instances when creditors will refuse to negotiate an account, and a good portion of these cases occur on accounts that have had large recent balance transfers, cash advances, or large purchases. In other words, if you withdrew a lot of cash from your credit card and then promptly enrolled in a debt settlement program, it is likely that the creditor will refuse to offer any settlements. The same is true with large recent balance transfers and large purchases. In most cases, credit card companies would rather settle an account than risk forcing someone into bankruptcy, but if they feel the consumer has been fraudulent in their business with them, there's a good chance that they will spurn any settlement offers to make an example of the client. On the same token, even if the balance transfer or cash advance was over 6 months ago and you've made several payments since then, it will still increase the settlement that the creditor is willing to accept. It is extremely important for a debt settlement company to be thorough during the approval phase of a client's program because it can have effects down the road.

Is the Debt Settlement Company being Upfront about the Potential Downsides?

This should go without saying---any debt settlement company that does not mention the potential credit impact and the possibility of legal action associated with their program should be avoided. The vast majority of debt settlement companies make a point to discuss the potential downsides of the program, but there is a select minority that values the sale over having long-term satisfied clients. Although the possibility of legal action is low and most clients' credit is suffering prior to seeking debt relief, a reputable debt settlement company will make a point of disclosing the potential downsides.

Is the Debt Settlement Company Putting you in a Long Program?

A big part of why the likelihood of legal action is low has to do with the fact that debt settlement clients are enrolling in short programs. When a creditor has to wait too long to get paid, they may get antsy and pursue legal action to collect the full balance. As a rule of thumb, clients should avoid debt settlement companies that are pushing them into programs longer than 36 months. Unless a client has ideal creditors, is from a debtor friendly state (Texas, Florida, Pennsylvania, etc.), or is on a fixed income (social security, disability, etc.), then a short program is necessary to protect the client.

Is the Debt Settlement Company Allowing you to Keep a Large Account out of the Program?

This goes in line with the first question regarding instances when a creditor will refuse to negotiate. Creditors willingly engage in negotiations with debt settlement companies when they feel the consumer has not been fraudulent in their dealing with them. Similarly, the creditors want to see that the client is not showing preferential treatment to another creditor. In other words, if a client is remaining current on an account with a large balance, the creditor may refuse to negotiate on the grounds, "If he or she can afford that big account, then they could afford to pay us back."

Has the Debt Settlement Company Asked if you Filed Bankruptcy Recently?

If you've filed bankruptcy in the past 7 years, then a creditor can theoretically refuse to negotiate since you have no other alternative but to pay them back in full. This tends to happen mostly to consumers who have filed within the past 3 years, but a thorough debt settlement company will investigate everything in order to ensure that they are enrolling a consumer who has a good chance of obtaining highly favorable settlements.
 

Debt Stress & Health

High credit card debt is bad for your financial, emotional and physical health!
A published study in 2000 reported that people with high levels of stress about debt had more physical and emotional problems.  According to the February 2000 issue of the Journal of Social Science and Medicine, people who reporting significant levels of debt related stress had more physical problems and reported worse than average health than those with little or no debt. In general, people with a high credit card debt to income ratio were in poorer physical health.

The study was based on two separate telephone surveys that reached a total of 1,036 individuals living in Ohio. "Any one of us who has debt knows that it can cause stress in our lives, and it makes sense that this stress may be bad for our health," said Prof. Paul J. Lavrakas, director of Ohio State's Center for Survey Research and the study's co-author, along with Patricia Drentea, assistant professor of sociology at the University of Alabama-Birmingham. "The stress of owing money, and [the] knowledge that we're paying high interest rates may lead to increased stress resulting in worsening health."

It was also noted that another aspect to explore is the degree to which credit card stress is reflected in more tense interpersonal relations with family members.

To measure health, the Ohio State researchers asked respondents to rate their own health on a scale of very poor to very good. They also used a standard scale of physical impairment, which involved asking respondents to rate how difficult it was for them to do simple activities such as climbing stairs or carrying groceries.

The results were then compared to responses on a debt stress index. This index, designed by Lavrakas, asked participants to rate their degree of worry about debt. This method showed a strong relationship between debt stress and health - the more people worried about debt, the more it affected their health.