Many people overwhelmed by debt attempt to handle that debt load by working with a variety of “debt consolidators” or “debt resolution centers.” If one reviews newspapers like USA today you can find ads everywhere offering this type of service. They nearly all proclaim “don’t file bankruptcy” or “settle your debts for pennies on the dollar,” etc.
My experience as an attorney has been to repeatedly have clients come to me AFTER they have attempted to work with these programs. I have learned from my clients how these programs uniformly offer no real relief to the consumers. What happens is that debtors agree to pay so much money each month to the agency and the agency promises to “negotiate” with creditors and settle their debts for less. After they are contacted by the agencies the creditors may agree to wait a little while before taking action. Inevitably, they give up on the agencies and start filing lawsuits.
This is when the debtors come to me and ask for help. At that point they have paid hundreds, if not thousands of dollars to the agency. The agencies obviously take a fee from the debtors, which is almost never returned. Some agencies have the audacity to say that the first year of payments will ALL go to “attorney fees.” The agency may possibly have settled with one or more creditors, but the others get impatient and start collection activities again. I can honestly say that not one client has reported positive results with these type of “debt relief agencies.”
I would recommend that anyone considering working with any such agencies to first contact an attorney to discuss bankruptcy options, or the possibility that the attorney could negotiate with the creditors directly. Usually, if the debtor is unable to pay their bills, and cannot realistically project being able to pay off their debts in the relatively nearly future, they should seriously consider bankruptcy. Filing bankruptcy may in fact be the best way to be honest about the financial realities they face, be responsible, and get a “fresh start.”