New regulations will soon crack down on shady debt settlement companies.

Starting Sept. 27, new Federal Trade Commission rules will require debt settlement companies to disclose:

• How long the process is likely to take.
• How much the companies charge to settle debts.
• Any negative consequences of debt settlement, including the facts that your credit scores will be trashed, you may get sued and you're likely to get a tax bill for any debt that is forgiven.

Starting Oct. 27, debt settlement companies will be banned from collecting upfront fees.

The new rules:

According to the FTC, after Oct. 27 debt settlement companies can't collect fees until:

• There is a written settlement agreement, debt management plan or other agreement between the consumer and the creditor, and the consumer has agreed to it.
• The debt relief service successfully renegotiates, settles, reduces or otherwise changes the terms of at least one of the consumer's debts.
• The consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

 Another important change has to do with where clients put their savings. Typically, debt settlement companies tell you to stop paying your creditors and instead put aside your payments to accumulate a lump sum that can be used for settlement offers.

It's always been a bad idea to let a debt settlement company have or control those savings, but now the FTC has spelled out that the money needs to be in an insured bank account controlled by the client, not the debt settlement company.

I am a firm believer that there is absolutely no need to hire someone to help you deal with your creditors. As an adult you should be responsible and mature enough to deal with your situation, which you have somewhat embraced by your actions and decisions. It is as simple as calling your creditors and explaining to them your financial situation. No company, or individual can accomplish miracle in regards to negotiating with your creditors. I suggest you read a couple of books: "How to get out of debt, stay out of debt and live prosperously" by Jerrold Mundis and "Debt Cures" by Kevin Trudeau.


After reading those 2 books you will gain the knowledge that will help you negotiate successfully with your creditors and find a solution to your financial distress.