Debt settlement companies offer to negotiate your debts down for a fee. Some people end up worse off, so it's important to understand the risks before signing anything.
The risks
- You're often told to stop paying creditors, which brings late fees, collections and credit damage
- Creditors don't have to agree to settle
- Fees can be large
- Forgiven debt may be taxable income
Red flags
- Fees charged before any debt is settled (for telemarketed debt relief, this is illegal under FTC rules)
- Guarantees that debts will go away
- Pressure to stop talking to your creditors
- Claims of a "new government program" to forgive credit card debt
Check first
Talk to a nonprofit credit counselor first, and check complaints with your state attorney general and the CFPB.
General information, not legal or tax advice. Nickel Keepers isn't paid by any lender, card company or debt relief company.