Learn the Difference between White Hat and Black Hat Debt Relief Services

They provide the same kind of common sense advice Dave Ramsey does in the above video.

There are two kinds of debt service firms.

  1. Those that counsel you on how to manage your money, pay your creditors, and advise you how to negotiate and settle with them.
  2. Those that ask you to pay them, so they can negotiate with and pay or resist (for you) your creditors.

If properly experienced and credentialed, the first kind can be very helpful and affordable providing you with good advice.

In my opinion even these white-hat debt counseling firms can too far if they offer a debt management plan that you paying money to them and them paying money to your creditors. If money is tight, you should not give up control of any of it.

The second kind can be expensive, ineffective, bring damage to your credit rating and can cause your creditors to blind side you with arbitration or lawsuit proceedings.

These firms promise to take care of your debt problems for you. They communicate with your creditors so you do not have to. The problem is using them puts you out of the loop with your creditors. You do not know what is being communicated about your finances. You do not know how your creditors are responding. Tread carefully with these firms, or even better, avoid them.

The online debt forums offer many stories of debtors being victimized by these debt service organizations. Quoted on newyorktimes.com, Deanne Loonin, a senior lawyer with the National Consumer Law Center in Boston, who has investigated [these debt service firms]. “It’s possible there are honest ones,” she said, “but I assume they aren’t until proven otherwise.”  Check out this pdf from the National Consumer Law Center, “Tips on Choosing A Reputable Credit Counseling Agency.” 

To eliminate credit card debt learn more on how to avoid the pay-us-first debt service firms.  Here is  another post to help you plan ahead, if you have credit card debt you cannot afford to pay.

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