Tips to Avoid Debt Management Scams
In many cases, people that seek bankruptcy consultations have unsuccessfully tried to regain control of their finances through a debt-management company. All too frequently, the result is they find themselves deeper in debt after paying hefty fees to the company. Be especially wary of debt-consolidation or counseling organizations that:
- Charge high up-front or monthly fees for enrolling in credit counseling or a debt management plan.
- Pressure you to make “voluntary contributions”, another name for fees.
- Won’t send you free information about the services they provide without requiring you to provide personal financial information, such as credit-card account numbers, and balances.
- Try to enroll you in a debt-management plan without spending time reviewing your financial situation.
- Offer to enroll you in a debt-management plan without teaching you budgeting and money-management skills.
- Demand that you make payments into a debt-management plan before your creditors have accepted you into the program.
There is no doubt that bankruptcy should be a last resort, but not always THE last resort. If you do wish to try debt management, make sure you:
- Choose your company through the National Foundation for Credit Counseling
- The company you choose is accredited by the Council on Accreditation for Children and Family Services (COA)
- Understand exactly how much the service will cost
- Know whether the fee is paid before any money goes to creditors
- Know the interest rates you will be paying the creditors
- Know how long it will take to completely pay down the debt
- Know how your creditors will report your account to the credit bureaus
Remember, if your attempts at debt reduction fail, bankruptcy offers you a financial fresh start. Yvonne Michaud Novak is an attorney who works with individuals and small businesses who need help with their debt problems throughout Minnesota and Wisconsin. As a federally designated debt relief agency, her office helps people file for bankruptcy.