As the cost of living continues to rise, Americans are increasingly relying on credit cards to cover basic expenses like food and gas. This shift in credit card usage has led to growing concerns as the nation’s credit card debt surpassed $1 trillion. It is not only the increased card usage that is a problem, but also the higher interest rates that are causing Americans to be concerned. According to an exclusive Newsweek poll conducted by Redfield & Wilton Strategies, almost 3/4 of Americans are concerned about their ability to pay off their credit card debt.

What can be done? Many people are turning to Credit Repair and Debt Settlement Companies. A credit repair company is an organization that offers to improve your credit in exchange for a fee. The companies often promise to handle all the heavy lifting of working with the credit reporting agencies. Credit repair organizations are different from credit counseling agencies, which are typically a free resource from nonprofit financial education organizations that review your finances, debt and credit reports with the goal of teaching you to improve and manage your financial situation. According to the Federal Trade Commission, the credit repair industry is fraught with scams. To help avoid scammers, it’s important to research any credit repair organization before agreeing to work with it.

Debt settlement companies are for-profit companies that claim that they can eliminate consumers’ debts by negotiating settlements with creditors that are a mere fraction of the consumer’s outstanding debt.  Many of these companies accomplish little for consumers and charge hefty fees. 

Many debt settlement companies make promises that they simply cannot keep and leave consumers in worse financial state then when they began.  These companies advise consumers to stop paying debts and, instead, to place money into savings account so that enough money will accumulate to allow a settlement offer to be made to any creditors.   Many consumers find the companies’ promises are empty.   Creditors are under no obligation to settle for less money and often refuse to do so.  Consumers who follow the debt settlement companies’ advice to ignore collection efforts or refer those efforts to the debt settlement company usually continue to find themselves subject to creditors’ collection efforts, including lawsuits.  And the debt settlement companies’ saving plans are often extremely unrealistic, so that the promised negotiated settlements do not occur, but the debt settlement companies still take their fees.  In addition, credit histories are further damaged and lawsuits can begin when you stop paying your debts.

Too often we have seen clients who have spent thousands of dollars on debt settlement come to us afterwards to file bankruptcy because now they are being sued. The biggest advantage to filing bankruptcy is that you are in more control and are forcing your creditors to accept what you negotiate in your case whereas in all of the other options the power is still with the Creditor to say No. But what about all those bad things you hear about bankruptcy. Many of them our myths that are often created by the creditors to keep you from using your chance at a fresh start.

If you are struggling with credit card bills, contact us today for a free consultation and learn how the negative things about bankruptcy are myths. Call us today at 732-333-0681 for a fresh start on life.