You’ve likely seen companies advertising on television and radio that offer to help people settle their credit card debt for less than their current balance. Other companies offer consolidation loans or payday advances to help people who are struggling financially. As we get in to tax season, there will undoubtedly also be companies offering tax debt solutions.
While these companies may promise to help you, the truth is that they expect to make money off of you. After all, those ads don’t pay for themselves. People desperate to avoid bankruptcy might get themselves in to much worse financial trouble by turning to so-called debt solutions that negatively affect their situation.
Debt solutions can be expensive and hurt your credit
Many of the companies offering to help with your debt really just want to give you a loan. Debt consolidation services will offer to lend you a large amount of money to pay off your credit cards. Settlement services will charge a fee to negotiate lower repayment amounts for your credit cards.
Although that may seem like it’s safe to trust such businesses, debt relief services could actually harm your credit and leave you racking up more debt almost immediately.
Many debt solutions simply lead to more debt
Obviously, taking out a consolidation loan and not closing the credit cards you pay off could mean that you end up using those credit cards and carrying even more debt. Even if you don’t end up doubling your debt load or incurring hundreds or thousands of dollars in charges and fees, you will still have significant amounts of debt to repay after using these services.
In a successful bankruptcy filing, you will be able to discharge your credit card, medical debts and other major unsecured debts. Instead of heaping more debt on an already unsustainable budget, bankruptcy gets rid of some of that debt so that you can balance your budget and start rebuilding your finances.
