The following guest post was contributed by an employee of Nationwide Support Services that handled Legal Helper Debt Resolution Accounts. They wanted to speak out anonymously to better help consumers understand the realities of the process. Any highlighted text has been added by me to make some key points stand out.
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The Debt Settlement Process
I want to start this article by making it clear that I am not writing this with any negative will toward the debt settlement industry or toward Nationwide Support Services or LHDR directly. Having worked for these companies for some time I know that most of the people who work for them truly do want to help the people who join the program and work hard every day to do just that. Unfortunately, the owners and executive management of these companies have made decisions, especially since the law changes on October 27, 2010, that have negatively impacted customers.
Debt settlement may still be a good option for you depending on your circumstances; however, as with anything it is imperative that you approach it with a full understanding of the risk as well as the reward. With that in mind I will endeavor here to give you a realistic expectation of what to expect through the enrollment process and throughout the program (in a condensed version).
Debt Settlement Sales Process
The first call you have with the company may be them cold calling you, or you’re returning a call from an advertisement that you receive or see on TV. Although the law changes do prohibit certain kinds of advertising there is still plenty that is legal as long as it can be associated with a law firm in some fashion.
The individual you speak with will go over a list of questions to “see if you qualify” for the program. If you have over $10,000 in unsecured debt you qualify, period. There are technically qualification guidelines for income levels, type of debts, and remaining funds after expenses, however, your debt analyst (i.e. salesperson) will find a way to make those numbers work.
Over the course of the conversation they will do what any good salesperson would do, build up the positives of debt settlement while highlighting the weaknesses of other forms of debt relief. Now, there are many good things about debt settlement and for the right person it is a good option. However, before simply accepting the “facts” they give you about other options such as debt counseling, consolidation, or even bankruptcy make sure you do some research on your own, that’s just being a good consumer.
One of the things they are going to tell you is that LHDR is the country’s largest “debt relief law firm” and that you will be represented by attorneys throughout the process. The wording they use may vary, but in some fashion they will tell you this. THIS IS ABSOLUTELY NOT THE CASE. Yes LHDR is a law firm, they may even be the largest bankruptcy law firm in the country if you include all of their contracted attorneys, and however, they will not in any way be associated with your actual debt settlement. The individuals who will actually be working your account are good people, and they are good at what they do, but they are not attorneys, as they will tell you themselves. They are employees of servicing companies such as Nationwide Support Services which are contracted to service the account once you are enrolled. I can’t speak for the other companies but I can say without a doubt that NWS has no attorneys working directly on, supporting, or in any way associated with your account.
The fact is that LHDR is a front for debt settlement companies to allow them to continue enrolling customers in the post Oct. 27th environment and continue to charge the 15% rate which was outlawed by the FTC for any non attorney debt settlement firm. The only time an attorney will be associated with your account is in two circumstances: a) during the original enrollment process you will have to sit down with one who will glance over everything and send you through to the next stage of enrollment. 2) If you are sued the LHDR attorney’s office will review your summons as I will discuss later. Now this is not necessarily a negative, but I feel it is important that you fully understand that before making a decision.
Another thing they are likely to tell you is that LHDR averages 40% settlements on enrolled balance for their clients. Simply put, this is not true. Before a few months ago you would have been told 45%, however, against the better judgment of a few of the servicing companies the majority voted to lower the stated amount due to the fact that other companies were quoting this amount and taking away business. Now I can’t speak for other companies beyond NWS but I do know that NWS regularly out settled all other LHDR companies both in percentage and amount of settlements according to LHDR so I assume that the numbers I am about to share are at least s good or better than most. The average settlement that you can expect is about 53% overall. This includes an average of about 45% on non legal accounts and anywhere from 60-80% average on legal accounts (obviously some settle much lower than 45% and some all the way at 100%, I’m just speaking averages however.) It is important to note, however, that this is NOT on the balance that you enroll in the program. These numbers are based on the balance of the account at the time of the settlement. The average when going off of original balance is closer to 60% overall. This is still a substantial savings, especially for someone with a large amount of debt, but again I feel it is important for consumers to understand the true numbers.
One other thing they will tell you is that the vast majority of LHDR clients successfully complete the program. If you ask for an actual number you will hear quotes ranging from 60%-90%, this is honestly to due less with any desire to lie and more to do with a lack of knowledge about the real number; they are simply repeating what they have been told. The fact is that with so many servicing companies working with LHDR the numbers vary greatly, however, as uncovered by the FTC it is far from the “vast majority”. There are two numbers that are reviewed when considering “completed” accounts, and this is what caused the confusion even amongst employees of debt settlement companies under executive management. When debt settlement companies state that the majority of clients complete the program it is because they are including what is known as #completes. Without getting into a lengthy explanation here these are basically clients who cancel from the program due to any reason who meet the 50/50/50 rule, i.e. have they settled 50% of their debt, 50% of accounts, or 50% of time in the program. This allows them to count clients who leave the program significantly early and potentially with a significant amount of their debt remaining as completed from the program.
