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Do debt relief programs work?

On Behalf of | Jan 31, 2025 | Consumer bankruptcy |

If you feel like you’re drowning in debt, seeing a commercial for a debt relief program can seem like a lifesaver. All you need to do is call the number on the TV, and they will put you on the yellow brick road to financial freedom.

But before you hit the dial on your phone, you should take a few moments and discover the truth behind the ads.

The debt relief program process

One type of debt relief program is debt settlement. Once you enroll in the company’s program, they will likely advise you to quit making payments to your creditors. Instead, you deposit your money into a separate account managed by the company.

Over time, you will save enough funds, and the debt relief company will negotiate with the creditor and make an offer lower than the original amount owed. If the company accepts your offer, you will make a lump-sum payment.

However, debt relief programs come with their own problems. They typically come with significant fees, which could wipe out any savings you have received from negotiating lower payoffs with creditors. There is also a chance that creditors won’t agree to your terms. This could put you in a position where you’re attempting to make lump sum payments while still dealing with unresolved debts, potentially putting you at risk of lawsuits or collection agencies.

Furthermore, it doesn’t stop your creditors’ phone calls and threats of repossession. Only bankruptcy can offer you legal protection. Once you file for bankruptcy, an automatic stay immediately goes into effect and stops collection efforts through lawsuits, wage garnishments and harassing phone calls. This gives you the breathing room you need to address your situation. It also takes away the uncertainty that a creditor may not accept the terms through a debt relief program. Creditors must comply with the court’s orders.

Before calling a debt relief program and falling prey to high-pressure sales tactics, call someone who can review your situation and explain exactly how bankruptcy can help you make a fresh start.