Are Debt Relief Companies Legitimate?

Unfortunately Kay, you've discovered the ugly truth about 'debt-relief' agencies: what you see is definitely not always what you get. In this case, too good to be true certainly applies. These companies promote their almost magical ability to help you eliminate a significant portion of your current or past due debt (some tout over 50% debt reduction). One I heard about recently can help you "take advantage of secret programs your creditors don't want you to know about". Hint: There Are No Secret Programs.

Here's the scoop: You will sign over representation on your credit accounts to the agency, meaning that they will begin taking the calls from your creditor. This will give you relief from harassment, at least for the time being. You will begin paying the agency a monthly fee (typically up to hundreds per month) to provide the service; you will also be requested to begin placing other funds in a savings account so the agency can use that money at a later date to settle the account with your creditor.

Here's the bad news:

1. Since there will be no payments made on your accounts for months, your credit is seriously trashed.
2. Some of these 'debt-relief' agencies are not legitimate, meaning they will take your money and provide no meaningful service. And no, you won't get a refund.
3. If you want to stop paying your creditors, have them turn you over to collections, risk a lawsuit and then settle for "pennies on the dollar" -- you can do that without an agency's help.

I routinely help many of my clients with credit negotiations, often with some pretty unbelievable results. Here are my thoughts:

• Stop paying the debt-relief agency immediately, and begin saving as much as possible so you may arrange a settlement with your $10,300 creditor. In other words, take the money you were paying the agency and use it combined with aggressive saving to eliminate your debt. 'Charge-off' status simply means the original creditor has written off the debt, and likely sold it to a collection agency. The debt is still valid, though, and the collector will still pursue you for payment until the end of time (though statute of limitations in Texas for suing you is four years from your last payment).
• Accept the $89/mo payment arrangement from the $8800 creditor, unless you have enough cash to negotiate a settlement now.
• Get serious and get on a disciplined budget NOW and get control of your money (and your life!)
• Make some sacrificial changes and begin living on far less than you make so you can clean up your mess ASAP.

Kay, I hope this helps. All my best and encouragement to you!