Do debt reduction services make you file bankruptcy?
Emily asked:
I’m in about $4,000 in debt and was considering a debt reduction service. I heard that you have to file for bankruptcy to complete them. Is this true and what all is required to follow through and complete a reduction service. Is it worth it?
I’m in about $4,000 in debt and was considering a debt reduction service. I heard that you have to file for bankruptcy to complete them. Is this true and what all is required to follow through and complete a reduction service. Is it worth it?
March 11th, 2010 at 9:47 pm
No, they’re not going to make you file bankruptcy for 4 thousand dollars into debt… and no they just help you reduce your debt, just as the name states.
People are usually thousands to millions in debt before they file bankruptcy..
I’m not sure if the company your going through is worth it, but clearing your debt up is of course worth it..
March 12th, 2010 at 6:36 pm
Many debt reduction services charge large fees. They also often times make you save all the money up (including their fees) before they contact the creditors. This can make someone with good credit get bad credit because some of these services recommend to people to stop paying off their debt completely. I wouldn’t use any service except maybe a credit counselor. A credit counselor will help you set a budget and create a payoff plan for your debt. Use the below link to help you find a reputable one.
You could even get away with doing everything yourself.
First pull your credit reports from the three major credit bureaus:
Experian, TransUnion, and Equifax
You can get free ones at.
Then take note of how much money you owe and to whom.
If the account(s) is delinquent:
Order the accounts by either smallest to largest amount (makes you feel like you are accomplishing something quicker), or largest to smallest interest rate (will end up saving you money in the long run).
Start saving up what you owe for each account. Keep making payments on any that are still open or in good standing.
After you have saved a total to pay off the first amount contact the creditor and see if you can negotiate a reduced payoff amount…if not then you can pay in full.
If the account(s) is in good standing:
Make all of your payments on time.
Order the accounts by either smallest to largest amount (makes you feel like you are accomplishing something quicker), or largest to smallest interest rate (will end up saving you money in the long run).
Pay the minimum on all the accounts below the first one listed, then pay all the other money you have devoted to paying off debt to the first account listed.
Once the first account is paid off apply all of the money you were paying on the first account and start paying off the second account on the list. Repeat until everything is paid off.
You may want to go to the library and check out The Total Money Makeover by Dave Ramsey. It explains everything I just told you in greater detail.
March 13th, 2010 at 3:23 am
has a list of reputable companies provide debt relief and help programs.