When entering into the debt settlement process, everyone knows that they will be expected to pay the lenders, even if the principal amount is reduced.
However, like all businesses, the settlement service will also charge fees for helping facilitate the process and negotiating with the credit card companies.
Some of these fees may be very up-front and obvious while others may be more elusive.
The largest cost will most likely be the fee that is charged for negotiating the debt reduction.
Most firms will take a percentage of the amount that the principal was reduced by.
For example, if the original balance owed was reduced by 40%, then the settler may request 20% of that amount as payment.
Sometimes, this amount is required to be paid upon signing the finalized settlement contract.
Other times, it may be spread out in installments over the course of a year.
A more confusing series of costs fall under the heading of administrative fees.
These are generally fees for handling paperwork, maintaining records about your account, or even sending documents through certified mail services.
There may be many different types of very small administrative charges that accumulate and are paid on a monthly basis.
You can request a document called a fee schedule from your settlement agency.
This should list all of the extra charges that can be accrued during the normal process of debt settlement.
Some of them can be avoided, some can not.
Finally, there may be fees that are incurred if the settlement counselor has to make appearances before an arbitrator or attend some type of legal hearing.
These charges could include gas for miles traveled and even lodging in extreme cases.
Whether or not the associated costs of pursuing debt settlement are worth it is a decision that only the debtor can make.
Each agency will charge for their services.
The question is whether the financial trouble you are in is worth that extra cost.