Americans are collectively buried in more than $1 trillion in credit card debt, according to federal figures.
So when balances become too much, some consumers look for outside help from companies that claim they will help them settle and renegotiate those debts. But before you sign up, one woman has a warning.
Nicole, who requested that we not publish her last name, says she was facing thousands of dollars in credit card debt after a recent divorce.
"I was just trying to get back on my feet," she said,
But paying off her credit cards was getting tougher and tougher.
"The monthly payment was getting to the point where it was higher than my mortgage," she said.
Relief firm offers help
So, she found a debt relief company online that promised to negotiate for her.
"They told me to stop paying my bills," she said, "and that they would then work with my creditors."
So instead of paying her two credit cards, she says she sent the relief firm $200 every two weeks, as they requested. But when she started getting late payment warnings, she said she realized that the firm had kept most of her money.
"They are paying my creditors right now just $31 a month," she said.
She checked her cards and discovered they were paying $30 a month for one card and just $1 for a second card. Now, she says, one company is taking her to court for non-payment.
Stunned, she asked us, "Why wasn't my money managed better?"
What to check for before hiring help
Leslie Tayne is a financial attorney and founder and managing director of the Tayne Law Group.
"It is absolutely impossible to give anybody a guarantee on what a credit card company or any kind of creditor will do for you," Tayne cautioned.
She says any promise of debt going away is the first red flag. The second, Tayne says, is being slapped with fees before a company settles your debts.
Before hiring a company, she suggests contacting creditors yourself to see what they can offer, such as reduced interest or an extended payment plan.
"Sometimes it's just changing the payment day," Tayne said,
If you're still behind, or if your debt is sent to collections, then consider help from an attorney, credit counselor or relief program. But be sure you know exactly what a company or service offers, and research them for complaints at the Better Business Bureau website.
The BBB lists the warning signs of a debt relief ripoff and links to recommended companies that may be able to help. We contacted Nicole's debt relief firm to ask why they have not been paying down their creditors.
A spokesperson said they would work with her and try to come up with a payoff offer, but they cannot guarantee that debtors won't sue her.
"I trusted them," Nicole said. But now, she says, they have her money, and her creditors are still coming after her.
So be careful who you hire to help with your debts, so you don't waste your money.
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