You see the commercials now and again about people just like you who are trapped by crushing debt, unable to move on with their lives, or always living check to check. They also incorporate a consoling theme about it being okay to ask for help in getting out of debt through a debt consolidation plan. The ads may also end with a sentimental promise about how one phone call can put you on the path to a better life.
The commercials may seem too good to be true. But like the old adage goes: if something sounds too good to be true, chances are that it is.
While they seem simple enough, debt consolidation plans can be fraught with traps for the unwary. The problem is that in order for such a plan to work, all your creditors must agree to take less than they are contractually obligated to collect; and getting everyone to agree to take a haircut is not so easy or certain. As such, a consolidation plan cannot exist without all creditors buying in.
Meanwhile, the consumer is left holding the bag because payments have not been made to creditors since no agreement had been reached. This often leaves consumers in worse shape than they were before dealing with the debt consolidation agency.
So what can a consumer do to avoid such a nightmare scenario? Doing one’s homework is a good first step. It may be helpful to search the local Better Business Bureau (BBB) or the American Association of Debt Management Organizations (AADMO) are two entities that actually certify debt consolidation firms that abide by best practices.