The FTC estimated that only about 20% of clients actually settle all of their debts successfully through the program. Now this could be skewed as well by clients who choose to leave when they have 1 debt remaining because it can’t be located. What the numbers actually are is very hard to tell, but now at least you have an understanding of where the numbers come from.
Once in the Legal Helpers Debt Resolution Debt Settlement Program
I am not going to go over a step by step process here because it would take far too long; however, I am going to touch on some of the more important steps in the process. Again this is based on the NWS process and I am sure it varies widely from that of other servicing companies.
Shortly after joining the program you will receive a Welcome Packet that includes a large amount of information. You will then be contacted by your Settlement Specialist or SAR. The SAR will walk you through the process and tell you that they will be in contact with you every month on a set schedule. Although the majority of SARs will attempt to actually keep this schedule, and some actually can, the average SAR to customer ration is about 1 to 300 and it is growing due to layoffs. It is even possible that shortly after getting your SAR you will lose them and not receive another for some time. During this time if you call in you can likely expect to wait anywhere from a few short minutes to an hour to get someone depending on call volume. I suggest calling in on Thursday’s or Friday’s as this is the lightest call volume day. I only mention this as fair warning to clients about something that the employees simply have no control over right now.
Depending on when you stopped making your payments you will start to receive collection calls from outside agencies (not your creditor) at 2-3 months into the program. The script that is provided to you by the company can be effective, however, expect them to be very aggressive and at times downright belligerent. Remember that they make a commission for collecting money from you. These calls will continue throughout the program, though the pace of the calls will rise and fall.
At about 6-7 months you can typically expect to see your first settlement. This will come either from one of your small accounts being negotiated by your SAR, or from the bulk department settling with one of the companies NWS has a set relationship with. Listen carefully to the settlement terms. Just because it is offered does not mean you should always accept it. The fact is that while most times the settlement being offered is the best you can hope for there are plenty of times, especially with the bulk accounts, where a better settlement may be able to be worked out at a later date. Unfortunately, however, it could also be that you are sued during this time.
It is around this same time that you are likely to receive your first summons, either mailed to you or delivered in person by a sheriff or courier. It is possible that during the enrollment process, or in speaking with a rep, that you will hear that only about 20-25% of clients ever receive a summons. This again is a misrepresentation of the numbers due more to ignorance than any intent to deceive. The number they are referring to is the fact that during any given month 20-25% of clients will receive a new summons. This of course then compounds to mean that over the course of the program most of the clients enrolled will be sued on at least one card with many being sued on several. The last I reviewed the numbers the actual number of clients to receive summons at some point in the program is closer to about 75-80%. As I stated earlier when you receive a summons if you fax it in right away it will be sent to LHDR’s attorneys for review. Now what this actually means is that a representative working in the attorney’s office (not a licensed paralegal) will review the summons and contact you. They will go over the basic process in your area and will let you know that they are going to attempt to settle the account. Unfortunately in most cases at this point you are not going to have funds saved up so they are going to ask you to put in additional funds or they are going to set you up on a VERY long payment plan. Now in some cases the settlement they can get even with payments is pretty good, but in most cases is close to or at balance. Now if you don’t accept this settlement they will go over how you can file your response with the court and depending on where you live may file the response for you, there may also be an additional charge for this. If you settle the account or if you are one of the lucky 3-5% that actually win the case or have it dismissed then you are done with that account. If not, unfortunately, you are likely to be garnished (have a portion of your paycheck taken, up to 25% in most states), levied (have money taken directly from your bank account), or have a lien put on your home (prevents the sale or refinancing of the home without payment being made to the creditor). Individuals with fixed incomes do have some defense against these things, however, for the majority of people there is not much you can do other than try to set up payments or accept the hit at this point.
The remainder of the program will pass basically in this fashion with settlements and summons coming at varying times.
A few other things that it is important to understand prior to joining the program:
- In addition to the service fee you will be paying a maintenance fee. The time that it will start and exact amount varies, however, the most common starts right after your service fees end and is $42.50 a month.
- Depending on your program you may also have a trust fund servicing fee charge.
- Any payment changes of any kind have a $25.00 fee associated with them.
- The length of time quoted to you when you enrolled in the program is an estimate, and typically it is wrong. Most clients end up needing to be extended at least a few months with some needing nearly a year additional.
For some people even with its downfalls debt settlement may be a good opportunity to eliminate your debt. Before enrolling in LHDR or any company, however, make sure that you have a firm understanding of the process and the above and that you have looked at all of you options to make sure that it is the right one for you.