Debt Relief Desperation

By mortgagecreditproblems.com

If you're struggling with paying bills every month, you may be tempted to jump at the first offer of debt relief help--anything to loosen that knot of fear in your gut. But look before you leap to avoid falling prey to scammers.

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In the wake of growing complaints about unscrupulous debt settlement companies, various state attorneys general have taken action, and the Federal Trade Commission is considering a new rule for telemarketing.

Debt Settlement: Beware of Scams

Debt settlement firms charge you upfront fees, ask you to stop paying your credit card bills and then negotiate settlements on your behalf. But some unscrupulous outfits are taking the fees and skipping the last step. The proposed new federal rule would, among other things, ban debt settlement companies from collecting fees until debts are settled.

That's not to say there aren't some good credit counselors out there, but know who you're dealing with.

Debt Relief Red Flags

The Federal Trade Commission says to be wary of firms that do the following:

• Charge high fees for enrolling in a debt management plan or pressure you to make hefty "voluntary contributions."

• Won't provide free information without getting personal financial information from you, such as credit card account numbers.

• Pressure you to enroll in a debt management plan without reviewing your financial situation or teaching you budgeting and money management skills.

• Require that you pay money to the company before your creditors have agreed to the debt management or settlement plan.

Real Debt Relief

One way to get some relief is through debt consolidation, which rolls your debts, such as credit card balances, into one lower-interest loan, such as a home equity loan or cash-out refinance.

Whether you can get a debt consolidation loan or not, you may benefit from the help of a reputable credit counselor.

Ask your bank, credit union or local consumer protection agency for referrals to a good credit counseling organization. (Beware that just because an organization calls itself nonprofit doesn't mean its services are free or its counselors are credible). If a debt management plan is necessary, reputable credit counselors help develop a workable solution and teach you money management skills. A reputable service won't be able to provide debt relief overnight. A successful debt management program often takes 48 months or even more to complete, the Federal Trade Commission says.





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