How to prepare for a debt relief consultation

This article was paid for by Freedom Debt Relief.

A debt relief consultation is the first step to seeking help from a debt relief company. In this introductory call, you'll learn about the services a company offers and talk through the best options for dealing with your debt.

Follow these tips to prepare and get the most out of a debt relief consultation.

Before the call with a debt relief company, pull together an overview of your debts. This will help guide your conversation and give you a clear picture of the support you need.

Check your bank account for debt payments and get a free credit report through an app like Credit Sesame or Credit Karma to get a full list of your debts.

For each debt, note:

• Who holds it (This could be the original creditor or a debt collection agency.)
• Outstanding balance
• Minimum monthly payment
• Interest rate
• Status (Is it in good standing, delinquent or in default?)

Not all debt relief companies are reliable, and the industry is vulnerable to scams. Before you get on a consultation call, prepare these questions to make sure the company is legitimate:

• Is there a charge for the consultation? Debt relief consultations should be free.
• Are there upfront fees? A legitimate debt relief company shouldn't charge you until it has performed its service.
• Do I retain access to my money? You should always retain control of your money, rather than handing it over to a debt relief company. For example, Freedom Debt Relief has clients deposit money into an FDIC-insured account they control until they have saved enough funds to pay off their debt.
• Do I get preapproval before any action is taken? A debt relief company will negotiate with creditors on your behalf, but it shouldn't agree to any settlements without your approval.
• Can I see the status of my debts? There should be full transparency with the program's progress and the status of your debts. Freedom Debt Relief, for example, provides a client dashboard that lets you follow its actions and any updates.
• Can I continue to talk to my creditors? The Consumer Financial Protection Bureau warns against working with companies that ask you not to communicate with creditors while you're in the program.
• Is the debt relief company accredited? Standard accreditation for debt relief companies comes from the nonprofit International Association of Professional Debt Arbitrators (IAPDA) and the industry group American Association for Debt Resolution (AADR).
• How much will I be charged for the service? Debt relief companies typically charge a percentage of the balance you start with, typically between 15% and 25%, which is charged after a debt is settled. You might also have to pay fees for the bank account that holds your savings.
• How long will I be in the program? It's common for debt relief programs to take anywhere from 18 to 48 months, depending on the size of your balance.

Debt relief companies focus on negotiating a debt settlement that reduces your balance and enables you to pay it off in a lump sum or through a payment plan. This may not be the best option for everyone.

During the consultation, you should learn about debt relief options beyond what the company offers, in case those are a better fit for your situation. Ask how the various options might impact your debt, and be skeptical if a debt consultant is unwilling to provide information about options beyond their services.

Consider these debt relief options:

• Forgiveness: A debt relief company can negotiate with the creditor or debt collector to forgive a portion of your debt in exchange for a lump-sum payment.
• Payment plan: With your approval, a debt relief company can set up a payment plan to pay off your outstanding balance or a lower payoff amount.
• Consolidation: Take out a loan with a lower interest rate to pay off your existing debts and make payments to a single lender. (Debt relief companies don't usually offer debt consolidation, but they might partner with companies that do.)
• Bankruptcy: You can work with a lawyer to file to discharge some debts in court by proving they cause you financial hardship.
• Validation: Request proof from the creditor or debt collector that you're responsible for the debt they're attempting to collect. Debt relief companies might offer this service, but beware of paying upfront fees. They can't guarantee debts will be invalidated.

Not all debts will qualify for some kind of relief, and you won't know until you've negotiated with creditors. CFPB warns against working with debt relief companies that guarantee they'll make your debt go away or promise a percentage reduction.

While you're in a debt relief program, you'll likely set aside money into a dedicated account the company will use toward settlements. In addition to those (usually monthly) payments, creditors can continue to charge your monthly minimum payment, interest and late fees (if you miss payments).

Before talking with a debt relief company, review your monthly resources to figure out how much you can spare toward debt settlement expenses.

Talk with the representative during your debt consultation about the monthly payments you'll be expected to make. Take time to review how that fits into your overall financial plan before you commit to a program.

Keep in mind that you typically have to report forgiven debt as taxable income. In addition, your credit score will take a hit even if the program is successful, so make a plan to rebuild your credit after the settlement.

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