Non-Profit Debt Relief Agencies - Scams?

I admit it, I am $20k+ in debt and the credit cards at getting close to their 30% interest rate out of me.

And at least once a week I get offers from “non-profit debt relief agencies” who will help consolidate my monthly payments to one low payment with a lower interest rate.

Because I get so many of these offers, I think there must be something scammy about them – but am I wrong? Would this be a good way to take care of my mounting debt?

I Google debt consolidation and get pages and pages of companies, but how does one determine who is reputable and who will end up screwing with my credit rating?

Different companies can do different things with different levels of scumminess. I’m sure others will chime in with more info then I have.
Some will call your debtors and settle for less, that will fuck your credit score.
Some will take your money and just not pay anyone. Remember, even though your beef is with them, you still owe the debtors the money.

Back when I used to listen to Jean Chatzkey (sp?). I believe something she used to mention is that when you got into trouble, you should always seek out a for-profit place since they’re much more likely to be on the up and up and more willing to help you through this.

Also, if your interest rate is in at almost 30%, you’re probably in default with most of your cards, so this probably isn’t much help, but you might want to start by talking to some banks or credit unions and seeing if they can take on the credit at a more reasonable rate. Even if they can get it down to 15%, that would help a lot. Also, if you own a house, I would strongly suggest you don’t use any of the equity in your house to pay down your credit cards. I don’t think it’s ever a good idea to turn unsecured debt into secured debt. Meaning, right now, there’s not much they can do other then call and harass you and make it hard for you to get more credit. If you were to secure the debt, that is, use equity from your house and pay down the debt with it and you found yourself now not able to make your mortgage payments, the bank could take your house.

Check out I used to listen to her back when she had a radio show, but that’s been a while so poking around on her website it turns out one of my opinions is a bit different then hers, and something I mentioned that I thought she said was just plain wrong so I’ll let you take a look around.
I think this page is what you’re looking for. It also includes a link to help find debt settlement places. But like I said, I think settling a debt still looks bad on your credit report since even though the credit card company is agreeing to the new amount, you are still paying less then you owe. Personally, I’d start by talking to some banks and seeing if I could get a loan with a lower rate. In order to keep my credit rating from completely tanking, I’d like to at least attempt to pay everyone in full.

The first thing is are you behind? The problem with owing money is the banks won’t work with you till you fall behind. This means taking dings to your credit.

Once you fall behind, anything a debt consolidation company can do, so can you.

But remember once you do this, your credit rating falls drastically. You may be only a point better than being a total deadbeat and not paying anything or filing for bankruptcy.

If you owe less than $10,000 that’s a part time job. If you’re between $10k and $25K you’re now looking whether or not paying back or bankruptcy is better. Over $25K it’s time to consider bankruptcy.

Bankruptcy is a tool, I know a lot of people think of it as for deadbeats, but major companies do it all the time. Is GM a deadbeat company? United Airlines? Trump and his companies?

The main issue with a lot of these non-profit places is they’re sloppily run. There have been many issues with them taking your money and not paying your creditors. This leaves you worse off then before and you still wind up in bankruptcy.

Agree to a point. You need to do a cost/benefit analysis on how much your credit rating is worth. I talked to a friend who was over $100k upside down on her house (that she was moving out of anyways) and had $60k in credit card debt. She wanted to keep paying so as not to ruin her credit.

The thing is, even a bankruptcy comes off of your credit report in 10 years, and you can start getting loans after about 3 (albeit at terrible interest rates). Is her “good credit” worth $160k over the next ten years? Hell, declare BK and pay yourself that $160k.

I agree with Markxxx; it is a good tool. Forget about what your grandmother said about paying debts. That applies to friends and regular people. Banks are in the business of making money and they set usurious interest rates of 30% precisely because some people can’t pay. Fuck 'em

That’s very true. Especially since you aren’t likely to consolidate $160k.
Also, we don’t know the OP’s situation. It he’s not planning to make any giant purchases (car, house etc) in the next few years, settling his debt may be a good idea. Whereas if he finally coming here for help becuase he would like to buy a house or car in the next year or two it might be more worth while to attempt to pay them off first.
We also don’t know other important factors, like how much he makes or spends.

My ex-wife, back when we were first dating almost called a debt settlement place once because she was freaking out by how much debt she had. When I finally got her list it all for me, she actually had less in debt then she had in her checking account, she was just so terrible at managing her money she couldn’t get it under control. She really truly couldn’t wrap her head around why her (for example) JCPenney credit card balance kept going up. Even though she made her monthly payments. Turns out, she would make her payments at the store, but then almost always buy something while she was there. This was the same for all her store cards as well as a few credit cards.
She didn’t have that much in debt, she just had a hard time paying it down.

