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Is a debt relief company a viable option for you?

Finding yourself in a situation of unmanageable credit card debt can be surprisingly easy to do; consider that the average American household that carries a credit card balance owes more than $16,000. Many of these households do not have sufficient savings to cope with the required monthly payments on such balances if something happens to interrupt the source of income from which those payments are made.

If you need help short of bankruptcy when coping with past-due consumer credit debt, companies exist that purport to help you to eliminate your debts for only a fraction of the balance owed. But how do such seemingly too-good-to-be-true claims work in actual practice? 

Credit card settlement companies frequently rely on the consumer to create an account into which they pay sums on a monthly basis until enough money is in it for the settlement company to offer to the credit card issuer a settlement amount. These companies also often advise their customers to stop making monthly payments on their balances. While this concept may sound persuasive at first, you should know about some potential downsides:

  • The settlement company cannot force the credit card issuer to accept a settlement of the debt. 
  • Ceasing to make your monthly payments can have a negative impact on your credit score, even if the debt holder agrees to the settlement.
  • Settlement companies may try to bind you into plans that can take years to finish, during which time you need to keep paying the settlement company on a monthly basis. Many times people who start out with such a payment plan are unable to sustain these payments.

Before you sign up with a credit card settlement company, it is a sound strategy to do your homework on that company in advance. Or, as an alternative, you may want to discuss other options with an experienced Kentucky bankruptcy attorney before committing yourself to an strategy that can have negative effects on your credit and possibly still leave you with significant debts.

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