Only choose a debt solution service that discloses its prices and terms, offers a timetable for results and warns you of the negative consequences of nonpayment to creditors, cautions the Federal Trade Commission. Avoid services that demand personal financial information before providing information about themselves, charge fees before settling debts or make unrealistic guarantees. Check out possible debt solution services with consumer protection agencies and your state attorney general, and conduct an Internet search for complaints against the services.
Debt solution services, also known as debt settlement programs, negotiate with creditors to resolve debts by paying back less than you owe, explains the Federal Trade Commission. They usually have you deposit monthly sums in a special bank account to use for the debt settlement. Be sure the account administrator has no connection with the debt solution service and that you control the account and receive the earned interest. Before you make any payments into the account, find out if your creditors accept the debt settlement program.
Because the debt settlement business is fairly new, a number of companies operate illegally and fraudulently, warns the Consumer Financial Protection Bureau. Often, your debt grows larger through their intervention because creditors refuse to work with them, hasten collection efforts, and charge penalty interest and late fees. As an alternative to a debt solution service, consider developing a debt management plan with the help of a nonprofit credit counseling service.