How Often Do Debt Relief Agencies Actually Work?

Debt relief agencies are also known as debt management agencies or credit counselors. These programs can seem like the answer to people who are facing bad credit and other debt problems- but in reality, sometimes they aren't all they are cracked up to be. It is important to understand how debt relief agencies work and what they do before signing up.

What a Debt Relief Agency Will Do

  These organizations make various claims, including: 

• They will get your creditors and collection agencies off your back
• They will negotiate a better interest rate on your debts
• They will help prevent you from filing for bankruptcy
• They will simplify your life by having you make one monthly payment, from which they will pay all of your bills
• They will offer you free resources, like books and CDs, to help teach you how to manage your money as you utilize their services

Do Debt Relief Agencies Work?

Of their list of claims, debt relief agencies typically do lower your interest rates and your overall monthly payments.  They do this by leveraging their position with your creditors directly, insuring those creditors some payments, and lowering your interest rate. 

However, these agencies do this at much cost to you!  In many instances, you may pay less per month than you were before you signed up with the debt relief agency, but you are doing so for a much longer period of time.  What’s more, you are likely to pay various hidden fees, and even up front fees, to have the debt relief agency work for you. 

Furthermore, many of these agencies do not provide various services that they promise to provide, and while they claim they will improve your credit, working with them can have the very opposite effect!  Having a credit counselor work on your behalf can amount to a stain much like bankruptcy, so beware! 

In many states, debt relief agencies have come under much scrutiny, and are under investigation for various crimes.  They have been convicted for fraud and misrepresentation, and many have had to close their doors. 

Getting Help

You should strongly consider working with a qualified and experienced debt relief attorney instead of with a debt relief agency. Your attorney is bound by a code of ethics that applies to all attorneys. Under this code, he owes you a fiduciary duty and must put your interests first. His fee agreement also must be fair, so you won't have to worry about hidden costs.