Should i use a debt relief company

From there, a program will be created for you, during which you will make monthly deposits into a separate account. DMB Financial will then negotiate with your creditors for you to pay less than what you owe on your debts.

While DMB Financial focuses on all unsecured debts, it claims to be able to help consumers the most with high-interest credit card debt. With one of its programs, you can consolidate all your bills into a single monthly payment you make into a savings account each month.

This can be a lifesaver when your interest rates and bills are just too high and continue to grow as you make only minimum monthly payments. Read the full DMB Financial review.

New Era Debt Solutions maintains a staff of attorneys ensuring that everything is done according to state and federal law giving consumers confidence in the job done. Clients will not pay any upfront charges for its services. Its plans also come without any monthly administration fees, and performance-based fees are only charged when you see results.

Like other debt settlement companies, New Era Debt Solutions has its clients save money for debt settlement in a separate account. In the meantime, they negotiate with your creditors to help you pay less than what you owe. According to the company, its clients settle their debts and become debt-free after an average of fewer than 28 months. The company claims to lower both the balance and interest rates of debts. Other benefits of New Era Debt Solutions include the fact it has attorneys on staff and an account management team is also assigned to each client from the start.

The company also handles all of its work in-house and never outsources tasks to other unproven firms or contractors. Read the full NewEra Debt Solutions review. While other debt relief companies shy away from tax debts, CuraDebt offers special assistance for consumers who owe back taxes. This program is offered on top of its traditional debt settlement programs that can help consumers become debt-free while paying less than what they owe.

CuraDebt has been in business since , and it offers a free consultation for consumers interested in its debt relief programs. There are no monthly administration fees. This makes CuraDebt unusual in that it can help consumers who have multiple types of debt including taxes, credit cards, and personal loans. Specifically, CuraDebt's assistance for tax debt relief includes transparent, flat-fee pricing and help to settle and to negotiate on IRS and state tax debts.

It even has federal and state tax experts on staff, and this assistance is available in all 50 states. Read the full CuraDebt review. We chose Freedom Debt Relief due to the fact it offers an interactive client dashboard that lets clients track their progress. Freedom Debt Relief has been in business since and currently employs over 2, highly trained debt experts and professionals.

It starts clients off by offering a free consultation with a certified debt consultant who can help them talk over their debts and what they hope to accomplish. From there, they craft a personalized debt settlement plan that asks you to save a specific amount in a separate account to use for debt settlement later on.

One feature that helps Freedom Debt Relief stand out is its interactive process. This dashboard lets you see how much you have saved, how much you owe, and any progress Freedom Debt Relief has made negotiating debts on your behalf.

By the end of their debt settlement programs, customers pay a fee equal to a percentage of the amount of debt they enrolled in the program.

While Freedom Debt Relief cannot guarantee it will settle your debts, it claims that many of its clients wind up paying significantly less than the amounts they once owed. Read the full Freedom Debt Relief review. All of the best debt relief companies on our list are reputable, offer various services, and have overall good reviews with helping customers manage and reduce their debt. Some provide numerous debt relief options and others charge lower fees. Overall, we recommend checking out National Debt Relief first.

The company has a proven track record, a money back guarantee, and shows clear examples of debt reduction on its website. Debt relief companies are for-profit organizations that help consumers settle their debts for less than what they owe. These companies gear their services to clients who are so overwhelmed with debt that they cannot figure out a solution on their own. You should also strive to avoid working with debt relief companies that try to collect fees before they settle your debts or ones that advertise a new government program that could help.

Generally speaking, debt relief companies turn to debt settlement as the best debt relief option. With debt settlement, these companies ask their clients to set aside a specific amount of money in a dedicated savings account each month. The goal of this account is to build up a sum of money that can be used to settle debts later on. Debt relief companies then negotiate with creditors on your behalf, which typically involves offering less than what you owe toward your balances.

At the end of a debt settlement program, clients should be debt-free and able to move on with their lives. If you exceed your credit limit , additional fees and charges may apply. This can cause your original debt to increase. Avoid doing business with any company that promises to settle your debt if the company:. An alternative to a debt settlement company is a non-profit consumer credit counseling service.

