Negotiate Your Own Debt and Avoid Scams
If possible negotiate your own debt and avoid scams that are common in this market place. Since the economic crisis began, there has been a flurry of TV ads and online sites claiming that they can assist you in relieving the pressure of debt. While there are some legitimate operations that can assist you, most of which are non-profit organizations, there are others that are deceiving the public.
A word of caution: If it sounds too good to be true, it usually is. For example, according to an article in AARP concerning debt fraud, an agency can tell you that their method of operation is to force creditors “to accept pennies on the dollar by warning that clients could exhaust their assets and leave the creditors hanging.”
However, it is not all that it is cracked up to be. The article goes on to state that: “First, not all of your creditors are likely to go along. Second, when a creditor does buckle, the unpaid portion of your debt doesn’t disappear. It can be reported as bad debt, delivering another blow to your credit score, and the IRS counts forgiven debt as taxable income, so you could end up owing Uncle Sam.”
In addition, there has been a myriad of so-called “credit counseling” agencies that have been under investigation by the FTC.
Most experts recommend that if you decide to choose a credit counselor, you need to research several of them thoroughly. Select four or five and call each of these agencies. Ask questions regarding their services and what fees are incurred. Keep in mind, however, that most consultations are free.
Credit counseling agencies utilize debt management plans to get you back on track. They negotiate with creditors to reduce interest rates and may charge a monthly fee and/or a percentage of the debt owed. While debt management plans may be fine for some, they are not always conducive to an individual’s needs.
There are other counselors who will sit down with you, go over your budget, and make necessary modifications. This seems to be the better alternative if you are deeply in debt and need assistance. After all, you can call the credit card companies and ask to have the interest lowered on your own.
By tweaking the household budget in a way that is feasible for you and your family, the counselor sets you on the right path to a debt-free life. However, as strict as the budget may become, using a counselor can only work if you are willing to commit to the changes.
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