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BY BLAIR LOONEY Contributing columnist
Dear Action Line: A few years ago I lost my full-time job, and ever since I've been going deeper into debt. I have more than $30,000 in credit card debt, and now I am working full-time to pay back my debts. I constantly see ads from companies that claim to help people become debt free. I am starting to consider a debt settlement/negotiation company to help manage my debt. Do you have any advice before I contact such a company?
Dear reader: Consumers are bombarded every day with ads and emails offering services to manage or reduce debt.
Debt negotiation companies negotiate with a consumer's lenders to lower the total amount of debt owed for an upfront fee. Relying on debt negotiation firms could negatively impact your credit score, because the program may advise you to stop sending payments directly to creditors.
Avoid debt settlement businesses that charge a fee before they reduce or settle your debts. Also, beware of businesses that guarantee they can make your debts disappear, stop all collection calls and lawsuits, and have your debts be paid off for a significantly low price.
Scammers that prey on victims with debt may never contact your lenders and just take your money and run. Remember a business should not enroll you in a debt settlement program before going over your financial situation and teaching you debt management skills.
Take precautions and use these tips as a guide when searching for a business that offers a debt settlement program. Check back next week to read about tips on companies offering debt consolidation services.
*Thoroughly research the business and check out bbb.org/Central-California to make sure the business is in good standing. Read complaints and what those who are enrolled now in a debt settlement programs have gone through
* Usually programs require participants to make a monthly deposit into a special bank account for at least 36 months. Make sure your budget will allow you to make the long-term monthly payments the program requires. Remember the creditors are not obligated to negotiate even if you are enrolled in the program.
* Make sure the business lays out the fees and terms of its services. The business must tell you the timeframe it will take to get results and the percentage of debt that must be saved before the business will make an offer to the creditors.
-- Blair Looney is president and CEO of the Better Business Bureau serving Central California. Send your consumer concerns, questions and problems to Action Line at the Better Business Bureau, 1601 H St., Suite 101, Bakersfield, CA 93301 or email@example.com.