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What to know before working with a debt settlement program

On Behalf of | Oct 26, 2021 | Chapter 7 Bankruptcy

Many people across Oregon are struggling to stay atop of their finances. This is often the result of unanticipated medical expenses or mounting credit card debt. If you count yourself among those struggling to keep up, you may be looking for ways to regain control and thinking about working with a debt settlement agency.

However, you may want to think twice before doing so. According to the Federal Trade Commission, there are certain risks that come with working with a debt settlement company. The majority of these companies are also for-profit businesses, and some of them engage in questionable tactics to get you to work with them.

How debt settlement programs work

When you sign on to work with a debt settlement company, that company typically tells you it is going to work with your creditors and pay them off by making a lump-sum payment for less than what you owe. You then pay back the debt settlement company by setting aside a certain amount each month. Your debt settlement company may tell you to stop communicating with any of your creditors, too, but this is not always good advice.

Why debt settlement has risks

There are a number of problems that may arise when you work with a debt settlement company. For example, your creditors do not have to agree to negotiate or budge on what you owe, even if the debt settlement business tells you as much. Also, if you agree to stop communicating with your creditors altogether, this may hurt your credit score.

Before working with a debt settlement company, consider other options. There may be less risky ways to overcome your financial hardships.

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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 23 years.