RICHMOND, VA (WWBT) - If you are looking to get out of debt, financial experts say be leery of those debt settlement offers. While there are legitimate ones to chose from, the other companies are waiting for you to drop your guard.
Financial experts warn that trying to get out of debt could lead to new problems. Many consumers turn to companies which promise to work with creditors to reduce what you owe - for a fee, of course. Consumer Attorney, Jason Krumbein says it's not the best option.
"This is a darkened room where you are blind folded and there are knives hanging from the ceiling," he said.
Krumbein says many of his clients end up worse off than they started. He says the biggest compliant is the broken promises that the problem will be fixed.
"You keep sending your money to this debt settlement company who says we will make a deal with them, we will settle this and they don't, they just out right keep the money," he explained.
An option for many consumers is legitimate debt management companies like Clear Point Credit Counseling Solutions. Rebecca Gershowitz, a manger with the agency, says what they do is different from debt settlement.
"We don't ever offer our clients to settle debt and we don't tell clients we are going to reduce balances; it is a repayment plan. The client continues to make a payment and we disperse it to the creditors," she said.
Gershowitz says before you sign up with any company, do your research with organizations like the Better Business Bureau or try to work with the company you owe, on your own.
"One of things consumers don't know is that if you are interested in settlement, it is something you can work out yourself, you don't have to pay an agency to do it," said Gershowitz.
The experts we talked to say there are legitimate debt settlement companies out there but you need to do your homework. Here are some red flags:
"They are using high pressure tactics. Number two, they don't have a local office. If there isn't a local office where you can go, it's very suspicious. Number three is that they don't know state and local laws," Krumbein explained.
In fact, debt settlement companies must register with the State Corporation Commission. It's illegal for a company to operate in the state without the proper licensing and registration.
"A lot of them are hard to go after because they are not registered in Virginia and are not registered as a corporation in Virginia and we start researching who and what they are and they are ghost," Krumbein said.