Many people who are experiencing financial distress may consider working with a debt settlement company in order to try and reduce the amount of money they owe. Debt settlement companies work with a person’s creditors and attempt to negotiate a settlement for less than the total amount owed, and typically charge consumers fees based on the amount of debt that is forgiven. In addition, they typically advise consumers to stop paying their bills, often resulting in the accrual of significant late fees and other penalties. Additionally, these practices have the potential to have a substantial adverse impact on your credit score.
Because of these and other issue, the United States Consumer Financial Protection Bureau (CFPB) calls working with a debt settlement company “risky,” and advises consumers to be aware of the following facts:
- Debt settlement companies often charge high fees
- In many cases, a debt settlement company will not be able to settle all of your debts
- Creditors may refuse to work with debt settlement company
- The money that a debt settlement company may save you could be offset by fees and penalties that occur as a result of not paying your bills
- There may be tax consequences for debt forgiveness
In many cases, people who are considering working with a debt settlement may be better off filing for bankruptcy. Bankruptcy often can completely eliminate many types of debts, including credit card debt, personal loans, certain tax debts, and vehicle loans. Additionally, unlike debt settlement companies, a bankruptcy attorney is ethically required to act in your best interest, so you can rest assured that the advice you are receiving will benefit you and not leave you worse off. Filing bankruptcy can improve your situation immediately, as the moment you file you come under the protection of the “automatic stay” which halts all collection attempts and prevents creditors from filing suit in order to collect a debt.
Contact a Phoenix bankruptcy attorney today for a free consultation
People who are experiencing financial difficulty should discuss their situation with an experienced Phoenix bankruptcy lawyer as soon as possible. To schedule a free consultation, call Ellett Law Offices today at (602) 235-9510.4
Ellett Law Offices , P.C.
2999 N. 44th Street,
Phoenix, AZ 85018