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How Can a Debt Relief Provider Help Me With Debt?

High levels of debt can be stressful and difficult to overcome. Proactive consumers can often negotiate repayment terms with lenders and debt collectors. This may include reduced monthly payments or extra time. But when your actions come up short, consider a debt relief program that can help you look into your debt relief options.

Third-party debt relief services vary in scope, approach, and integrity. Before choosing a service to help you get out of debt, understand the differences among various credit counseling organizations and debt relief companies. Also, make sure you can identify fraudulent debt relief providers. Fraudulent providers often ask for payment upfront or make promises that sound too good to be true.

Learn more about your debt relief options through FindLaw's overview of Debt Relief.

What Is a Debt Management Program?

A Debt Management Program (DMP) helps individuals structure a debt management plan. In a DMP, a certified credit counseling agency negotiates with creditors to lower interest rates and debt payments.

They help waive fees and consolidate monthly payments. This simplifies the repayment process. Nonprofit credit counseling agencies often provide DMPs. Enrolling in a DMP is a proactive way to work toward financial stability and become debt-free.

Can a Credit Counseling Agency Help Me With Debt?

Consumer credit counseling agencies provide a broad range of different credit counseling services. This includes debt management education and direct communication with credit card companies. Many of them are nonprofit. Look for an agency that is licensed and/or accredited in your state. The Department of Justice maintains a database of approved credit counseling agencies.

Once you find an approved credit counseling agency, make sure to take the following actions:

  • Ask individual counselors about their qualifications
  • Make sure you understand the services offered
  • Get promises in writing
  • Get a clear presentation of the fees they charge
  • Read the contract before you sign

The initial meeting with a credit counselor will last at least an hour. After that, there may be periodic follow-up sessions (if necessary). Agencies will provide money management tips, help you develop a personalized plan to get out of debt, and even negotiate lower interest rates or term extensions with your creditors.

See FindLaw's article on Credit Counseling and Counseling Organizations to learn more.

Can a Debt Negotiation Company Help Me With Debt?

Debt negotiation companies, also called debt settlement companies, may negotiate with your creditors on your behalf to lower the total amount of debt owed. They usually do this for an upfront fee or a percentage of your savings.

Using these services can hurt your consumer credit score. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau warn that many of these services are not legitimate. Many have been known to keep the upfront fee without contacting creditors.

The FTC, the Better Business Bureau, and other organizations urge consumers to work with approved credit counseling agencies or negotiate directly with creditors.

A debt consolidation company is a type of debt settlement service that combines several debts into one. This allows you to pay the company one monthly fee that is lower than you would otherwise pay. This may seem like a simplified solution to the weekly or daily barrage of bills. However, such services often come with hidden fees and exorbitant interest rates, making your debt even more expensive in the long term.

Under federal laws, debt relief services must provide you with the following disclosures before you pay any fees:

  • How long it will take to meet your debt relief goal
  • Whether the service includes a settlement offer to creditors and the date by which settlement offers will be made
  • Debtor's right to cancel the contract within seven days and receive a full refund of any funds (not owed) that are held in an account
  • Whether the service changes the terms of your debt obligations, possible negative impact on your credit score, the fact that creditors still may sue you, and the possibility that interest and fees may increase the total amount owed
  • Amount of money (or percentage of each debt) that will have to be accrued before the service provider makes an offer to your creditor(s)

How To Spot Debt Relief Scams

Unfortunately, many organizations and individuals are willing to take advantage of debtors, who too often believe someone promising a simple fix. If a debt relief provider automatically promises an easy debt solution to your problem, it may not be a reputable company. Here are some of the more common signs of a possible debt relief scam:

  • They ask you to pay for services upfront before any services are rendered.
  • They don't inform you of your legal rights.
  • The company advises you against directly contacting a credit bureau.
  • The company recommends applying for an Employer Identification Number to use instead of your Social Security number to invent a new credit report.
  • The company advises you to dispute everything in your credit report or do something that seems fraudulent.

See Avoiding Credit Repair and Credit Counseling Scams for more details.

Legal Help With Debt Relief

Getting legal help for debt relief is crucial when dealing with complicated financial issues. Legal professionals specializing in debt relief can offer helpful advice on various legal options for managing and reducing debt. They can assist in negotiating with creditors, exploring potential settlements, or recommending suitable debt relief programs.

Seeking legal help ensures that individuals are well-informed about their rights, protections, and the potential consequences of different debt relief strategies. Consider speaking with a bankruptcy attorney in your area.

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