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Debt Negotiation

Question: Can one get rid of debt through a debt agency? My husband and I have very good credit and we are not behind on our bills. We have four credit card accounts. A debt relief agency located in another state contacted us about getting rid of these credit card debts. They proposed that we stop paying these accounts, which will go into arrears and affect out credit scores. They tell us that within 12 months they can have us debt free and then repair our credit. Is this something we should do? I have serious problems with this.

Answer: There are some out of state “debt negotiation” firms out there that basically tell you to default on debts and pay money to the negotiators, which they will supposedly use to settle the debts. What in fact happens is the creditors file suit, people do not complete the program, and the money you pay the negotiator is retained on one pretext or another. In the end, you are out what you paid the negotiator and have multiple judgments against you. The judgments ruin your credit and even if you pay them, they remain on your report until the 7 year reporting period expires. It is not legally possible to remove something from your credit report unless it is inaccurate or too old. Many of these firms are violating various federal and state laws.

If you have or expect difficulty in paying your debts as they come due, first see if your creditors are willing to work things out with you. If you cannot obtain a satisfactory outcome, consult a consumer credit counseling service or local attorney.