When faced with debts that have become overwhelming, it is easy to be misled in the eagerness to find a way out of the predicament. The promises of unscrupulous companies sound like a lifeline but they are not.
Here are five things about debt settlement services that you should understand before engaging them;
1. Creditors may not cooperate
An increasing number of major creditors are saying no to for-profit debt settlement companies and working only with reputable, non-profit debt settlement services companies. This is a fact that most for-profit companies do not reveal to their clients up front.
2. Creditors won’t wait
Typically, debt settlement companies get you to make monthly payments into a bank account opened specifically for this purpose. Ideally, the company will have negotiated directly with the creditors for a new payment plan. For-profit companies take advantage of desperate people and promise to handle the creditors as soon as their fee is paid. They will tell you that they will work with any amount but if an amount isn’t paid to each creditor every month, your debt creditors won’t wait. Smaller debts may be taken care of but the creditors whom you owe the most may come after you.
3. You may be taken to court
If the above scenario unfolds, you may find yourself in court. When they don’t see payments, creditors will come after you and not the debt settlement services company that has failed to deliver. Your assets can be seized and sold or a judgment may be granted against you to put a lien on your house or garnish your wages so the creditors can recover what is owed to them.
4. Your credit can be ruined for six to seven years
A debt settlement program gone wrong can leave a dent in your credit report and rating for at least six years from the time the last payment is made on every debt by a for-profit company. It is different with non-profit debt settlement services companies who are authorized by law to erase all records of debts settled through them after two years. This means you can have a clean record and good rating after two years compared to six or seven years.
5. No legal recourse
If things don’t work with a debt settlement company, you won’t have any legal recourse. Their contracts typically allow them to collect fees from clients without providing the services in return. The Consumer Protection Office in your province can advise you on whether a company is licensed and a check with the Better Business Bureau will reveal if they practice ethically.
Tried, trusted and legal
Credit Counselling Services of Atlantic Canada (CCSAC) is a registered non-profit debt settlement services organization operating within the Personal Information Protection and Electronic Documents Act laid out in Canadian federal legislation. The company is also a member of the Better Business Bureau of the Maritime Provinces Inc. and observes their code of their ethics. Contact them and get real help with settling your debts.