The Skinny on Debt Negotiation Companies | Law Office of Daniel X. Nguyen, Corporations, LLC, Contracts, Wills & Trusts Attorney

The Skinny on Debt Negotiation Companies

I was reading Debt Reduction and Elimination Ads: The Real Scoop over at The Simple Dollar personal finance blog, and Trent summed up his article:

In short, all of these plans do what they advertise, but they often cost far more than they’re worth.

This reminded about a discussion over at the ABA SoloSez Listserv, about debt negotiation companies, which Robert Loque broke it down to this:

Client pays $X amount to debt negotiation per month in order to build a surplus, which mostly goes to paying for the services of the debt negotiation company;
After a certain amount of months, and if there is enough money in the surplus, the debt negotiation company will try to settle, but often there is not enough money to pay them off. All the while the client is still paying their money monthly to the debt negotiation companies for supposed payment to the creditors;
Eventually the client gets sued and their wages get garnished.

Debtors should be really careful about engaging with debt negotiation companies and should be performing extensive research before paying one to handle debt negotiations for them. Many of the unscrupulous ones prey on the financial hardship of individuals and often have them ending up in worse position than before. Consider handling your own debt negotiation directly with the creditor or if you need help, consider contacting an attorney.