Be skeptical about broad claims to wipe out your debt. Debt negotiation can be risky, and it can have a serious, long-term effect on your ability to get credit.
The ads are commonplace; they tout a way to consolidate your bills into one monthly payment without borrowing further. Or they offer to stop credit harassment, foreclosures, repossessions, tax levies and garnishments, or to wipe out your debts.
These offers often require you to declare bankruptcy, but they rarely say so. While bankruptcy is one way to deal with serious financial problems, it's generally considered the option of last resort. The reason: It has a long-term negative impact on your credit worthiness. A bankruptcy can stay on your credit report for up to 10 years, and can hurt your ability to get credit, a job, insurance or even a place to live. In addition, there are hurdles that you must clear before filing for bankruptcy, and it’s likely that you’ll be responsible for attorneys' fees. Get more information about debt relief and bankruptcy from the Federal Trade Commission.
What You Can Do
If you’re having trouble paying your bills:
- Talk with your creditors. They may be willing to work out a modified payment plan.
- Contact a credit counseling service. These organizations work with you and your creditors to develop debt repayment plans. These plans require you to deposit money each month with the counseling service. The service then pays your creditors. Some nonprofit organizations do this for no charge; others charge a nominal fee for their service.
- Carefully consider all your options before you borrow more money. While a second mortgage or home equity line of credit may allow you to consolidate your debt, they also require your home as collateral.
Report Online Scams
If you believe you’ve responded to an online scam, file a complaint with:
- The Federal Trade Commission.
- The FBI’s Internet Crime Complaint Center.
- Your state attorney general.
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