Working with a Debt Settlement Company: A Light at the End of the Tunnel or Just Another Risk?

Posted on in Debt Relief

Illinois bankruptcy attorney, Illinois debt settlement attorneyWhen the bills have piled up, debt collectors begin calling you, and you see no relief in sight, you might begin to question the idea of debt settlement and its advantages to you as a consumer, sole proprietor, or small business owner. Whether you have personal financial troubles and are considering bankruptcy or your business is sinking due to loss in profit or changes in the economy, wanting to turn to debt settlement to alleviate or completely eliminate your financial burden is understandable.

Debt Settlement Has Its Own Risks

Before pursuing any settlement action, it is important to be aware that debt settlement has its own risks. Just as there is a cost to your credit score when filing bankruptcy, working with debt settlement companies can cost you something in the long run if you are not careful and informed before entering into an agreement with them. Typically, debt settlement companies are for-profit companies who work to negotiate with your creditors, on your behalf, to help resolve your debt. The term “settlement” essentially means a lump sum of money. This sum is usually less than the total amount you currently owe.

While this sounds appealing, there are still significant risks when choosing this option. For one, your credit score may still be negatively impacted. This is due to the fact that most debt settlement companies encourage or outright ask you to stop making direct payments to your creditors. This means you can still experience a hit to your credit score, harassing phone calls, and increased fees and penalties for failure to pay on time. Secondly, your creditors are not required to agree on a settlement for the debt you owe, which may leave you in the same, if not worse, mess later on, once you have already agreed to services from a debt settlement company.

Lastly, but certainly not least, some settlement programs may set you up for failure. There are many scams, and in general, most programs require you to deposit money monthly into a special account over a prolonged period of time before your debts are paid off completely. Many people end up struggling to make the monthly payments and drop out of the program as a result, which completely cancels out the reason for signing up for a debt settlement program in the first place.

Want to Go for It? Protect Yourself, First.

Should you decide to take these risks and work with a debt settlement company or negotiate with creditors on your own, it is crucial you consult with a knowledgeable Cook County debt settlement lawyer to ensure you are getting the best deal and that your rights are protected in the process. Call the Law Offices of Eric G. Zelazny today at 708-888-2299 for a special consultation.

 

Source:
https://www.consumer.ftc.gov/articles/0145-settling-credit-card-debt

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