You’ve probably heard the ads on the radio for many debt settlement programs offering to settle your debt for a fraction of what you owe. You may have even heard the consumer warnings about debt settlement companies. But can they really settle your debt? Is an informal debt settlement program a good debt settlement alternative?
Know Who You Are Dealing With
Debt settlement companies grew out of the debt crisis in the US and many have now entered the Canadian market. Others have followed suit, setting themselves up as ‘not-for-profit’ credit counsellors offering quick fix debt settlement for a fee.
A recent report stated that:
the chances of you becoming “debt free” from using one of these ‘American style’ debt settlement programs is less than 10%, and 65% leave the program having paid for a service they never received.
Here are some facts to consider:
- Many large credit card companies don’t deal with these debt settlement companies. They will only agree to talk about debt settlement with accredited credit counselling agencies and trustees in bankruptcy.
- The success rate for many of these programs is quite low, some reports saying as low as 10%.
- Many people leave the program after having paid months of fees with no results.
- If you stop paying your debts (as recommended by most of these agencies) but do not reach an agreement you end up with even worse credit than your started.
- Creditors are unlikely to wait for you to set aside a large enough fund to settle your debts. You will likely see an increase in collection calls.
- Since they are not receiving payments for an extended period, creditors may take you to court, garnishee your wages or freeze your bank account.
So, before you part with your hard earned money, be sure to investigate them thoroughly, to ensure that you are dealing with a company that can actually solve your debt problems. Some of them might be able to, some of them can’t, so do your research first.
Read our article on “How To Choose a Debt Advisor” and make sure you know:
- Who you are dealing with.
- What service is being provided.
- What you will be required to pay.
- How and when the program will settle your debts.
All of the advisors on MoneyProblems.ca are accredited experts in debt management. They are licensed Bankruptcy Trustees, Qualified Insolvency Counsellors or accredited Credit Counsellors. Contact an advisor today and ask them how they can help and why they are the right advisor for you.