For those struggling to escape consumer debt, a debt negotiation plan can be a way out. While this is one option for debt relief, there are also a lot of misconceptions about how the process works. Let’s go over a few common myths to help you decide if this is the right path for you.
5 Myths About Debt Negotiation
- The negotiation will eliminate all debts: While it’s true you can get out of consumer debt if you follow the program extremely closely, debt negotiation isn’t going to help you get out things such as student debt or alimony payments. It’s a step forward, but not a restart.
- The program will be quick and easy: There are many benefits to debt management programs. You can reduce your total debt and change the terms of repayment. There are also a few downsides, however. For instance, while you’re in the process of negotiating, interest rates can accumulate, and missed payments can make a dent in your credit score.
- Debt negotiation will give you a clean record: Debt negotiation will not repair your credit score. It can help you get back on track, but it may take time for you score to climb back up to a healthy level.
- You need to pay upfront: New regulations require debt relief businesses to lay out the terms and even take steps to improve the customer’s debt before they can charge any fees. This means that you will not have to pay upfront.
- Debt negotiation is your only option: Many people believe that finding a plan to repay consumer debt is the only option. They might think this because of misconceptions about bankruptcy. For example, many mistakenly think filing for bankruptcy will mean losing their home and other belongings. The truth is that in many cases bankruptcy is the wisest option.
Debt negotiation can be a good path out of debt and towards a fresh start. Hopefully, this post gives you a sense for some of the myths about how the process works. In the end, only you can choose what is the right debt relief option for you and your family.
Kevin D. Judd is a DC bankruptcy lawyer who fights to provide his clients with a gateway to financial freedom.