Yesterday, I had a consultation with a potential client. She had racked up about $50,000 in unsecured debt and could no longer pay her bills. Given her financial situation, I told her that I thought that bankruptcy was a good option for her, and I look forward to helping her through the bankruptcy process.
But there’s more to her story. Several months ago, she had signed up with a credit repair company when she started falling behind her bills after a divorce. This company promised to help her negotiate lower settlement amounts on her debts. She signed a contract and, instead of paying her creditors directly, she sent that money to this credit repair company.
Every month, she sent them $375. How much went to the credit repair company for “legal fees”? $360. How much went to her creditors to pay her bills? $0.
She finally came to me when she got served with a lawsuit by a credit card company. A lawsuit the credit repair company was supposed to help her avoid.
There are only two ways to legitimately deal with your creditors: pay your bills or file bankruptcy. If you decide to work with a credit repair company, read the fine print. Do your homework. And then talk to a lawyer.