Debt Consultants – Can You Trust Them?

Question: I heard the ads on the radio for a debt consultant. I talked to them on the phone, and they said they can cut my debt, but I have to pay them $700 per month, and I have to stop talking to the credit card companies and not answer my phone.  I have paid them for three months now, and my phone keeps ringing, and no I’m getting letters from lawyers.  Help.  I don’t know what to do.

Answer: Debt consultants can negotiate settlements on your debt, but generally they are most successful when you have debts that are old, and when you have a lump sum of money to offer.  For example, if you owe $20,000 on debts that you have not made any payments on for two years, it is quite possible that a debt consultant can negotiate a settlement for $4,000 or $5,000.  However, for this to work, you need to have the $5,000.  If you have that amount of money, you are probably already making payments on your debts, so you don’t need a debt consultant.

If you don’t have the cash, then they will ask you to start paying them a fee each month, and they will tell you to start saving money to use for the eventual settlement.  Unfortunately while you are saving the money and not paying the credit cards and not answering the phone, you increase the risk of having one of the creditors take you to court and sue you.

In most cases a consumer proposal is a better option, because you get full legal protection.

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