A Cautionary Tale of Debt Settlement
One woman’s journey serves as a warning for others seeking debt relief.
When NBC6 reached out to Consolidated Credit for expert advice on the right way to find debt relief, we recognized Navys’ story because it’s one we’ve heard before from other clients we’ve helped. It contains more than one warning for other borrowers who are seeking debt relief. If you’re facing problems with credit card debt, here’s what you should take away from Navys’ story:
#1: Don’t sign anything out of desperation
Problems with credit card debt can be extremely stressful and put you into an emotional and mental state where you’ll sign practically anything just to feel like you’ve done something to eliminate your debt. However there are scammers who will prey on that desperation. You’ll sign up for a program without reading the fine print and start paying before you know the program will actually work.
Always read service contracts carefully and vet companies through the Better Business Bureau and independent third-party review websites to make sure a service is legitimate before you sign anything.
#2: Debt settlement should only be used as a last resort
As Consolidated Credit’s Community Development Manager Beatriz Hartman explains in the video, debt settlement should really only be used as a last resort before filing for bankruptcy. Settling your debt for pennies on the dollar sounds great, but it isn’t always guaranteed to work and even when it does it is likely to do significant damage to your credit.
Solutions like debt consolidation should be considered first. With consolidation, you pay back everything you owe. You just do it in a way that’s more manageable on your budget at reduced interest rates. If you’re in debt, consider a debt reduction strategy first. If that won’t work, move on to consolidation options, then to credit counseling. Only after you’ve exhausted all of these other solutions should you even consider settlement.
#3: Your debt may not be as insurmountable as you think
To Navys her $14,000 in credit card debt seemed impossible to eliminate in-full, so she assumed her only option was to settle for less than she owed if she wanted to get out of debt within a few years. However, in the world of consumer credit card debt, consolidating $14,000 of debt is common.
In fact, Consolidated Credit and other credit counseling agencies have worked successfully with clients who need to consolidate significantly more. Consolidated Credit has cases where clients have eliminated over $100,000 in credit card debt in less than 5 years. Amounts from $20,000 to $50,000 are fairly standard. So even if you have what seems like an impossible amount of debt to overcome, there are solutions available that can help you without doing damage to your credit with debt settlement.
#4: Be careful with debt settlement companies
If you go through your options, talk to a certified credit counselor and still can’t find a solution that works, then and only then should you consider debt settlement. To be clear, there are debt settlement companies who provide legitimate services, but there are also companies out to make a quick buck and disappear.
Thankfully Navys’ story ended well and the former employee seems to be working to make things right for her and other clients. However, these stories don’t always end so well. Laws have been passed that prevent debt settlement companies from taking any fees until at least one of the client’s debts has reached a settlement agreement with the creditor.
However, even if the company does not collect fees in advance, you may still be making payments into the program to generate money for the settlement. As a result, you can pay for months or years like Navys did before any settlement would be reached. It’s hardly a situation that will give you much peace of mind.
By contrast with solutions like a debt management program, as you make payments into the program you will also see results. Once enrolled, your credit card balances will decrease and be eliminated in-full one by one when you start making payments. The money isn’t kept – it’s distributed amongst your creditors each month on a schedule the creditors sign off on before you start the program. So you don’t have to wonder if the program is working because you can see the results as they happen.
Take a lesson from Navys and explore your options!
If you’re in a similar situation with credit card debt and you’re desperate to find relief, call Consolidated Credit today for a confidential debt and budget evaluation at no charge. We can help you explore your options to help you find your best path out of debt Call or complete an online application to request your consultation today.