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Resolving credit card debt through debt-settlement companies

Credit cards can be a tremendous benefit. But, they can turn into a nightmare for any Tennessean. All it takes is a few bad choices or a dollop of poor luck. For Tennesseans struggling under the weight of credit card debt, the situation can often feel overwhelming. High interest rates stack the debt up higher and higher. In these desperate times, many are eager to seize any lifeline that comes their way. But, they need to be careful because not every lifeline is safe.

Consider debt-settlement companies. These programs are offered created by for-profit companies. These companies will negotiate with creditors to get the debtor a better deal. This deal will normally involve the debtor paying a one-time payment to wipe away the debt. To make that payment, the debt-settlement company will normally ask the debtor to make monthly payments into an escrow-style account. At the same time, the company will frequently instruct the debtor to stop paying their creditors.

These programs can be risky. For one, the payment plans often last for up to three years. Many debtors struggle to make their payments that long, which prevents them from having their debt settled.

For another, even if the person makes all of their payments, there is still no guarantee that the debt will be fully settled. For example, in many instances, the company will only negotiate some, but not all of the debt down, which means the debtor will still owe money after the deal is done.

Perhaps riskiest of all, these companies regularly tell debtors not to pay their creditors, while the debtor is building up their settlement fund. This approach can wreck a person's creditor report -- among many other financial consequences, like late fees and interest increases.

These are just a few of the risks that can accompany working with a debt-settlement company. Tennesseans need to do their homework before they enter a debt-settlement program. One avenue they should research is whether other alternatives, like bankruptcy, may better suit their situation.

Source: FTC.gov, "Settling Credit Card Debt," accessed on May 3, 2016

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
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