From the Debt Settlement Company Horror File.
July 4, 2009
The Debt Settlement Company Horror files are now open. Too many of my clients have wasted their precious time and money on so-called debt negotiation, debt relief or debt settlement companies, who promise to settle your debt for 60 cents on the dollar and get you debt free in twenty minutes. Sounds good, until you learn that the upfront fees and monthly account maintenance fees can amount to 20% -40% of the total debt. Do the math. It doesn’t leave much room for real savings. When you consider everything, even if they do make good on their 60% promise, you’ re still out of pocket 80% – 100% of the total debt, plus you’re going to pay taxes on the portion of the total debt that you didn’t pay. It’s called forgiven debt and its taxed as ordinary income.
Want to hear another dirty little secret? They won’t tell you this up front either: some creditors won’t even talk to them. Also, when stop paying your creditors as they instruct, and instead pay them to set up a settlement “war chest”, they don’t tell you that you are likely to be sued well before your settlement fund hits critical mass. Since these companies are not law firms and don’t practice law, you are left high and dry, payin’ money for nothin’.
Oh and one last thing. Most of these outfits are out of state, so good luck getting your money back. They’ll take a hefty bite out of any refund as a cancellation fee.
