Debt Relief

The Downsides of Using a For-Profit Debt Settlement Company

Carrying large amounts of debt is stressful, which is why many people turn to debt settlement companies to fix the problem. However, it pays to use caution when seeking solutions with consumer debt. Countless for-profit debt settlement companies exist, offering deals that seem too good to be true, hoping that they will be able to entice a consumer to use their service. Consumers who hire a for-profit debt settlement company often find there is more risk than reward.

Debt settlement companies are easy to find, whether on the internet or on TV commercials. We have all seen them.  These companies use lines such as– “Settle your debt for less than you owe”, “We work with your creditors to reduce your monthly payments,” etc.

How most of these company’s work is the consumer agrees to sign up with the for-profit debt settlement agency and immediately will stop making payments toward his or her existing debts. Instead, he or she will end up depositing a large sum of money into a special account set by the debt settlement company. The debt settlement company will then use this money to negotiate and pay on the consumer’s debts.

Unfortunately, once the consumer stops paying on his or her debts, creditors will consider these accounts as going into default. Lack of payment will reflect negatively on the consumer’s credit score. At this point, the debt settlement company says they will work to get the creditor to agree that any amount, even a partial payment, is better than pursuing a legal action to collect on the debt. The problem is this concept hinges on a lot of assumptions.

Many times, for-profit debt settlement companies will require the consumer pay a fee to continue their services. Charging a fee until the debt settlement company fulfills their promise is illegal. However, these companies hope that the consumer is not savvy enough to know the same.

If a consumer is interested in obtaining the services of a debt settlement company, it is important that he or she does their research first. Non-profit credit counseling services are oftentimes a safer alternative.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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