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Although credit funds can help you complete large projects such as buying a car or a house, consumers should exercise caution before getting into any kind of debt. To some extent, it can be described as inevitable.
To support this notion, a study showed that 80 percent of all Americans have consumer debt, with 13 percent of the entire population expected to remain in debt for the rest of their lives. Regardless, if you or someone you know is having trouble coping with debt, there are possible solutions that can help attain financial stability.
These options include self-help that can entail realistic budgeting as well as debt relief services that may involve debt settlement, credit counseling, or debt consolidation. If you’re still struggling to clear your debt, filing for Chapter 7 or Chapter 13 Bankruptcy may also be a viable option.
However, before you start working with a debt relief service provider, go through a few National Debt Relief education reviews and those of other firms to help you learn to confirm their credibility.
Along the same line of thought, it would also be a good idea to check out the service with the help of the Attorney General of your state and nearby consumer protection agency. One of them can provide adequate information regarding any complaints on file regarding the service you want to work with.
That aside, read on to find out the risks of working with a debt relief company, common debt relief scams you should look out for, and the distinguishing features of a reliable debt relief service company.
Risks Associated with Debt Relief Services
Even though they may prove effective in some scenarios, there are certain risks associated with debt relief services. For starters, most companies charge a fee to help you settle or clear your debt.
If the company manages to have your debt forgiven, the amount of cash used to reduce your debt may be considered your income and used to determine the amount of federal income tax you owe. Eventually, based on your average earnings, deductions, and tax bracket, you may end up paying the IRS an amount similar to the forgiven debt.
Debt relief services can also destroy your credit score. As you negotiate your way out of debt, if you’d suspended payments based on the discretion of the debt relief company, the missed payments will reflect on your credit report, seriously hurting your credit score.
Moreover, your creditors may begin filing debt collection lawsuits against you. They may also sell your debt to another debt collection agency. Sold accounts often display on your credit report as negative entries and they can deter you from taking up another loan in the future.
Beware of Common Debt Relief Scams
Besides the risks, when working with a debt relief service company, you should keep abreast of some common scams you may encounter. Firstly, beware of companies that promise to eradicate unsecured debts cheaply.
It’s also advisable to steer clear of service providers that guarantee their system can help you avoid bankruptcy. In the same context, exercise caution with companies that advise you to sever communication with your creditors and those that fail to provide statements of any payments made to the creditor.
Additionally, companies that tell you that creditors can’t sue you for non-payment of unsecured debts are a fraud. You should also not trust a company that promises you that using their system won’t have negative effects on your credit score.
In the same line of thought, avoid working with organizations that claim to be affiliated with any credit reporting bureau as well as credit experts that lack a cancellation or refund policy.
Distinguishing Features of a Trustworthy Debt Relief Service
Some of the distinguishing features of a trustworthy debt relief service company include an excellent turnaround time. Companies that offer timely debt relief solutions have established networks with major financial institutions, allowing them to deliver results within the agreed-upon period.
Additionally, a good debt relief service should have no upfront or additional service fees, end-to-end solutions, and experienced financial professionals.
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