Warnings against Debt Negotiation Programs
Warnings against Debt Settlement / Debt Negotiation programs
In debt consolidation, debt negotiation is often brought up in conversation. Debt negotiation is a program whereby companies offer to get you out of debt by merely holding your money and offering settlements to creditors at a future date. These programs are not what we would classify as a true debt consolidation curriculum, and they can severely damage your credit rating. Many creditors will immediately forward your account to their legal department for collections and clients may find themselves faced with judgments, liens and even garnishments.
The federal government has recently announced a nationwide crackdown on debt negotiation also known as debt settlement services.
The government is charging these companies with targeting consumers who were in debt by luring them with false promises according to "Lydia Parnes" director of the bureau of consumer protection: These companies claim that for a non-refundable fee they can settle debts for as much as 40% to 60%. Consumers who stopped making payments to their creditors at the advice of these companies were sued by the creditors or debt collectors resulting in garnishments of their wages, additional interest to their accounts, interest rates increases, late fee's and balance increases.
Clients who enroll found collection efforts increased and found their credit rating worsen substantially and many were forced into bankruptcy. Clients were also not informed that any money a consumer saves in negotiating a settlement with a creditor must be treated as earned income for tax purposes. In one most recent case the court appointed receiver found that only 683 out of 44,844 consumers actually completed the program.
The federal government has announced they are committed to ridding the debt services industry of these companies who shatter consumer confidence and hurt legitimate businesses ability to help consumers.
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Debt Consolidation Bullets
- Cut Payments up to 70%
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- Elimination of past-due collection calls
- Account re-aging
