How to recognize debt settlement scams

As someone facing increasingly overwhelming debt, you may be willing to do just about anything to help dig yourself out of the hole and regain control over your financial affairs. You would be wise, however, to think twice before agreeing to work with a debt settlement company that promises to settle your debts for far less than you owe. In some cases, these “companies” are little more than predatory scammers

Usually, debt settlement agencies are for-profit entities. While not all of them are bad or unethical, some make false promises that could potentially land you in even more financial trouble than you face now. Therefore, before you decide to work with one, you must recognize and understand the risks involved in doing so.

Known risks

Often, debt settlement companies will instruct you to stop making all payments to your creditors. They may also tell you to stop taking calls from them about your outstanding debts. There are, however, certain dangers involved with doing this. In some situations, your credit can take a serious hit if you start ignoring your debts and creditors.

Furthermore, even if a debt settlement agency proposes to settle your debt for a particular amount, this does not necessarily mean that your creditor will agree to the new arrangement. Also, your debt settlement company may attempt to settle your smaller debts first, which can make interest on your larger debts increase, leaving you even more in the hole.

Recognizing scams

Luckily, there are several key signs that you can look for that may help you recognize a debt settlement scam. For example, be extremely wary of any company that promises or guarantees it can settle your debt for a specific figure. Be cautious, too, before working with any company that charges upfront fees or instructs you to stop communicating with your creditors without first explaining the risks associated with doing so.

Ultimately, it may serve you well to explore other options before deciding to work with a debt settlement agency.

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