Consult with consumer credit counseling service before seeking debt settlement

By Oscar Monfort on Mar 26th, 2010

A recent column suggested that people consult with a consumer credit counseling agency before they consider debt settlement.

In writing for the Detroit Free Press, Susan Tompor noted that a debt settlement could end up costing them while also hurting their credit score. Through debt settlement, lenders agree to take less money than is owed in order to square up an account.

"Regulators and others warn that if borrowers get involved with the wrong outfit, they could end up losing thousands of dollars, ruin their credit, and find themselves hounded and even sued by creditors and possibly forced into bankruptcy," Tompor said.

Attorneys general in a number of states, including Illinois, Montana and North Carolina, have warned consumers against debt settlement companies that ask for large up-front fees for their services.

Sometimes these companies will ask for the fees and then not provide the promised debt relief, leaving the consumer even further in the hole than when they first started.

Tompor said that people should consult with a bankruptcy attorney or consumer credit counseling service before they agree to debt settlement.

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