In today’s blog I want to distinguish between commercial relief companies and traditional nonprofit credit counseling agencies. They are significantly different. Non-profit agencies teach you how to better manage your money and how to gradually pay off your debts. Whereas commercial debt-relief companies make claims of being able to help you dramatically reduce your debt, but whether they actually do or not is questionable. A nonprofit credit counseling service bases your monthly fee on your income. In contrast to most debt relief companies who charge fees that are often equivalent to anywhere from fourteen to eighteen percent of your total debt. They also expect their money-or a large percentage of it-in advance.
Debt relief companies frequently tell you to stop paying your bills. You are then instructed to make monthly deposits of a certain sum into a separate bank account set up by the company. Once there is enough money in the account, the company promises that they will negotiate a single payment settlement with your creditors. The problem is that during this time the interest charges and penalty fees keep piling up on your unpaid accounts. Gail Hillebrand, a financial services expert at Consumers Union, warns that “you will definitely wind up in worse shape if you are paying your bills and then stop paying them. Creditors get tired of waiting and they will give your account to a collection agency or sue you.”
The debt-relief industry insists that the accusations are unfounded. According to the Association of Settlement Companies its members saved consumers approximately $640 million in 2009. The association’s vice president, Robert Linderman, insisted in a letter to the FTC that his industry treats its clients “respectfully and responsibly while producing significant benefits for consumers that far outweigh the cost of realizing those benefits.”
In Thursday’s blog I will further explore debt -relief companies. In the meantime, if you have questions you need answered or are considering filing bankruptcy please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form. I will answer your questions without obligation. Remember, I am here to help.
