Debt Relief Scam – Is Debt Relief Legitimate?[yoast-breadcrumb]
Debt Relief Scam – Is Debt Relief Legitimate?
Being in debt can feel overwhelming. You may be struggling each month to make minimum payments, receiving calls from creditors, or facing threats of legal action. It’s understandable that you would jump at the chance for debt relief – but beware, there are many debt relief scams out there!
At our financial consulting firm Delancey Street, we want to help you avoid falling victim to these scams. Here’s what you need to know about spotting illegitimate debt relief offers and finding real solutions to get out of debt.
How Debt Relief Scams Work
Debt relief scammers promise to negotiate with your creditors to reduce or eliminate your debt. They may contact you by phone, email, or online ads. Some common claims include:
- “We can erase your debt – guaranteed!”
- “New government program can eliminate your student loans.”
- “We know special legal loopholes to remove debt.”
If this sounds too good to be true, it probably is. Here are some red flags to watch out for:
- They contact you first with an unsolicited offer.
- They ask for large upfront or monthly fees before providing any services.
- They tell you to stop communicating with creditors.
- They promise specific results like improving your credit score by 100 points.
- They use exaggerated claims about “little-known” government programs.
Once you pay the fees, the company often provides little or no help. They may string you along with more promises, or disappear altogether. Meanwhile, your debts continue growing with late fees and interest.
Protect Yourself from Debt Relief Scams
If you receive an offer that seems questionable, take steps to verify it:
- Ask for details in writing, including terms and conditions.
- Research the company online and check for complaints.
- Contact your state consumer protection office.
- Consult with a non-profit credit counseling agency.
Legitimate companies will be happy to provide information and discuss your options. If a company becomes evasive or aggressive when questioned, it’s better to walk away.
Your Debt Relief Options
The Federal Trade Commission recommends exploring all alternatives before choosing debt relief:
Budgeting and Money Management
Getting your finances in order can help you start tackling debt. Try tracking expenses, reducing unnecessary costs, and setting up a realistic budget. Our financial advisors can help create a customized money management plan.
Non-profit credit counseling provides advice on managing debt. They can help you consolidate multiple debts into one monthly payment, often with reduced interest rates. However, these programs take dedication and discipline.
Debt Management Programs (DMPs)
With a DMP, you make one monthly deposit into an account, and the funds are divided among creditors. This can help simplify payments, but DMPs have drawbacks like enrollment fees and negative credit reporting.
Debt settlement companies negotiate directly with creditors to settle accounts for less than the full amount. However, you must stop paying debts which can hurt your credit and lead to legal action. Debt settlement also involves fees based on saved amounts.
While bankruptcy eliminates many debts, it severely damages credit for up to 10 years. Bankruptcy filings also involve legal fees and require following strict rules. It should only be considered as a last resort.
Every debt relief option involves trade-offs. At Delancey Street, our financial experts can walk you through the pros and cons of each method. We’ll help develop a personalized plan to tackle your debt in a way that fits your needs and budget.
The Risks of Debt Settlement
Debt settlement may seem like an easy way out, but there are serious drawbacks to understand:
- Fees can be 20-25% of enrolled debt amounts.
- Your credit score will drop drastically.
- You may face legal action from creditors.
- Any forgiven debt could be taxable.
- There’s no guarantee creditors will agree to settlements.
The Consumer Financial Protection Bureau cautions that less than half of people complete debt settlement programs. Consult a financial advisor to review the risks before proceeding.
Beware of Debt Relief Calls and Robocalls
If you receive an unsolicited call about debt relief, hang up. It’s likely a scam or at best a sales pitch you didn’t request. The Federal Communications Commission warns these calls often involve illegal robocalling or spoofing tactics.
You can reduce unwanted calls by:
- Registering your number on the National Do Not Call Registry
- Filing complaints about illegal robocalls
- Using call blocking tools from your phone provider
If you receive written offers or see online ads for debt relief, scrutinize them carefully before responding. Unrequested solicitations are frequently scams.
Get Real Debt Help from Delancey Street
At Delancey Street, we provide legitimate debt and credit counseling services. Our expert financial consultants can:
- Review your full financial situation
- Explain debt relief options clearly
- Create a customized action plan
- Negotiate directly with creditors
- Help improve your credit and budgeting habits
- Defend you if creditors sue
We will never promise unrealistic outcomes or ask for upfront fees. And we’re always transparent about potential risks like impacts to your credit. Our goal is setting you up for financial success over the long-term.
If debt feels overwhelming, don’t fall for quick fixes. Get in touch today to schedule a free consultation with our caring financial experts.