Today, more people are turning to debt settlement as an alternative to bankruptcy; this is not surprising because Americans are burdened with more debt now than before.
Debt settlement is the process where a consumer negotiates with either debt settlement agencies or creditors to reorganize their debts with lower monthly payments and interest rates.
Debt settlements have advantages for both consumers and creditors, but there are also some complaints, too.
A lot of these complaints are made with the Better Business Bureau.
As the number of settlement companies increase, so do the number of complaints.
Complaints regarding settlement of debt are filed by consumers towards those companies when they do not complete their promises or are unable to satisfy.
The number of complaints was high last decade but has lowered some in the past few years.
Over the years, 70% of complaints filed with the BBB are resolved, so filing with them may help your individual situation.
Complaints made about debt settlement: 1.
Lowered credit score.
A debt settlement can affect the credit score of the consumer.
On a credit report, settlement will be stated as 'paid by settlement'.
This can be negative for a consumer if any credit is desired in the future.
2.
Tax liability.
A consumer can face problems at the time of filing taxes.
3.
A lower monthly payment results in a larger total debt to pay at the end.
4.
Settlement companies claim to provide reduction of payments and interest but do not follow through.
5.
Sometimes before completing a settlement agreement with a consumer, a company will just disappear.
6.
There are times when a debt settlement company takes money from a consumer but does not forward that money to their creditor.
The company is simply stealing from the consumer.
7.
Many times it takes companies a long time to negotiate debt for a consumer.
As the consumer waits, the total amount of debt continues to rise.