Everybody has seen ads on television where someone will promise to magically negotiate your high debt down to a manageable bite-sized amount. Before dialing that toll-free number, there are a few things you should know.
Using a debt settlement company is not without risk. Debt settlement companies often charge expensive fees for their services and may ask you to agree to long term payment plans in order to pay off what you owe. If you are unable to keep up with the payment plan, you may end up owing more than when you started.
The U.S. Consumer Financial Protection Bureau warns that:
- Debt settlement companies typically encourage you to stop paying your credit card bills. If you stop paying your bills, you will incur late fees, penalty interest and other charges, and creditors will likely step up their collection efforts against you.
- Unless the debt settlement company settles all or most of your debts, the built up penalties and fees on the unsettled debts may wipe out any savings the debt settlement company achieves on the debts it settles.
- Using debt settlement services can have a negative impact on your credit score and your ability to get credit in the future.
As a bankruptcy attorney, many of my clients come to me after attempting to resolve their debts through a debt settlement company. Unfortunately, this rarely works out well for my client. Invariably, the client will have made high monthly payments for many months or years, only to find that their debt has been reduced by only a small amount due to exorbitant fees charged by the debt settlement company.
Before engaging a debt settlement company, I would urge anyone to first contact a reputable attorney experienced in debtor matters so that you will understand all of the options open to you.
Thank you to our friends at Willinger, Willinger & Bucci, PC for providing this article to be shared with you.