Digging a deeper hole: No relief with so-called debt relief companies
The pitch is they can take a panicked and seemingly hopeless situation and turn it into one of control and hope. However, your faith is better left to other devices.
Today, the state of Illinois announced it is suing two of these debt settlement companies -- SDS West/Nationwide Support Services and Debt Relief USA.
The allegations are similar to what has been leveled against supposed foreclosure relief companies. The customers are told to stop making payments to their lenders and instead make upfront payments to the debt settlement company, which is supposed to work out a payment plan that would only require paying off a portion of the debt.
It doesn't seem to play out that way. Instead, the upfront money is allegedly pocketed and little, if anything, is done to help pay down the debt. Customers are often left in deeper trouble than they were before.
"Too many people who find themselves under a mountain of credit card debt are tempted to turn to debt settlement companies that often worsen their financial problems," Illnois Attorney General Lisa Madigan said announcing the lawsuits. "After being enticed by these companies' promises to reduce debt, consumers too often end up owing
more than their original credit card debt."
The Federal Trade Commission has some helpful materials for those in debt and seeking a solution. Madigan recommended consulting a credit counseling service -- make sure it's a reputable one -- to get more grounded advice.
These types of shady operations often have professional looking and sounding sales pitches. Before you get seduced by them, make sure you're dealing with an established operation with a solid track record -- and don't just base that on what they tell you.