What I’m saying is, before we tell the OP to declare bankruptcy or settle his debt, we need other data. For example he said he has 20K in debt, but for all we know he makes $100,000 a year and could have this paid off in 6-12 months. In my ex-wife’s case, she literally had the money to pay off the debt just sitting in her checking account, but after years of training herself to make the minimum payments, she couldn’t bring herself to make $400-$500 payments on each card for a few months.
I’m not asking the OP for his personal info, but I’m just saying that while debt settlement, loan consolidation and bankruptcy can all be good options. Sometimes a copy of Quicken can go a long way. It puts everything right there in front of you and makes it easier to wrap your head around what you owe. I enter every receipt for everything I spend every few days. It’s harder to spend $175 on a new toy when you know exactly how much you already owe instead of pretending like you don’t owe anything until the credit card statement shows up.

It also makes it really easy to set goals. Either for individual cards (I want to get each card under $xxxx or under 75% of it’s limit and keep lowering that number) or by looking at your net worth at the bottom and watching it rise. For example, you would see that number as -20,000+anything in your checking/savings. You could set a goal of getting it to -$18,000, then -$16,000.
Maybe it’s just me, but I find it so much easier to stay under control with everything right there. Every debt I have (car, house, credit cards) and every asset I have (house, savings, checking) all laid out for me.


Agreed. But that 30% interest is just a damned albatross around your neck. More often than not, if you had a job making a lot of money or had it sitting in your account, you wouldn’t need to slap it on the plastic at these rates. And if you fall behind, the bank puts their foot to your throat and makes it almost impossible to pay it off.

I agree that nobody here should tell the OP what to do with his finances. But I agree with Markxxx that these debt consolidation places are overrated in that if you aren’t behind on payments, they can’t help you. If you are behind, you can do the same thing yourself. And if you do use them, your credit rating gets trashed. And if your credit rating is trashed, then what’s to lose by looking at bankruptcy?

That’s one of the reasons that I was mentioning debt consolidation rather then debt consolidation places.
What a debt consolidation place will do, that you can do for yourself is calling up your credit card company and saying (in more words then this) “I owe you $10K, I can’t pay it, I might have to declare bankruptcy, how about I pay you $5K over the next 36 months and close the card” Assuming they accept, you’ve just settled for 50¢ on the dollar. Like you said, you might have to purposely fall behind for a few months before they’ll let you do that though.

If you do debt consolidation on your own, it’s different. You would go to a bank or credit union, tell them what’s going on and see if you can get a better rate. Even if they can offer you a $20,000 loan at 15%, that’s still way better then 30%. If I’m doing my math right, that’s a savings of $250 a month in interest. You might be able to get an even better rate by moving opening a checking account with them and letting them automatically draft the payments each month.

Regarding the debt consolidation places not being able to do anything you can’t do on your own, while that’s true, the one thing I’ve heard they can do is negotiate better with the credit card companies. They usually know exactly how low the different credit card companies will go and just start there. So while I mentioned 50¢ on the dollar over 36 months, they might now that (for example) MasterCard will take someone in your circumstance and go as low as 10¢ on the dollar over 48 months.
Also, if you’re working with a truly legit company, they would then collect a single payment from you each month and fulfill your obligation to your debtors for you. Remember, people who get themselves into this situation might not be so good at making monthly payments so it’s not always a bad idea for them to have someone holding their hand.

This has all been very helpful…

I make about $60k a year and have $30k in credit card debt and $100k in student loan debt (which I have been deferring because I can’t pay those loans). I did file bankruptcy twelve years ago and the collapse of the economy is where the new $30k debt came from; I lived off cards during several years of unemployment. Now that I’m employed, I am not making any dents in the debt because of the 30% interest.

I have no intention of ever trying to buy a home (living in California, I don’t think I will ever be able to save the $40k down payment that is needed for most homes in this area), and have to pay $1300 in rent for a modest abode.

I am seriously considering bankruptcy again as that $850+ a month I’m giving to the credit card companies could start to go to the student loans…

Sounds like you should at least seek a consultation with a bankruptcy attorney, then. One thing I always say about bankruptcy: It’s about protecting what you do have, not just about getting rid of debt. Many people sacrifice all their assets and only then think about bankruptcy.

Going back to the original question about companies offering help: I think it’s not all that different from any other service. There are scammers out there and then there are those who will honestly help you.

If there’s any litmus test to tell the difference, start by looking at the promises. If it sounds too good to be true, it probably is. While it’s possible to renegotiate things with credit card companies, there’s no magical way to cut the debt in half and get back to 10% interest. There’s no magical way to remove things from your credit score.

Watch out for consolidation loans. For many people, they’re just another way to run up more debt.

You can get advice at

Gilles de Rais, the main thing you need to learn how to do is manage your money. Following Dave Ramsey’s “baby steps” will get you out of debt and teach you how to manage your money and have a secure financial future. You can get his book, Total Money Makeover at a library.

You can get out of this hole. You will have to completely change your attitude about money and debt along with making some drastic changes, but you will have peace of mind while you are doing it instead of feeling like you are drowning.

You can listen to his show online and on the radio to get a feel of his style.

Another vote for both Clark Howard and Dave Ramsey.