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Should I try to consolidate my debt first with a Debt Resolution Firm or Debt Consolidation Agency?

Be extremely cautious if you decide to work with a Debt Resolution Firm or Debt Consolidation Agency. There are some reputable ones out there but most are just frauds. Check with the Better Business Bureau and the Consumer Protection Agency in your state before sending them your money.

Things to consider when you want to consolidate your debt:

  1. You may owe 1099-C income taxes on the entire amount of “forgiven debt”.
  2. You will continue to accrue late fees, over limit charges, and any other penalties while you are in the consolidation program.
  3. You will continue to get harassing phone calls at home, work and at your neighbors and friends house while you are in these programs.
  4. You will get sued and possibly garnished by your creditors while you are in the programs.
  5. The Firms and Agencies get their money from you upfront through your first few months of payments to them while they do nothing on your behalf with your creditors.
  6. Generally, these agencies do not do anything that you cannot do yourself. If you wait long enough you will be offered the same settlement that the Firms and Agencies will eventually get you.
  7. The overwhelming majority of people who enter consolidation programs do not stick with the payments long enough to get a settlement.