The information provided in this article is for informational purposes only and should not be construed as legal advice. It is not intended to create an attorney-client relationship.
You’ve moved that credit card app to the second page of your phone so you stop seeing the number every time you unlock it, but tonight you open it anyway. You add up what you owe across every card, and the total is worse than the one you’d been expecting. You’ve made every minimum payment on time for months or years, and somehow the balances barely moved. You start typing “how do debt settlement companies work” into your search bar, then delete it, then type it again, because you’ve read enough conflicting things online not to trust any of it anymore.
Guardian Litigation Group understands how exhausting it is to do everything right and still feel like you’re losing ground. We can give you a straight answer about whether debt settlement makes sense for your specific numbers, even if the answer is that it doesn’t.
Do Debt Settlement Companies Work for Everyone?
The honest answer is that results vary: Your creditor has no legal obligation to accept a reduced settlement, and whether one works out depends on the creditor, your account history, and who you have on your side. Some accounts settle. Others don’t. That’s why it’s worth asking questions before you sign with a debt settlement company.
What Are the Real Debt Settlement Company Risks?
Consumers run into these problems most often:
- Missed payments pile up while you wait. Most programs ask you to stop making payments directly to creditors and instead deposit money into a dedicated account each month. While waiting to settle with a creditor, missed payments may trigger late fees and penalty interest.
- Forgiven debt is often reported to the IRS as income. Creditors that discharge $600 or more of debt generally must report it to the IRS, and you may be required to include that amount as ordinary income on your tax return unless a specific exception applies.
- You shouldn’t pay until something is actually settled. For-profit debt relief companies are prohibited from collecting a fee until they’ve actually settled, reduced, or changed the terms of at least one debt, and you’ve made a payment to the creditor under that settlement, so review your agreement closely to understand exactly when fees are triggered.
- A creditor can still sue you while you wait. Enrolling in a program doesn’t stop a creditor from filing a lawsuit. If that happens before an account is settled, you’re responsible for responding to it on your own unless you have separate legal representation.
These are important to note. An attorney can help you weigh these risks against the potential benefits based on your specific debts and circumstances.
Debt Relief Company vs Attorney: What’s the Actual Difference?
This is where most comparisons stop short, and most guides don’t tell you. It’s about what happens the moment a creditor decides to stop negotiating and files a lawsuit.
Most debt settlement companies are built to do one thing: Call creditors and try to talk down a balance. They’re not law firms, and their staff typically can’t step into a courtroom on your behalf. When that happens, your best hope is that the settlement company’s negotiator can talk the creditor’s attorney into backing off, since most of them can’t step in and answer the lawsuit for you.
Guardian Litigation Group has an attorney-led approach to debt settlement, so legal representation isn’t an add-on you have to seek out later. It’s already part of our arrangement.
What Should You Ask Before You Sign with Any Company?
Before you commit to a debt settlement program, ask the company these questions and listen to how directly they answer:
- What are your fees, and when do I pay them? A legitimate company charges reasonable fees and doesn’t collect anything until your debt is actually settled.
- How long will this take? Be wary of any answer that sounds like a guarantee. A real timeline depends on your creditors and how much you can deposit into your dedicated savings account each month, not on a fixed promise.
- Will you work with all of my creditors? Some accounts may not settle, and a company should tell you that upfront rather than after you’ve enrolled.
- Are there other options that work better for me? A company that only pushes its own program, without mentioning when something like bankruptcy or a debt consolidation loan might actually serve you better, isn’t giving you the full picture.
- What happens if a creditor sues me while I’m in the program? This is the question most settlement companies would rather you not ask, because the honest answer, for most of them, is that you’re on your own.
- Will I still get calls about late payments? You have the right to send a debt collector a written request to stop contacting you directly, but a program can also handle this on your behalf. Ask whether the company does this automatically or if it’s still on you to send it yourself.
The answers to these questions tell you more about a company than any advertisement ever will.
Why Consumers Trust Guardian Litigation Group
Guardian Litigation Group started in 2018 as a small consumer rights firm in California, defending clients against aggressive creditor collection actions, and has since grown into a nationwide practice with offices in Irvine, Jacksonville, Dallas, and Washington, D.C. We’ve resolved more than $900 million in debt for over 50,000 clients across 46 states. The Ramsey Show named us its exclusive nationally endorsed law firm for debt-related legal matters. Every client who works with us receives attorney oversight and legal guidance from the start of the engagement, not after a lawsuit forces the issue.
Talk to an Attorney Before You Choose a Debt Relief Option
You don’t have to sort through debt settlement company reviews or guess whether a program will hold up if a creditor sues. Reach out to Guardian Litigation Group for a free consultation, and our attorneys will walk you through your situation so you understand what protection you’re getting before you commit to anything.
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