Should You Settle that Debt?


Many people hear debt settlement and think what a great idea. They will negotiate with their creditors to pay a lower sum than what is owed and the debt will disappear. The debtor will pay less money, the creditor will get some of what they are owed and life will go on its merry way, right? Not quite. There are consequences to taking this route to get out of debt.

What usually happens is the debtor contacts a debt settlement company. The company will take the payments the debtor was supposed to be making to the creditor and hold it in a special fund. Then, when the debtor has fallen significantly behind in their payments, the settlement company will contact the creditor and negotiate a lower balance. But what if the debtor was current on his/her payments but has followed the advice of the settlement company? Now, their credit record has been damaged and will remain so for the next 7 years.

There are dangers to this method of getting out of debt. Especially if the debtor gets involved with a unscrupulous settlement company.

According to nomoredebts.org, we are now seeing misleading advertisements from US based debt settlement companies promoting their services in Canada. They make it look like they are operating in Canada with Canadian offices.
  • The success rate of these for-profit debt settlement companies is less than 10%.
  • 65% of the people who pay these companies leave the program without settling their debt. 
  • People pay almost the same amount of money in fees to these companies as the original savings. And that is before the creditor applies late fess, penalties and interest. Those charges can often double or triple the original debt.
The vast majority of people dealing with the for-profit companies do not save money and are often left in worse financial shape than they were when the approached the debt settlement company.


There are also more hazards of dealing with a for-profit debt settlement company. A debtor diverts their payments from the creditor to the settlement company - thinking they are going to be able to settle for a lesser amount and then the creditor refuses to deal with the settlement company. Now what?

Also the creditors don't have to wait. When the debtor makes payments to the debt settlement company, those funds are put aside until they reach a lump sum that can be then offered to the creditor. This works all right for smaller debts but what about the larger ones? It will take much too long to raise the funds to make a settlement that will be satisfactory. Do you really think that the creditor will wait that long? Probably not. And the debts just keep getting further and further behind.

Remember that while the debtor is paying the funds to the debt settlement company, nothing is going to the creditors. The creditor is going to pursue all avenues opened to them to collect the amounts due as in collection agencies, taking the debtor to court and wage garnishee.

If you are still convinced that this is your way out of financial hardship, please do your research and deal with a reputable company.


If you feel that you are ready to gain control of your debt, then stop trying to figure it all out on your own and make sure you don’t go another year without gaining control —click here
 
I might be able to help you by supporting you through the 5-Step Financial Stability program that I have used to get control of my financial situation. click here

To your success, 

Karen Magill 

P.S. It is NOT right for everyone – but if you feel having me working with you almost “daily” & giving you a proven step by step system to follow will help you get your  finances and life back on track then for more details. - click here

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