Debt Management Options

Unit 4: Know Who You’re Working With

Turning to a business that offers help in solving debt problems may seem like a reasonable solution when your bills become unmanageable. But before you work with any company, talk with your credit union and their partner agencies.  Ask your state Attorney General if the company is required to be licensed to work in your state and, if so, whether it is.

Some businesses that offer to help you with your debt problems may charge high fees and fail to follow through on the services they sell. Others may misrepresent the terms of a debt consolidation loan, failing to explain certain costs or mention that you're signing over your home as collateral. Businesses advertising voluntary debt reorganization plans may not explain that the plan is a bankruptcy filing, tell you everything that's involved, or help you through what can be a long and complex process.

In addition, some companies guarantee you a loan if you pay a fee in advance. The fee may range from $100 to several hundred dollars. Resist the temptation to follow up on these advance-fee loan guarantees. They may be illegal. It is true that many legitimate creditors offer extensions of credit through telemarketing and require an application or appraisal fee in advance. But legitimate creditors never guarantee that the consumer will get the loan or even represent that a loan is likely. Under the federal Telemarketing Sales Rule, a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for or accept payment until you've received the loan.

You should be cautious of claims from so-called “credit repair” clinics. Many companies appeal to consumers with poor credit histories, promising to clean up credit reports for a fee. But you already have the right to have any inaccurate information in your file corrected. And a credit repair clinic cannot have accurate information removed from your credit report, despite their promises. Only time and a conscientious effort to repay your debts will improve your credit report.

If you're thinking about getting help to stabilize your financial situation, do some homework first. Find out what services a business provides and what it costs, and don't rely on verbal promises. Get everything in writing, and read your contracts carefully.

Protect Yourself

Be wary of any debt management organization that:

  • charges any fees before it settles your debts
  • touts a "new government program" to bail out personal credit card debt
  • guarantees it can make your unsecured debt go away
  • tells you to stop communicating with your creditors
  • tells you it can stop all debt collection calls and lawsuits
  • guarantees that your unsecured debts can be paid off for just pennies on the dollar
  • won't send you free information about the services it provides without requiring you to provide personal financial information, such as credit card account numbers, and balances
  • tries to enroll you in a debt management program without spending time reviewing your financial situation
  • demands that you make payments into a DMP before your creditors have accepted you into the program


If you’re having trouble implementing these strategies, or struggling to resolve your debt crisis, it may be time to seek outside help.  Speak with your credit union about their loan services or ask about Trinity Debt Management who will provide you credit counseling and debt management options. 

Back | Take Quiz!