Is “Debt Relief” Or “Credit Repair” A Scam?

If you’re in debt, you might be tempted to click on one of those links that advertise “American Debt Relief,” or “National Credit Repair.”

If the shadiness of the name didn’t tip you off immediately, you might actually end up falling for their inherently predatory business model.

Now, “technically,” these companies DO provide a service. And the services they provide sometimes “help” people lower their debt.

But the cost-to-value ratio makes zero sense.

Some of the big national debt relief companies charge $200 a week to “negotiate” your debt in court with a “real” lawyer.

Many of these lawyers are appearance lawyers hired for $100 to show up at your case with zero clue as to what is actually going on.

Now, the debt company may be able to “negotiate” your debt, but they fail to tell you two things.

First, for the amount you pay the debt relief company, you could’ve been putting that money to better use by paying off your debt.

Second, even defendants who represent themselves in court are afforded an opportunity to negotiate their debt. Now, it may be scary and intimidating to go to court, but the creditor KNOWS you don’t have the money. The old saying is “you can’t squeeze blood out of a rock.”

So, the creditor is incentivized to kind of take what they can get from you. This means they’re incentivized to settle your debt for lower monthly payments regardless of if you’re represented by a lawyer.

You can negotiate your own debt for free.

Now, a creditor also has other options like garnishing your wages. In MA and CT wage garnishment typically doesn’t exceed 20-30% of your check (I’ll go into a more detailed blog later.)

As far as your house goes, in MA and CT, your house is protected from creditors anywhere from $150,000 to $500,000.

Are They Scams?

They’re not necessarily “scams” because they do provide a service… But it’s a dumb service that you could do yourself for free. Or hire an actual lawyer for the same cost.

Typically, these cases will require court appearances less than once a month.

So, I’m sure you can find a private attorney willing to take on your case for the same cost of a national debt relief company.

Here’s The Kicker

The reason why I think these companies are inherently dishonest is because they advise people to continue negotiating insurmountable debt when there is an ignored golden ticket on the table: Bankruptcy.

Bankruptcy, despite it’s reputation, is a form of debt negotiating.

It wipes your debt clean if you meet certain criteria.

Sure, it takes a toll on your credit, but not anymore than being in collections!

Seriously, getting a judgment against you in court, or being in collections, really fudges your credit.

So why prolong the experience when you can file bankruptcy, take the credit hit, but be debt free and then start rebuilding?

Many of my clients have filed bankruptcy multiple times. It should be more normalized and not viewed as a sign of failure.

America is expensive, don’t be ashamed of your debt. Everyone is in debt. Literally everyone. Like try naming a person who isn’t. I’ll give you a minute.

Sometimes, debt becomes unmanageable, and you deserve a fresh start and a clean slate.

So whether you’r negotiating your debt or considering bankruptcy, stay strong and know that you are more than your debt. Wear it like a badge of honor. America tried to screw you and you found a loophole: bankruptcy.