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The Consumer Law Group, P.C.

Should I consider using a debt settlement company to get out of credit card debt?

The Truth About Debt Settlement CompaniesThe answer to this question in one word is NO. No matter how desperate you are to get out of credit card debt, a for-profit debt settlement company is NOT the answer. If you contract with one of these companies, you will most likely end up in worse financial shape than you are now.

How Debt Settlement Companies Work

These companies prey on desperate people looking for a way out of credit card debt. They claim they will negotiate with your credit card companies to lower the amount you owe and then create a manageable payment plan for you. You will make one monthly payment to the debt settlement company and your creditors will be off your back. Sound too good to be true? It is. When working with a debt settlement company, you will be expected to do the following:

  • Pay an up-front fee of 10-20 percent of your total debt.

  • Pay additional account maintenance fees of up to several hundred dollars per month.

  • Deposit money every month into an escrow account held by the debt settlement company.

  • Stop making payments to the credit card companies—in other words, default on the debt.

  • Commit to a 36-month minimum contract.

You may wonder why anyone would agree to these terms, but these companies are very good at hiding the fees and bottom-line cost of the plan, so many people have no idea what they’re getting themselves into. And some of these offers are complete scams; they have no intention of negotiating on your behalf. They are simply taking your money.

Who Should You Turn to for Help?

As soon as you run into trouble with your credit cards, you should stop using the cards and contact the credit card company directly to try to arrange a payment plan. They are not likely to be overly generous, but you may be able to come to a workable agreement. Avoiding the problem or turning to a third party will just make things worse.

If you are looking for someone to advocate on your behalf, the attorneys at The Consumer Law Group, P.C. may be able to help. As attorneys, we have a fiduciary duty and an ethical obligation to you as our client, not to the credit card company and not to our own bottom line. National debt settlement companies have no such duty and will take full advantage of you. Contact us today for a review of your situation to see if we can help.