Fair enough: being “knee deep in debt” does not typically include “kicking up your heels” with glee. Who can be happy with the weight of debt on their shoulders? How can you have fun on a strict budget?

It turns out that the Federal Trade Commission has a consumer report titled “Knee Deep in Debt”. It’s got a lot of great tips so you can start kicking up your heels again.

We found it thanks to blogger Mary Bell of Millennial Financial Coaching [warning: turn down the sound, cube dwellers!]. Here are some of Mary’s helpful additions to the FTC report:

1. Be Very Careful When It Comes to Debt Repayment Companies or Organizations

Mary lists three helpful agencies, below.

InCharge Institute

National Foundation for Credit Counseling – To find an NFCC counselor click here

Consumer Credit Counseling Services – To start credit counseling online click here

2. Know Which Type of Service You’re Getting

Mary breaks it down into “good”…

Debt Management Plans = These are plans where the company works to help you negotiate lower interest rates but repay the debt over a feasible time frame that works for you. The purpose of these plans is negotiate a feasible payment to pay the debt that you incurred.

…versus “bad”, or just plain evil:

Debt Settlement Plans = NEVER recommended. Let me repeat, NEVER recommended. Debt settlement companies have a very aggressive marketing campaign and continue to grow (many mortgage brokers who went bust in the housing fallout have now found a “new” career in the debt settlement arena).

How it works: A debt settlement company sounds fabulous because they promise to pay pennies on the dollar for the debt you have incurred. What they do is have you pay them instead of your creditors. They keep the money, minus their generous cut, in a bank account in your name (which is why it is “guaranteed”). After a year of two of not paying the creditors, which means your credit is wrecked, the debt settlement company “negotiates” with the creditor and tells them they will pay pennies on the dollar for the debt that is owed. Sometimes the creditors accept and the debt is repaid at a fraction of the cost. But when the creditor will not accept the terms, you are still liable and can end up in bankruptcy court. Oh and by the way, telling the judge that you hired a debt settlement company to take care of the debts doesn’t stand up in court. The debt settlement company has taken their cut of the money and fled the scene. You are left in a worse situation than before: You still owe the debt, you’ve lost the money that the company took, and your credit is even more wrecked than before.

We’d like to add that there are four legal ways to clear your credit card debt. Make sure you take Mary’s thoughts into account, too, as you work your way out of knee-deep debt so you can eventually kick up your heels.

Related articles:

• What to Do If You Can’t Pay Your Bills (geezeo.com)
• The Hidden Costs of Debt Consolidation (geezeo.com)
• Reasons Your Credit Score is More Important Than Ever (geezeo.com)
• The Family Balance Sheet (geezeo.com)

Further Reading

• The Hidden Costs of Debt Consolidation (3)
• 4 Ways to Start Lowering Your Debt (2)
• Focus on the Payoff to Eliminate Your Debt (5)
• The ABC’s of Budgeting and Finance : P – T (0)
• 4 Things That May Trigger Your Spending (0)

Tags: Bankruptcy, Credit, Credit card, Credit card debt, Credit counseling, Creditor, Debt, Debt consolidation, Debt settlement, Federal Trade Commission, Mary Bell

This entry was posted on Monday, March 30th, 2009 at 11:00 am and is filed under Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.