5. Is debt settlement legal?
Yes it is 100% legal. While the creditors have laws in place to protect them, consumers are also protected by the FDCPA and Consumer Credit Rights. Unfortunately, most creditors ignore these laws and negotiating the actual law itself is best done by an attorney specializing in consumer law. These laws provide relief to consumers struggling with consumer debt.
My credit card company told me they don’t deal with debt settlement companies.
We
hear this all the time from potential clients. Creditors derive their
income from the interest that they charge and debt negotiation
threatens that revenue stream. The truth of the matter is that every
creditor will settle for a reduced amount if they are not receiving any
payments. They collect what they can in a lump sum and write off the
rest as bad debt for IRS purposes. This in turn reduces their taxable
income.