We just saw an advertisement for a debt solutions center that promises to settle your debts for pennies on the dollar. Many of these agencies are hogwash!

What they do is have you pay in hundreds of dollars a month, charge huge fees, and then occasionally get a creditor to accept a lump some payment for less than you owe – usually for sixty pennies or more on the dollar (rather than just a few pennies).

All too often, your money just disappears into a black hole and your debt situation ends up worse rather than better.

Even when you do get a debt forgiven for less than what you owe, you get a nice surprise in January of the next year. Any debt forgiveness over $600.00 gets reported by the creditor as income to you. You have to pay taxes on forgiven debt and chances are money is still really tight for you and you don’t have the cash to cover the extra taxes. So, you have paid huge fees to convert dischargeable credit card debt into non-dischargeable tax debt.

There are legitimate debt help agencies. Good agencies will sit down with you and tell you what relief you can expect and what your monthly fee would be and where it would go.

The fees are distributed to creditors monthly. If, instead, the agency wants to just collect a large pool of cash with the notion that they may work out a lump sum payout, run away – run far, far away.

Debt Solution Centers can be the right solution and bankruptcy can be the right solution for you.  There is one thing that is common though when plagued with financial difficulty – make sure you talk to an experienced lawyer first.