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Debt Settlement

Alabama’s Attorney General cautions consumers to carefully choose a debt settlement company after several large scams were shut down in the state. In Alabama, debt settlement companies are required to follow the Alabama Deceptive Trade Practices Act, which prohibits companies from engaging in deceptive business practices, such as false or misleading claims. Additionally, the Sale of Checks Act requires that all debt settlement companies obtain a license from the Alabama Securities Commission before working with clients. Alabama residents are encouraged to call 800-222-1253 to verify that the agency or company is licensed. Any resident who feels that an agency is not reputable can file a written complaint with the Alabama Securities Commission.

Questions You Should Ask

While there are many agencies that offer debt settlement services in Alabama, it is important to find the right one. The NFCC recommends asking a lot of questions before signing a contract. Be sure to ask the company if they will recommend that you stop paying your creditors, if the settlement will reported as “Paid by Settlement” on your credit report and what taxes on the forgiven debt you will be responsible for. You should also ask detailed questions about the fees, including if the fees are due up-front, on a monthly basis or after the settlement. If a company’s fees are a percentage of your debt, then most companies charge 13 percent to 20 percent. Other companies base their fee on the amount of debt settled, typically around 35 percent. Be sure to also ask if there are any monthly fees.

Credit Counseling

The first step toward credit counseling is finding an approved counselor

Note that credit counselors are regulated by the Alabama Securities Commission. You can also work with an agency that is located in another state, but is approved to work with Alabama residents.

Ask Detailed Questions

Typically, the different services have different fees associated. Be sure to also inquire about fees for debt management plans in case you decide to go that route. For example, Consumer Credit Counseling Service of Central Alabama offers a free consultation for DMP setup with monthly fees ranging from $10 to $49 per month. Consumers can also get budget counseling for $45, where the counselor uses the information collected by the credit counselor to create a livable budget that will help the consumer live beneath his or her means and work to pay off debts.

Meet With Your Credit Counselor

Meet your counselor either in person, over the phone or using the internet. Take careful notes during the meeting and ask any questions. Begin following through with the advice offered during the sessions so you can begin becoming financially independent.