Debt Negotiating Companies

Excessive debt often leads to drastic action such as filing for bankruptcy, according to the Federal Trade Commission (FTC) website, but you have a few other options before you hurt your credit rating for 10 years with a court filing. Sometimes you can make your own financial plan or work with creditors yourself but you may need professional help from a debt negotiating company.

Definition

Legitimate debt negotiating companies help you make agreements with creditors when your bills get overwhelming. Bob Frick, a senior editor for "Kiplinger's Personal Finance," explains that good negotiators often get interest rate reductions and waiver of late fees on delinquent bills. Credit counseling companies usually often debt negotiation along with budgeting advice, financial courses and creation and administration of debt management plans.

Finding Legitimate Companies

Frick advises that professional organizations offer referrals to legitimate credit counseling companies. Their websites have searchable databases so you can find counselors servicing your area in person, online or over the phone. Banks, credit unions, military bases and colleges sometimes offer referrals to counseling companies, too, according to the FTC. Check any firm with the Better Business Bureau before making contact, then ask whether it is nonprofit and if its agents have outside training. Request a full fee disclosure up front before making any agreement.

Warning

Avoid debt negotiating companies that initiate contact with you via telemarketing, texts or emails or that make unrealistic promises. The FTC warns that unscrupulous firms promise to settle your bills for pennies on the dollar or claim they can restore your credit, but never come through once you pay their fees. Some even imply that they work for your credit card issuers when there is no affiliation or claim to have an "in" with banks that gives them special negotiating power. Such claims are false, according to the FTC.

Alternative

Your creditors may be willing to make settlements directly with you with no third party necessary. MSN Money columnist Liz Pulliam Weston explains that credit card firms often turn delinquent accounts over to in-house collectors who can work out deals. These agents may offer an interest rate or minimum payment reduction or a settlement for less than the actual debt. Accept any offer that works for you but get it in writing. These solutions may help you get out of debt but your credit score still takes a hit because late payments and settlements appear on your credit reports unless you can negotiate for their elimination.