19 Mar Tips to Avoid Debt Management Scams
In many cases, people that seek bankruptcy consultations have unsuccessfully tried to regain control of their finances through a debt-management company. All too frequently, the result is that they find themselves deeper in debt after paying hefty fees to the company. As Marshall Loeb, writer for MarketWatch, reports,
Be especially wary of debt-consolidation or counseling organizations that:
- Charge high up-front or monthly fees for enrolling in credit counseling or a debt management plan.
- Pressure you to make “voluntary contributions,” another name for fees.
- Won’t send you free information about the services they provide without requiring you to provide personal financial information, such as credit-card account numbers, and balances.
- Try to enroll you in a debt-management plan without spending time reviewing your financial situation.
- Offer to enroll you in a debt-management plan without teaching you budgeting and money-management skills.
- Demand that you make payments into a debt-management plan before your creditors have accepted you into the program.
There is no doubt that bankruptcy should be a last resort, but not always THE last resort. If you do wish to try debt management, make sure you:
- choose your company through the National Foundation for Credit Counseling,
- the company you choose is accredited by the Council on Accreditation for Children and Family Services (COA),
- understand exactly how much the service will cost,
- know whether the fee is paid before any money goes to creditors,
- what interest rates you will be paying the creditors,
- how long it will take to completely pay down the debt, and
- how your creditors will report your account to the credit bureaus.
Remember, if your attempts at debt reduction fail, bankruptcy offers you a financial fresh start.
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