Wolf Pack Inc

While being able to reduce your debt faster through debt counseling programs may seem like a great idea, there are a few things you should know before you sign up with any of the services out there. The first thing to do is to make sure that the company is legitimate, and find out whether or not any complaints against them filed with either the Better Business Bureau or your state’s attorney general’s office.

Next learn what kind of fees they charge. Some firms may have flat fees for their services, while other programs for debt reduction will only charge you a percentage of the amount of money they save you (usually around 10%). Thus, if they are able to save $500 from a debt of $1500, the fee owed would be $50 on top of the $1000 you still must pay to the creditor. Fees are only owed to the company if they succeed in getting your balance lowered.

However, they will be collected up front once the agreement is signed, so you need to make sure you have enough money available to pay both it and the settlement amount on hand. If not, many companies will void the agreement if you cannot come up with it by the due date. In turn, the original creditor may choose not to make a new settlement or will insist on a smaller reduction if the deal has to be renegotiated.

You must also understand that no creditor is legally bound to accept less than the full amount you owe them. Many, however, feel that it is better to recover some of the debt instead of risking a total loss should you file for bankruptcy. If you do fail to pay they can sue you and even obtain a court order to put a lien on your property or garnish wages.

In addition, you will be required to pay income tax on any amount saved through debt reduction, so be sure that it does not place you in a higher tax bracket.