Beware of Debt Settlement Companies and Scams

How NOT to deal with your debts tip of the day: Beware of Debt Settlement Companies and Scams

You are buried in debt and looking for a way out. You have likely heard the radio and TV advertisements pitching debt settlement programs that promise to reduce your debts by ‘up to 70%’. Many mention words like government debt settlement programs or debt relief programs, others say they are not-for-profit debt settlement companies.  And you are left wondering who to trust.

Not All Debt Settlement Companies Are Created Equal

Debt settlement can be a legitimate way to reduce your debts in certain circumstances.  Essentially, under a debt settlement plan or debt settlement program (they really are the same, there are no ‘official government debt settlement programs’ except bankruptcy and consumer proposals) you, or your debt advisor, negotiate with your creditors to accept a reduced payment for the total amount you owe.

Avoid Debt Settlement Companies unless you fully understand how they work.

For the program to work, you have to stop paying your creditors – you then fall behind, compromise your credit rating, and run the risk of having your income garnisheed. Worse yet, the creditors may not agree to the settlement that the Debt Settlement Company offers to them. Wouldn’t it be awful to pay all of that money to the Debt Settlement Company, have your credit ruined in the process, and still owe the money?

Research your debt consultant before you sign anything, and be aware of your options.

October 2012 UPDATE:  Global News report: Do credit settlement agencies really deliver?

Finding The Right Solution

It is important that you deal with your debt problems as soon as possible to prevent your situation from worsening as time goes on.  For help in dealing with your debts we recommend that you talk to a professional who will look at your personal situation and help your choose the best option. A licensed trustee is a professional, trained debt advisor who can help you decide.  Contact a trustee to arrange a free initial, no obligation consultation. Or if you prefer, use our free, on-line evaluation form to contact one of our experts for more advice.

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