Debt Reduction Companies

Debt Reduction Companies: Do they really work?

Many people have asked me that, How do Debt Reduction Companies work? Do they really work or are they some kind of Scam? Well, see there are some debt management companies which are scams. They offer to reduce your debt by 90% and ask you for higher fees. But at the end, they don’t do anything for you. However, almost all the other debt management companies are genuine.

How rapidly you will be out of your debt really depends on your current income level and how much deep you are in debt. There are several debt reduction strategies that these debt management companies use. You can read my article,

Debt Reduction Strategies

However, before choosing a debt management company, you should check its past record and its customer feedback. Some debt reduction companies offer you to reduce your debt by 90%.

It really depends on what they mean by "reduce your debt by 70%" and most likely it is "up to 70%" and not all customers can get a 70% debt reduction.
What could this mean?
Several things. One could be bankruptcy. Several "companies" and "debt counselors" are just fronts for bankruptcy attorneys. A Chapter 13 bankruptcy can significantly reduce your debt. All your creditors get notified and have to respond in order to maintain their claim on you. If they don't respond, they lose out and you don't have to repay the debt.
A judge will then look at your income and decide what you can afford to pay toward your debts each month. S/he then decides how long you will make payments and what portion of each payment goes to which remaining creditors.
But, of course, a bankruptcy on your credit report completely hoses your credit. You can still borrow money, but you will be paying 25% rates and it will cost much more in the long run. Also your bankruptcy may not be approved and you could end up owing the attorney money for his/her time.

These companies realize that you probably will continue to get further into debt, but by doing this you will continue to be a good customer for them. If they make money off of you, they have a motive to keep making money from you. So do they really want to see you get completely debt free or just remain a steady customer?
Watch out for companies that want a large up front fee (more than $200) or will charge monthly fees to manage your bills. Watch out for companies that claim they can clear up your credit report; some try illegal tactics that will get you (not them) into trouble. Remember you are considering employing them to negotiate with your creditors on your behalf; be sure you know exactly what they are going to do and say. If they don't disclose their methods, watch out.