Resolve to get debts under control this New Year
by Attorney General Roy Cooper
If you spent more than you meant to this holiday season, you may want to start the New Year by resolving to pay off your debts and get your spending under control. Now is the perfect time to get a handle on your financial situation, but be sure to steer clear of scams that could drive you even further into debt.
Debt settlement or debt negotiation scams
Avoid companies—including out-of-state lawyers—that offer to eliminate or cut your debts by negotiating with your creditors. These operations typically collect large upfront fees but reach very few settlements with creditors, leaving you deeper in debt. Under North Carolina law, it’s illegal to collect any upfront fee for debt settlement services.
My office has taken action against several debt relief scams, such as a Florida outfit that promised to reduce consumers’ debts by half and leave them debt-free without bankruptcy. The company collected more than $2.6 million from 3,000 North Carolina consumers. In reality, the company rarely helped consumers with their debts but kept their money anyway.
Consolidating your debt through a second mortgage or a home equity line of credit is also a risky way to manage your debts. Remember that these loans require you to put up your house as collateral. If you can’t make the payments or if your payments are late, you could lose your home.
Instead of throwing away your hard-earned money, consider the following tips to get your finances in order:
- Know what you owe. Figure out exactly what you owe to creditors. Gather all of your monthly statements and look at your balances and when payments are due.
- Stop piling on debt. If you’re overextended, stop using your credit cards and pay for your purchases with cash or check instead. And remember to check your credit card interest rates--paying a high rate can cause your debts to add up quickly.
- Seek help from a non-profit, local credit counselor. Your creditors may be willing to accept reduced payments if you enter a debt repayment plan with a reputable organization. In these plans, you deposit money each month with the
credit counseling service and your deposits are used to pay your creditors according to a payment schedule. Contact the National Foundation for Credit Counseling at 1-800-388-2227 or via their website at www.nfcc.org to find a counselor in your area.
- Protect your credit. Once you've taken steps to get your financial house in order, check your credit report regularly. You can get a free credit report per year from each of the three credit reporting bureaus at www.annualcreditreport.com. If you see something that isn’t yours, you may be the victim of identity theft—meaning that someone pretending to be you has opened new accounts or taken on debt in your name. If you have fallen victim, visit www.ncdoj.gov or call my Consumer Protection Division at 1-877-5-NO-SCAM for help.
- And here's another resolution to consider: when you shop in the year ahead, buy only what you can afford so you can start the next year debt-free.
For more help and tips or to file a complaint about a debt relief scam, visit my website at www.ncdoj.gov
or call my Consumer Protection office at 1-877-5-NO-SCAM.