These non-profits can attempt to work with you and your creditors to develop a debt management plan that you can afford, and that can help get you out of debt. They usually will also help you develop a budget and provide other financial counseling.

Also, you may want to consider consulting a bankruptcy attorney, who may be able to provide you with your options under the law. Some bankruptcy attorneys will speak to you initially free of charge. Warning: There could be tax consequences for debt forgiveness. If a portion of your debt is forgiven by the creditor, it could be counted as taxable income on your federal income taxes. You may want to consult a tax advisor or tax attorney to learn how forgiven debt affects your federal income tax.

Searches are limited to 50 characters. Please do not share any personally identifiable information PII , including, but not limited to: your name, address, phone number, email address, Social Security number, account information, or any other information of a sensitive nature. Skip to main content. If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan DMP.

Even if a DMP is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills. In a DMP, you deposit money each month with the credit counseling organization. It uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees.

Ask the credit counselor to estimate how long it will take for you to complete the plan. To make that lump sum payment, the program asks that you set aside a specific amount of money every month in savings. Debt settlement companies usually ask that you transfer this amount every month into an escrow-like account to accumulate enough savings to pay off any settlement that is eventually reached. Further, these programs often encourage or instruct their clients to stop making any monthly payments to their creditors.

Although a debt settlement company may be able to settle one or more of your debts, there are risks associated with these programs to consider before enrolling:. These programs often require that you deposit money in a special savings account for 36 months or more before all your debts will be settled.

Many people have trouble making these payments long enough to get all or even some of their debts settled, and end up dropping out the programs as a result. Before you sign up for a debt settlement program, review your budget carefully to make sure you are financially capable of setting aside the required monthly amounts for the full length of the program.

Your creditors have no obligation to agree to negotiate a settlement of the amount you owe. So there is a possibility that your debt settlement company will not be able to settle some of your debts — even if you set aside the monthly amounts required by the program. Also, debt settlement companies often try to negotiate smaller debts first, leaving interest and fees on large debts to continue to mount.

Because debt settlement programs often ask or encourage you to stop sending payments directly to your creditors, they may have a negative impact on your credit report and other serious consequences. For example, your debts may continue to accrue late fees and penalties that can put you further in the hole. You also may get calls from your creditors or debt collectors requesting repayment. You could even be sued for repayment. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.

Other companies may try to collect their fees from you before they settle any of your debts. Before you enroll in a debt settlement program, do your homework. Enter the name of the company name with the word "complaints" into a search engine. If you do business with a debt settlement company, you may have to put money in a dedicated bank account, which will be administered by an independent third party.

The funds are yours and you are entitled to the interest that accrues. The account administrator may charge you a reasonable fee for account maintenance, and is responsible for transferring funds from your account to pay your creditors and the debt settlement company when settlements occur.

Before you sign up for the service, the debt relief company must give you information about the program:. Depending on your financial condition, any savings you get from debt relief services can be considered income and taxable. Credit card companies and others may report settled debt to the IRS, which the IRS considers income, unless you are "insolvent.

Insolvency can be complex to determine. Talk to a tax professional if are not sure whether you qualify for this exception. You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit.

But these loans require you to put up your home as collateral. In addition to interest, you may have to pay "points," with one point equal to one percent of the amount you borrow.

Still, these loans may provide certain tax advantages that are not available with other kinds of credit. Personal bankruptcy also may be an option, although its consequences are long-lasting and far-reaching. However, bankruptcy information both the date of the filing and the later date of discharge stay on a credit report for 10 years and can make it difficult to get credit, buy a home, get life insurance, or sometimes get a job.

Still, bankruptcy is a legal procedure that offers a fresh start for people who have gotten into financial difficulty and can't satisfy their debts. There are two main types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court.

Filing fees are several hundred dollars. For more information visit the United States Courts. Attorney fees are extra and vary. Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they might otherwise lose through the bankruptcy process.