You see the ads all the time. Debt settlement companies promising to keep you afloat.
An Omaha family enrolled in one thinking they were protected. Instead, its turned into a credit nightmare.
Chad's family of four are victims of today's tough economy. He has been laid off twice since last summer.
Chad says, "The layoffs is what got us started looking for help."
Before the layoffs, Chad was making $66,000 a year. In a moment, his paycheck, gone. He turned to a debt settlement company. It promised to manage his bills and take over his credit card payments.
He started paying them $780 a month.
Chad says, "Six months later we find out that nothing was getting paid."
That's because debt settlement companies wait until they have enough of your money in a bank account to make a reasonable offer. Then, they play hardball with credit card companies.
But in Chad's case, he paid the price. His credit score fell from 780 to 522!
When his insurance company checked that score, his rates skyrocketed.
It didn't stop there.
Chad says, "We got turned down to sign for our son's college loan, so it hurt real quick."
Chad fought back. He got the debt settlement company to refund his money.
He took a chunk out of he and his wife's 401k's, and got all bills current.
Although he's back to working again, he's only earning half of what he did before.
Chad says, "Some of us work a lot harder to get where we are and now coming back is four times as hard."
Consumers Union advises us, "Don't Get Caught In the Debt Settlement Trap."
According to Consumers Union:
Most debt settlement companies charge regardless of whether they ever settle your debts.
Debt settlement companies don't provide instant relief.
--Try and resolve the debt problems with your creditors first.
--Contact a nonprofit credit counseling service. There may be a small fee. To find the nearest nonprofit credit counseling service, contact the National Foundation For Credit Counseling at www.nfcc.org or by calling (800) 388-2227.