Today I received an email from a lady who has been working with a “debt settlement company” for about 6 months. She told me that she has paid a considerable amount of money to this company but so far she has received nothing in return. Unfortunately, this is an all too common story.
TV and radio are filled with ads from these debt settlement companies promising quick debt relief. They say they can negotiate deals with your creditors where you end up paying only pennies on the dollar and your creditors consider the balance paid in full. It all sounds great but unfortunately it’s too good to be true. In fact, it’s nothing but a lie, a scam, a rip-off.
Here are the two main things to be aware of regarding debt settlement companies:
- they will charge you a lot of money, and
- they will end up hurting your credit.
Debt settlement companies have two basic fee structures: fees of up to 20% of your total debt or fees of up to 35% on the amount of debt reduction they can negotiate. Many also charge a monthly fee up to $90 per month.
Debt settlement companies also give bad advice which ends up lowering credit scores. They will tell you to stop paying your creditors and begin depositing money in a special account while they negotiate with your creditors. Usually what happens is there is no real negotiation going on and all the while your creditors are charging you various late fees and penalties because you have stopped paying them. So you wind up owing more than when you started and your credit suffers as failure to make payments on debts comes to the attention of the three national credit reporting bureaus.
A recent Tulsa World article on debt settlement companies had this advice – “run away” as fast as you can.
A Washington Post article details how the federal government has sued several unscrupulous credit-counseling and debt-management firms including AmeriDebt, the National Consumer Council, Debt Management and Better Budget. The companies were falsely promising easy debt relief that left many consumers deeper in debt and sometimes forced them to file for bankruptcy protection.
If you are struggling with debt problems and being harrassed by bill collectors and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.
