Can a Credit Repair Company Really Save Me From Bankruptcy?

By Cara O'Neill, Attorney
Credit repair companies help consumers fix credit report errors—not prevent bankruptcy.

If you can’t pay your bills and are facing bankruptcy, it’s unlikely that a credit repair company will be able to prevent the inevitable. Credit repair services claim that they can raise a low credit score so that a borrower can get a more reasonable interest rate—not help you eliminate your debt.

Repair companies attempt to improve credit scores by disputing information on your credit report. If the lender fails to respond within a particular number of days, it must delete the disputed information. Any gains can be fleeting, however, because the creditor can replace accurate information later. