Twelve questions to ask a debt relief company before you sign anything

You are going to be on the phone with somebody whose job is enrolling people. That is not sinister — it is their job — but it means the conversation has a shape, and the shape does not naturally include the things you most need to know. These twelve questions put them back in.

A provider worth working with answers all twelve without getting irritated. One that deflects, rushes, or redirects to how much you could save has told you what you needed to know.

About the company

1. What is your legal company name, and are you licensed or registered in my state?

Some states require debt settlement providers to be registered or bonded; some prohibit the business model altogether. Get the exact legal name — not the marketing brand — and check it against your state attorney general’s office and the Better Business Bureau.

2. How long have you been operating under this name?

Companies in this sector re-brand. A new name over an old operation is worth knowing about.

3. Are you the company that will actually negotiate my accounts, or do you hand me to someone else?

Some outfits enroll clients and pass the servicing to a back-office firm. That is not automatically bad, but you should know who you will be dealing with in month nine.

About the money

4. What is your fee, expressed as a percentage of what?

Fees in this industry are typically a percentage of either the enrolled debt or the amount saved. Those produce very different numbers. Get it in the form: “X% of Y, per account.”

5. When exactly is a fee charged?

The correct answer is: after a specific debt has been settled, you have approved the settlement, and at least one payment has been made to that creditor under it. That is what the FTC’s Telemarketing Sales Rule requires. Any request for money before the first settlement is a violation, and you should end the call.

6. Where does my monthly payment sit, and who controls that account?

It should be a dedicated account in your name at an independent institution, which you can access and see. You should be able to withdraw your funds and leave at any time, minus fees already earned.

7. What is the total I will have paid by the end — program payments plus all fees?

Ask for a number, not a percentage. Then compare it to the balance you owe today.

About what actually happens

8. Across everyone who has enrolled in the last two years — not just those who completed — what share finished the program?

This is the question that separates the industry. Completion rates in debt settlement are not high, and the honest firms know their own number. A provider quoting only average savings for graduates is quoting a survivorship statistic.

9. How long until my first account settles, typically?

Usually several months, because a settlement fund has to accumulate first. If you are told weeks, ask how.

10. What happens if a creditor sues me while I am enrolled?

Being sued is a real possibility and the answer should be specific: what they do, whether legal support is included, whether it costs extra, and whether the program continues.

11. What happens if I leave in month six?

You should keep the money in your dedicated account that has not been earned as fees. Confirm there is no early termination penalty, and find it in the contract.

12. Which of my debts will you not take, and why?

Secured debts, most student loans, most tax debt, child support and recent accounts generally do not qualify. A provider who says everything qualifies is not looking at your file.

Three things that should end the conversation

• A fee requested before any debt is settled. Illegal under the Telemarketing Sales Rule.
• Any suggestion this is a government program, or connected to new federal relief. There is no federal debt settlement program for consumer credit card debt.
• A promise of a specific result, or pressure to decide today. Nobody can promise what a creditor will accept, and a genuine offer is still there tomorrow.

What to do with the answers

Get the agreement in writing before you sign anything and check that the answers to questions 4, 5, 6, 7 and 11 appear in it. If a term you were told on the phone is not in the document, it is not a term.

Then give yourself a night. Every provider in this business says the call has to be finished now. None of them mean it.

And one question for us

If you were introduced to that provider through a matching service — including this one — ask who is being paid, when, and how much. We publish ours: how we get paid. Anyone who will not answer that question has told you something too.