What are the disadvantages of hiring a debt settlement firm?
What are the disadvantages of hiring a debt settlement firm?Anyone searching for debt relief options on the internet will likely see ads for firms offering debt settlement services to Ontario residents. These firms might be traditional debt settlement firms—which are supposed to hold the necessary license issued by the Ontario
Government—or they might be a firm exempt from this requirement. This latter group includes law firms, credit counselling agencies, and bankruptcy trustees. Debt settlement involves an informal agreement between a creditor and a consumer under which the creditor agrees to accept a one-time lump sum payment for less than one hundred percent of the outstanding balance as settlement in full. This is an alternative to a consumer proposal which is only available through a bankruptcy trustee.
No creditor will agree to an informal proposal unless your account is a minimum of six months overdue. In contrast, there is no such requirement for making a consumer proposal. Compared with a consumer proposal, debt settlement—or an informal proposal—has a number of disadvantages.
- You will receive collection calls
- You might be sued
- Results are not guaranteed
- It may be expensive
If you are an Ontario resident and you hire a traditional debt settlement firm then the fee they can charge you for settling a particular account is capped at ten percent of the amount of the debt on the date you signed a debt settlement agreement. If, however, you hire a law firm, you might pay substantially more in fees.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.