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Released: January 26, 2010
Consumer groups warn of debt settlement trap
Groups offer debt-strapped consumers advice on getting real relief
How to get real debt relief
- Try to resolve your debt problems with your creditors directly. You may be able to get your interest rate lowered, late charges forgiven, and your monthly payments reduced.
- Contact a nonprofit credit counseling service for advice. It may be possible to work out a plan through the credit counseling service to pay off the debts over time. To find the nearest nonprofit credit counseling services, consumers can contact the National Foundation for Credit Counseling, www.nfcc.org, 800-388-2227 or the Association of Independent Consumer Credit Counseling Agencies, www.aiccca.org, 866-703-8787.
- Know your rights. Ask your Attorney General’s Office if state law limits the amount or timing of debt settlement fees in your state. Find your state AG at www.naag.org.
- Read the fine print. Walk away if the contract doesn’t contain the promises that were made to you, or if the contract contradicts what you were told.
- Look for services that charge a fee only after the service actually settles your debts.
- Take immediate action if you can’t make your mortgage or car payments. (Debt settlement services don’t usually address mortgage or car debt.) Contact your lender or mortgage servicer immediately to try to work out new payment arrangements. For help regarding your mortgage, call 800-569-4287 or go to http://nhl.gov/offices/hsg/sfh/hcc/hcs.cfm to find a local housing counselor certified by the federal Department of Housing and Urban Development.
- Consider bankruptcy. Some people who have too much debt need the fresh start that bankruptcy provides. Get legal advice to see if that is the right choice for you.
The complete tips on debt settlement in English and Spanish are available here at Consumer Action, as well as:
Consumer groups warn of debt settlement trap (Debt_settlement_PR.pdf)
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