I routinely meet with people who have been in a so-called debt settlement plan that is making their situation worse with every passing month. The ongoing monthly payments are not within their budget, the plan is failing because they are now being sued and facing garnishment, and other debts that are not covered by the debt settlement plan are causing their own hardship. My biggest beef with all the debt settlement companies is the lack of full disclosure on the options available to their customers. How someone handles their debts is a personal issue and decision, but when someone seeks professional advice, they should be provided with an accurate picture of the options so they can make the choice that is best for themselves and their families.
Debt settlement companies never seem to be constrained either morally or ethically to fully evaluate the options. I recently met with a woman who started a debt settlement program at a time she owed over $40,000 in credit card debt, and her monthly mortgage payment exceeded one half of her entire take-home pay per month. She was using her 401(k) plan to make ends meet in her home, and causing tax problems each year because of the 401(k) withdrawals. To add insult to injury, the plan failed, and she is now being sued and is on the verge of facing garnishments. She has spent thousands of dollars with the company, ran up large income taxes, has created enormous stress on herself, and none of it is solving her problems. Had she been presented legitimately within the option to file bankruptcy, she could have saved vast sums of money, and had the problem solved in very short order. Some companies make a proposition that sounds too good to be true. Make sure that you ask them about options so that you decide the best course to take.