If you’ve maxed out your credit cards and don’t know how you’re going
to pay off your debts, you may think that a company that promises to
erase the debt for pennies on the dollar is the answer to your prayers.
Not true! Debt negotiation can be risky, and it can have serious,
long-term consequences for your credit report and your ability to get
credit in the future.
To Do
If you get a sales pitch from a debt relief firm, pay attention to the details. Stay away from any company that:
promises that unsecured debts can be paid off for pennies on the dollar. The truth
is that there is no guarantee that any creditor will accept partial
payment of a legitimate debt. Your best bet always is to contact your
creditor directly and as soon as you are having problems making
payments.
requires substantial monthly service fees and demands payment of a percentage of what they’ve supposedly saved you. The truth
is that most debt relief companies charge hefty fees for their
services, including a fee to establish the account with the debt
negotiator, a monthly service fee, and a final fee – a percentage of
the money you’ve supposedly saved.
tells you to stop making payments to or communicating with your creditors. The truth
is that if you stop making payments on a credit card, expect late fees
and interest to be added to the amount you owe each month. If you
exceed your credit limit, expect additional fees and charges to be
added. Your credit score also will be hurt by not making payments.
claims that creditors never sue people for not paying their unsecured debts. The truth
is that creditors may have the right to sue you to recover the money
you owe. And sometimes, when creditors win a lawsuit, they have the
right to garnish your wages or put a lien on your home.
claims that they can remove accurate negative information from your credit report. The truth
is that no company or person can remove negative information from your
credit report that is accurate and timely. It’s illegal.
