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I have been speaking with a debt settlement company that says month 1 – 3 the monthly payment will go towards their fees, months 4 – 16 1/2 the pymnt will go towards their fees. I understand that the money needs to accumulate before a payment can be made. But, is it common that the cc companies would wait months to receive communication regarding the settlement? I’m confused as to how this works. typically would the agency you choose to work with contact the cc companies up front, or do they wait until the funds are in the account and they go for a settlement amount?

Hello. As I discussed yesterday in answering some questions about debt relief, you will pay a portion of your monthly payments as fees to the debt settlement company. The way in which these fees are paid varies from company to company but typically a larger portion of the first few payments goes against the fees and then the percentage decreases for the duration of the time.

You are correct in stating that the payments accumulate and during that time there is no negotiations going on between your settlement company and your creditors. The negotiations do not begin until enough money has accumulated in your settlement trust account to be able to pay off at least one creditor. The creditors do not get paid while that occurs which is why your credit score will be damaged by the process. That is a major drawback to the process but one which many people accept to get out of debt through this method. Thanks.