Beware debt reduction offers

Dear Liz: What is your opinion of debt reduction programs? I am constantly receiving mail from various companies, and I was wondering if they are legit. They claim they can reduce my debt, which sounds promising, but I am hesitant to get involved with them.

Answer: You’ve got good instincts.

Many of the companies sending out these solicitations say they can settle your debt for pennies on the dollar. What they often fail to mention is that the debt settlement process can result in your being sued by your creditors and having your credit trashed. That’s assuming they try to settle your debt at all, rather than just disappearing with any money you pay them in advance.

If you’re struggling with too much debt, you should make two appointments: one with a legitimate credit counselor (visit the National Foundation for Credit Counseling at for referrals) to see whether you qualify for a debt management program to repay your credit card debt, and another with a bankruptcy attorney (check the National Assn. of Consumer Bankruptcy Attorneys at for referrals) to see whether a bankruptcy filing might be appropriate for your situation.


  1. About 10 years ago, my husband got into some financial trouble (start up business that tanked due to the economy, and then being out of work) – I signed him on a debt reduction website – (I think it used to be ACCC – American Credit Counseling Centers) – and they were able to help pay off all his debt, lower interests, and avoid all collection proceedings. We paid an agreed up monthly amount to ACCC, which then distributed a set amount to each creditor until they were all paid off. Took him about 3 years, and a heck of a lot less in interest then if we had paid a minimum amount each month.

    • ACCC is one of the non-profits that offers debt management plans designed to pay off all your credit card debt, usually at a lower interest rate. DMPs can be a solution for people who don’t have unmanageable debt, but you also should talk to a bankruptcy attorney to see if that might be a better option.

  2. I am 3 1/2 years into a 5-year debt management plan with a credit counseling service. I was referred to this service by NFCC, after reading one of Liz’s columns when I was starting to get desperate about my credit card debt (nearing $60K with no hope in sight).

    I would strongly recommend such a service to anyone in my position. The amount I pay per month is MUCH lower than I’d have had to pony up if I’d continued on my own. In addition, the reduction in interest rates (all cards were over 15%, while the DMP negotiated for less than 8%) meant that the total amount I paid was achievable, if painful.

    It’s amazing what you can do without when you make other choices: cable, expensive wine, new clothing/books/movies…

    Thanks, Liz!

    • I’m so glad you found this resource. I recommend people with troublesome credit card debt check both with an NFCC agency and with a bankruptcy attorney so they understand their options. If you seek help soon enough, a credit counselor’s debt management program can help you resolve your debt.