Debt Settlement Carries Danger of Upfront Fees

Consumers in states hit hardest by the recession may consider many options to avoid filing bankruptcy, including debt settlement.

Consumers in states hit hardest by the recession may consider many options to avoid filing bankruptcy, including debt settlement.

California, Nevada and Arizona have all seen foreclosure rates rise during the economic crisis, as people have a hard time making home loan payments. The problem is compounded by credit card debt, which many consumers may have relied on to buy basic necessities.

Through debt settlement, consumers stop paying the creditors, and instead give the money to a company that creates a fund. With that cash, these firms try to renegotiate the amount a person owes.

However, some of these companies may try to take advantage of indebted consumers. The Better Business Bureau recently reported that it has received more than 3,500 complaints about these firms from the start of the recession.

One of the main complaints lodged against debt settlement companies is that they may demand an upfront payment for their services while not providing any relief, thereby leaving a consumer further in debt.

Attorneys general across the country have warned against debt settlement, while New York Democratic Senator Charles Schumer recently introduced legislation to further regulate these firms at the federal level.ADNFCR-3423-ID-19771701-ADNFCR




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