Debt becomes problematic when you are unable to pay on time. There are several ways of managing your debt repayment. However, there is no quick fix or a universal debt management solution. Many people facing debt management challenges fall victim to debt negotiation agencies that end up making their debt situation worse.
Unlike credit counseling and debt management plans, debt negotiation can be an extremely risky process. It could have lasting negative impacts on your credit report and make it hard for you to get credit.
At Shrader Law, PLLC, our attorneys understand the tricks used by debt negotiation firms and agencies. Most people fall prey to debt negotiation agencies due to their convincing commercials on local media and dailies. The commercials portray debt negotiation companies as a solution to a debt crisis.
What Debt Negotiation Firms Claim
Debt negotiation firms claim that you can negotiate to have your unsecured debt paid between 10% and 50% of the total outstanding balance. They also claim that their services are a convenient alternative to filing for bankruptcy. In most cases, they will advise you to stop making direct payments to your creditors and instead start making payments to them.
Debt negotiation firms will assure you that using their services will not have an adverse effect on your ability to obtain credit in the future. They could also mislead you to believe that once you complete the debt negotiation program, all negative information will be removed from your credit report.
What You Need To Know
To avoid falling prey to debt negotiation firms, you need to understand some truths about them:
- Most debt negotiation companies will charge you a substantial amount of money for their debt negotiation services. You will have to pay an initial fee for establishing an account with the debt negotiation company. Other charges include monthly service fees and a final fee, which is a percentage of the money you’ve saved as a result of the negotiation. Pursuant to Florida law, debt negotiation companies cannot charge over certain rates, most illegally overcharge consumers.
- There is no guarantee that your creditor will accept the loan repayment terms proposed by the debt negotiation companies. Therefore, if you stop sending money to the creditors and send it to debt negotiators, you’ll incur late fees and interests on your debts.
- Creditors have a legal obligation to furnish credit reporting agencies with accurate information regarding your dent payment. This information includes failure to make the scheduled monthly loan repayments. Therefore, paying money to credit negotiators instead of your creditors will have a negative impact on your credit report.
- In certain instances, creditors may have a right to sue you to recover the money you owe them. This is likely to happen if you make payments to debt negotiators instead of creditors.
- If your creditors file a lawsuit against you and win, they may put a lien on your home or garnish your wages.
- If the debt negotiation agencies succeed in negotiating the loan terms on your behalf, the Internal Revenue Service may include the forgiven debt into your taxable income. Therefore, you will not benefit much from the debt relief after paying the negotiation fees and the additional tax.
Warning Signs of a Scam
If you ever decide to work with a debt negotiation company, you should first consult with your attorney. Our Tampa bankruptcy attorneys at Shrader Law, PLLC, can instantly identify a fraudulent debt negotiator. Some of the warning signs that could help you identify a scam are:
- A debt negotiation company that promises to remove your unsecured debt or promises to lower your debt than the outstanding amount
- A debt negotiation firm that encourages you to use its services instead of filing for bankruptcy
- A debt negotiator that requires some upfront fees before offering services
- A debt negotiation company that encourages to stop communicating with customers
- A company that claims to work in conjunction with credit reporting bureaus
- An agency or company that does not require you to sign a written contract
- Companies that do not have cancellation or refund policies
Speak to an Experienced Consumer Protection Attorney
The majority of Florida debt negotiation companies are not genuine but out to make profits by taking advantage of unsuspecting debtors. A consumer protection attorney will help you determine if debt negotiation is the way to go. If you are considering debt negotiation or if you have fallen victim to a debt negotiation company, contact an experienced consumer protection attorney at Shrader Law, PLLC as soon as possible.