Debt relief ads seemingly are everywhere these days, especially when you have a mounting pile of debt and you’re paying attention to people talking about debt.
These ads show up online and in the mail, and you may even receive phone calls offering debt relief services. The ads always say they can help you in one way or another, promising to erase all your debt or promising to get your creditors to settle for less than you owe.
Be wary of them. Debt relief services are never as good as they seem in advertisements.
In reality, these promises range from misleading to entirely unsubstantiated. Creditors have a legal right to refuse settlement offer, so a company cannot rightly promise you a settlement.
Alternatively, if a company promises to erase your debt entirely, it probably wants you to declare bankruptcy. Filing for bankruptcy is your choice and should only be considered after you’ve tried other techniques and after you’ve received credit counseling.
Here are some other warning signs of a debt relief scam:
- The company promises to remove negative information from your credit report. If negative information is accurate, only time can legally remove it. If it is inaccurate or outdated, inform the credit reporting agency and have it removed on your own.
- The company charges up-front fees before showing results. A debt relief organization can only charge you fees once you see results.
- The company offers to create a new credit report for you. It is illegal to change your name or take other action for the purpose of obtaining a clean credit report.
- The company does not go over all your options and instead recommends bankruptcy immediately. A legitimate company will review your unique case and go over all your options before suggesting one particular option.
- The company tells you not to communicate with your creditors. It is always a good idea to keep lines of communication open between you and your creditors.
If you’re unable to handle your debts and you need help, the best way to avoid debt relief scams is by seeking legitimate help.
How? Start by being responsible. Contact your creditors as soon as you realize you cannot make your monthly payments.
If you contact them early, they may be willing to compromise. They could help you work out an affordable repayment plan, and in some cases you can even ask for lower interest rates.
If you’re already behind on your payments, it’s in your best interest to explore all your options with the help of a credit counselor. Banks and financial nonprofit organizations typically offer free or low-cost counseling with certified debt specialists.
Your credit counselor will review your finances and give you personalized advice on how to control and reduce your debt. He or she may suggest techniques like a debt management plan, debt consolidation, debt settlement or even bankruptcy. Together, you can decide which option is best for you, and your counselor can help you follow through on your plan.
I have been fortunate enough to have never fallen into a debt relief scam, but one of my closest friends had. He sent a large sum of money to a debt management company trusting them that they would be able to negotiate lower interest rates on his credit cards. He was confident that this was a great first step to getting out of debt. Unfortunately it did not have the outcome he was expecting. The company was not able to lower the interest rates and refused to refund his money. He is now in a legal dispute with the company and still trying to find his way out of debt. His advice was do not just jump into things because you are in panic mode. Do your homework and research the companies you are doing business with. Shop around to find what suits you.
Our guest contributor, Vincent Ramos, is a Consumer Financial Advocate for Debt.org America’s Debt Center.