Debt Management vs Debt Settlement: Which Is Right For You?

Hi, I'm Sydney Klein and I'm sitting here with chairman and CPA Howard Dvorkin of Debt.com.

Welcome, Howard.

Thank you very much, Sydney.

We're going to get into debt settlement. It's one of the more popular ways to get out of debt, but I hear it's something that you once hated. Can you tell me more about that?

I don't know if I hated it. I didn't like it a lot. Hate is a strong word. The reason why is back when it started and we started to see this – it was Cowboys and Indians. It was the wild west. And we're talking 20 years ago. People that were involved in debt settlement were promising the world, not delivering anything, and a lot of thos people ran off with people's money, which was very sad to see.

As you know, I was in a similar business and I didn't want to see consumers get hurt. Fast forward 20 years, the industry has seemed to clean itself up. There are good players but there's still some bad players out there. Debt settlement is one way to get out of debt just like debt management is another way to get out of debt – and so is bankruptcy.

Debt settlement sits between those two, whereas people who can't afford to pay their bills or maybe they can afford it but they know if they keep paying they're going to be in debt for the next 30 years. Seek help and advice and that's really what Debt.com does. It tries to give the best advice to people in order to find a solution to their financial problems.

Debt settlement is a very simple thing but it's not it's not completely without paying. You're going to end up paying probably 50% of what you owe your creditors and it's mostly used for credit card bills medical bills, unsecured debt because there's no collateral involved in those debts.

Debt settlement and a good player will go through, take your information, pick up your income, pick up your expenses and analyze your expenses and your income to try to figure out would this program help people.

It's not a one size fits all program – even though you're saving 50% – there's a lot of landmines you hav to go through. One of them is you have to stop paying your bills in order to get your creditor's attention. That may lead to a lawsuit that may need lead to defaults and higher interest rates and higher payments or or late uh fees being assessed.

Debt settlement can cause you to ultimately be sued by your creditors. However if you're dealing with a reputable company, you're able to go through and alert those that company and they can represent you or try to represent you to the Creditor and get you at steer you clear of those landmines.

Debt.com has already done the work. I always like saying Debt.com takes the sweat out of your debt. Because we you like that maybe I should become a marketer instead of an accountant. But anyway we've done the analysis we've found the best-in class people to help people out of debt and that's why what we do we do all the hard work so the consumer doesn't have to.

Overall in debt settlement you're going to be making a payment whether your your debt is $10,000 or $20,000 or more you're going to be making a monthly payment into a separate trust account held separately from the company that you're dealing with.

Essentially it just disperses once your negotiations are complete with the people that you owe. It disperses and pays off your debt over time.

Debt.com has done a white paper on debt settlement which quite honestly you're right Debt.com does take this sweat out of debt because we do all the research and everything. We have fantastic researchers and it's available on our website to check out.

In that paper it says three in five Americans are looking toward debt settlement and you said there's a lot of pros and cons toward debt settlement but who do you feel would be the best candidate? What type of person is the best candidate for debt settlement?

If somebody has $10,000 or more of debt that could be a likely person. If somebody has tarnished credit. They've been late – that could be a good candidate for debt settlement. If somebody defaulted completely from their bills and credit is a mess – that's a good person to deal with when working with a debt settlement.

You got to take a step back and ask is this the proper thing to do? Is the person that is current on their debt, that has good credit however they may have a lot of debt –they may want to opt for a debt management plan. And a debt management plan typically the people don't get sued.

Typically your credit doesn't get destroyed and frankly in a debt management plan you could still buy a house and still buy a car while you're even on the debt management plan.

However in a debt settlement plan, your credit gets destroyed and that's something that a lot of purveyors of this service won't tell their prospects. Your credit is going to get hurt. All of these things, these options on how to get out of debt, that's something Debt.com can help consumers with.

Correct, how much would an analysis from a debt expert cost?

That's a great question. As with everything I've ever done the initial consultation is free. Absolutely free. Whether you talk to a certified credit counselor or whether we do it through AI technology that we have there is no charge. And there shouldn't be a charge.

Anybody that is charging you upfront before you you have a plan and before you enroll that should be your first sign that something's not right. Here people tell me oh I want to go to my lawyer and find out if this is great. Oh I want to go to my accountant and find out if this is the right move. Well guess what? There are very few lawyers in this country that understand this space, frankly.

Because they don't practice in this space. Because there's no money in it.

Typically accountants even worse even worse. And I'm an accountant – I'm a CPA. They don't specialize in this. You need to go to a reputable company that has been doing business for years and years, that knows what they're doing.

And truthfully takes the consumer's interest at heart. Companies need to be aware that consumers need help and these are vulnerable people. Sometimes and they can't take advantage of that vulnerability in order to line their pockets with money

Well thank you, Howard for all this advice.

Again if you are looking for help on getting rid of your credit card debt or just checking out Debt.com white papers, resources, chatting with our new AI technology, or chatting with a debt expert – please visit Debt.com or call us.