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What to know about debt relief companies

On Behalf of | Feb 28, 2022 | Consumer bankruptcy |

Working with a Tennessee debt relief company may seem like an effective way to fix your financial issues. However, the truth is that doing so may not be enough to avoid a default, repossession or foreclosure. The following examines the potential problems that you may encounter working with such an entity.

Debt relief companies may give you bad advice

The entity that you choose to work with may tell you not to make payments on your outstanding debt balances. This is rarely a good idea because failing to stay current on your accounts could result in a significant hit to your credit score. Furthermore, it could result in a creditor seizing property or filing a lawsuit against you.

It may take years to repay your debts

It’s not uncommon for debt relief companies to offer payment plans that take up to 36 months to complete. If you fail to make a payment, you could be removed from your plan, which means that you have effectively done little to nothing to pay down your existing balances. By filing for bankruptcy, it may be possible to craft a payment plan that you can afford to stick with. In some cases, by filing for protection from creditors, your debts may be discharged in a matter of months.

You could achieve the same results on your own

You have the option to settle your debt without the use of an intermediary. In most cases, a phone call or letter may be enough to start the process of resolving your debt for less than you owe without having to pay a fee to an outside party. It’s also worth noting that debt relief companies cannot guarantee that a creditor will forgive a balance or otherwise modify your existing payments.

There may be many options available to deal with your debt. These options may include working directly with your lenders to modify existing loan terms, filing for bankruptcy or liquidating assets in which you have positive equity.