Compelling reasons debt relief programs may not help you

When you have debt, you have several options on what to do to get it under control. Assuming you cannot pay the debt, you may choose to go through a debt relief program. Many people think these programs are a much better option than filing bankruptcy, but Forbes explains they could be more damaging than helpful. 

Debt relief programs often make big promises about how they can help reduce debt by so much that you can be free from it in months. While a company can help you to pay less through negotiating with your creditors for a settlement that is lower than what you actually owe, there are several issues with what the company does that present a problem. 

It can be expensive 

The debt relief institution has to make money somehow, and it does so through charging you fees. You may not even realize you are paying certain charges because the company might hide them in your monthly debt payment. 

You also will have to pay taxes on any amount a creditor forgives over $600. The company may not tell you about this. 

Bankruptcy, on the other hand, is often much more affordable. If you file Chapter 13, you generally only pay a few hundred dollars up front, and the attorney fees and remaining costs are a manageable part of your repayment plan. 

It harms your credit  

When you file bankruptcy, the court discharges your debts and restarts your ability to build good credit. Plus, the balances come off of your credit report as well. With a debt relief program, the debt stays on your report and the reduced settlement payment shows up, too. Additionally, both items can stay on your record for the maximum amount of time allowed under the law. It very likely could take you much longer to rebuild your credit than it would if you filed for bankruptcy.