Debt Relief and Debt Relief Scams (2024)

FAQs

Are debt relief programs scams? ›

Debt Relief Service and Credit Repair Scams

Some debt relief scams even tout their services using automated "robocalls" to consumers on the Do-Not-Call List. Auto loan modification scams falsely promise that they can reduce consumers' monthly car loan or lease payments to help them avoid repossession.

Unfortunately, there is no such thing as a government-sponsored program for credit card debt relief. In fact, if you receive a solicitation that touts a government program to get you out of debt, you may want to think twice about working with that company.

National Debt Relief is a legitimate company that has helped hundreds of thousands of people negotiate their debts. The company's debt coaches are certified through the International Association of Professional Debt Arbitrators (IAPDA). National Debt Relief is also a member of the American Fair Credit Council (AFCC).

Debt forgiveness is a process where a creditor pardons a debtor from part or all of their outstanding debt. Various types of debt may qualify for forgiveness. Debt forgiveness can offer relief from overwhelming financial burdens, but it does have downsides. There are alternative options for managing debt.

How Debt Collection Scams Work. It's very simple: Someone contacts you — often by phone, but also by text message, fax, mail or email — and claims that you owe a debt. The debt may be completely fake, canceled, discharged, forgiven or beyond the period for collection.

Filing for Chapter 7 bankruptcy wipes out unsecured debt such as credit cards, while Chapter 13 bankruptcy lets you restructure debts into a payment plan over 3 to 5 years and may be best if you have assets you want to retain.

Cons of debt settlement

Creditors are not legally required to settle for less than you owe. Stopping payments on your bills (as most debt relief companies suggest) will damage your credit score. Debt settlement companies can charge fees. If over $600 is settled, the IRS will view this debt as a taxable income.

The short answer is Yes, people are generally allowed to use their credit cards after debt consolidation as it does not typically involve closing credit card accounts.

Debt relief will also often give you a fixed payment plan and a set payoff date, which can also make it worth considering — as streamlining your payments can make it easier to manage while helping you save money on interest. "One of the biggest advantages of going through a debt relief program is the savings.

Is debt hardship relief legit? ›

A malicious scam has been surging lately, as reported by TNS' Robocall Protection team, targeting individuals who carry debt and are looking for a lifeline. Callers claiming to be from a 'financial hardship loan center' are attempting to steal victim's information or worse, digging them deeper into debt.

Debt relief can be a lifeline to help you get out from under unaffordable debt—but it can also damage your credit. So, if you're considering a form of debt relief, you'll want to bear in mind its effect on your credit report, where the information can stay for up to 10 years.

Credit Card Companies Sometimes Write Off the Debt

If you stop paying on your credit card debt and become seriously delinquent, the credit card company will likely write off the debt and consider it uncollectible. At that point, the company takes your debt off its books.

Debt management plans themselves do not affect your credit scores, but closing accounts can hurt your scores. Once you've completed the plan, you can apply for credit again.

Credit card forgiveness from credit card companies is unlikely. You may be able to negotiate with credit card companies for other debt relief, like creating a debt management plan. A debt consolidation loan can help you pay down credit card debt faster.

Debt relief services may have a negative impact on your credit score, but that impact may not be as big as you think — and in some cases, it can help your credit. How these services impact your credit depends on the debt relief option you choose.

These fees will typically range from 15% to 25% of the total enrolled debt — but can also vary based on the company you choose to work with. It's crucial to weigh the potential savings against the fees incurred — and consider the potential impact on your credit score — before making a decision.