These days, it is all too common to see commercials on TV or print adds touting the benefits of working with a debt settlement company. However, there is a lot of crucial information that these companies do not tell consumers that can leave borrowers in worse situations than if they simply just filed for bankruptcy instead of enrolling in a debt settlement program. Among the most damning statistic recently publicized about the debt settlement industry is the fact that less than 1 in every 10 borrowers who enrolls in these programs is able to successfully complete them (according to a 2010 study conducted by the Government Accountability Office).
Experts have contended that some of the reasons that more than 90% of debt settlement programs fail to help the consumer include the following:
- When borrowers enroll in debt settlement programs, creditors – specifically credit card companies – will typically ramp up their efforts to collect a debt. While this can mean a borrower receives more harassing phone calls, in many cases, it also means that the creditor will sue the debtor, as debt settlement companies generally instruct consumers to stop paying these debts. This can ultimately lead to wage garnishments or liens against one’s home.
- Debt settlement companies often fail to explain exactly how their programs work to consumers; in many cases, this includes failing to disclose the percentage of fees that they charge for their often unhelpful services.
- The longer that borrowers are enrolled in and complying with debt settlement programs, the more interest their outstanding debts are incurring – and the more their credit score is likely plummeting.
- Debt settlement companies often do not explain the tax repercussions of debt settlement to borrowers, which means that these borrowers will be hit with an unexpected tax fee for discharged debts.
If you find yourself facing overwhelming debt and are considering what your best options are, be sure to consult with our trusted bankruptcy lawyers for sound legal advice regarding how to proceed. We can not only inform you about your best options for moving forward, but we can also help you avoid financially ruinous pitfalls that may intensify your debt situation.