Vision Credit Education, Inc.

Why would credit card companies provide better deals to debt settlement companies? They don’t. In fact, most major credit card issuers assert that they do not work with debt settlement companies. So why on earth would anyone hire a debt settlement company? The answer is their claims are too good to be true!

What is Debt Relief?

Debt relief is the most overused and overly confusing term for getting help with your debt. There are several types of services that routinely claim to offer debt relief:

• Credit Counseling Organizations: These nonprofit agencies help you evaluate your credit and financial needs while finding a solution for dealing with debt. They can help you develop an action plan that may have you pay off debt on your own. They can also assist through a debt management program, in which many of your creditors voluntarily offer lower monthly payments, lower interest rates and suspended fees.
• For-Profit Debt Management Companies: These companies utilize sales representatives to enroll you into a debt management program whether you need it or not. Some programs are still of good quality, but the selection process is often questionable and counseling is nonexistent.
• Debt Settlement Companies: These companies make outrageous claims of reducing debts for pennies on the dollar. They tell you to stop paying your creditors while doing nothing to help you avoid imminent legal action. Fees and tax penalties, combined with additional interest can end up costing you nearly all of your expected “savings.” Nearly all debt settlement companies carry “F” ratings with the Better Business Bureau.
• Bankruptcy Attorneys: These firms can help you obtain relief from creditors that are pursuing legal action. Bankruptcy is not for everyone, and you will  still need to complete bankruptcy counseling with a credit counseling or debt management company prior to being able to file.

Why is Debt Settlement a Scam?

There are many reasons why you should never hire a debt settlement company:

1. Debt settlement companies cannot do anything more than you can do yourself. Most debtors could negotiate reasonable settlements for past-due debts on their own by writing letters. The internet is overflowing with templates and sample letters that you can use to write your own settlement requests.
2. Debt settlement company fees tend to run well into the thousands of dollars. Many people pay more in fees to a debt settlement company than they would have in attorneys fees and court costs for a bankruptcy filing.
3. You have no recourse if a debt settlement company steals your money. Credit counseling organizations pay your money out every single month. Bankruptcy proceeds are distributed through a court-appointed trustee. Debt settlement companies however pool your money and earn interest on it while charging fees even when they take no action. Numerous debt settlement companies have been shut down due looting of client funds and overall failure to provide the promised services.
4. Debt Settlement companies have “F” ratings with the Better Business Bureau. They simply cannot deliver what they promise.

If you can afford a smaller payoff on charged-off debts, then negotiating your own settlements would be wise. If you cannot afford to deal with charged-off debt, you may benefit from speaking with an attorney regarding protection from creditors. If you still owe your original credit card companies but cannot afford the monthly minimum payments, then credit counseling would be your best option.