Take control of your financial future, avoid debt settlement companies
As we begin a new year, many Americans struggling to escape increasing debts will make efforts to start fresh in 2013. Many will turn to reputable sources, such as attorneys, to receive advice on the best course of action for their specific situation. Unfortunately, though, many others will see hope in false promises made by debt settlement companies. For these people, although their intention may be to become debt free in 2013, debt settlement scams may actually leave them in a worse position than where they started.
The National Association of Consumer Bankruptcy Attorneys has reported that only around one-tenth of the people who use debt settlement companies actually get the results they are promised – typically, to be debt free within a certain time frame.
Meanwhile, Americans on average are facing larger credit card debts than last year. According to TransUnion, a credit-reporting agency, the average amount of credit card debt was 4.9 percent higher in the third quarter of 2012 than the same quarter of 2011. In other words, Americans owed, on average, almost $5,000 more in credit card debt.
Consequently, as more people struggle financially, debt settlement companies have a larger group that they can attempt to exploit. Unfortunately, many are taking advantage of people in difficult financial situations.
Dangers of using debt settlement companies
One of the most damaging trademarks of debt settlement companies is their advice to consumers to stop paying their bills altogether. Instead, many of these companies put the money the consumers would have paid toward their bills in a separate account. The companies typically claim they will later use these funds to pay the consumers’ debts after they have negotiated a reduced amount.
While this may sound promising to many consumers, the reality is often not as advertised. Once consumers default on their debts, they typically end up with higher interest rates and penalties for defaulting. Consequently, the amount of their debt increases dramatically. If the debt settlement company is unable to negotiate a lower amount due, the consumer is then left with much larger debts than he or she brought to the debt settlement company.
In the worst-case scenarios, the debt settlement company is entirely fraudulent. At times, the company will take money from the consumer under the pretense that they will negotiate a lower balance. Instead, the company steals the money and disappears.
Filing for bankruptcy can be a favorable alternative to using debt settlement companies
If you are facing mounting credit card debts, or are otherwise in a precarious financial situation, there are options available to help you move forward with a fresh slate. For many people, filing for bankruptcy provides the necessary relief and allows them to move forward debt free. If you are struggling financially, consulting with a skilled Texas bankruptcy attorney will ensure you take the right path to becoming debt free.