June 20, 2018
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Debt Settlement: Too Good to Be True

Debt Settlement: Too Good to Be True!

Are you considering debt settlement?... STOP!

Debt settlement is masqueraded as the quick fix and the escape from debt.  These agencies boldly proclaim that you will get out of debt fast, save money, stop collection calls and be rescued from financial crisis.  Sounds like a miracle!...Or, more like magic...  And, we all know that magicians never reveal their secrets!

Smoke and mirrors.  

Debt settlement, also known as debt negotiation, is not to be confused with the ethical methods of debt resolution (debt consolidation/credit counseling).  Debt settlement is promoted as an aggressive approach to quickly reduce debt, while trying to avoid bankruptcy.  These agents will ‘wheel and deal’ with your creditors, for a fee of course, attempting to “settle” your debt for a lower amount than what is owed.  The debt settlement company pays off the creditor with a lump-sum payment.  Keep in mind that there is no guarantee that the debt will actually be reduced by the creditor.

Just to start the process, debt settlement agencies will slap on set up fees of up to hundreds of dollars to your already teetering debt.  Adding pain to heartache, you’ll be assigned monthly service fees based on your total debt.  Those who fall into their net and sign on the dotted line are required to deposit money into their account every month.  When the account eventually grows to the appropriate level, it is then supposedly used to pay the awaiting creditor.  However, even if the creditor agrees to the debt reduction and lump-sum payment, they can still report to the credit bureaus that the debt was settled for less than the full amount. There is no guarantee it will be appear on your credit report as “paid.”

Liar, liar - what the debt settlement company doesn’t tell you.

Debt settlement agencies will instruct to stop paying your creditors and to pay them instead.  While the debt settlement agent will tell you not to worry, stating that they will handle everything for you, they typically fail to disclose what happens behind the scenes.

The bad, the worse, and the downright ugly...

Incurring late fees, interest fees, etc.

Defaulting on your loans and lines of credit

Further damaging your credit history

Increasing the creditor calls and the possibility of lawsuits

Positioning yourself to pay more taxes (you will pay taxes on any debt reduction amount)

Which way do I go, which way do I go?

Although debt settlement is considered legal, you will most likely end up a red letter credit report and quite possibly the financial mess you started with.  It’s important to know that the Federal Trade Commission has closed some of these debt settlement companies due to unlawful practices and has been keeping a watchful eye on these agencies ever since.  There is a better way to resolve your dilemma and regain financial control.

Consumer Credit Counseling will supply you with sound advice and map out the steps in a personalized plan.  This method has proven success working with creditors to lower interest rates and monthly payments.  Regain your peace of mind and win in the battle of the bills.

Contact a consumer credit counselor today, and take the a step in the right direction!


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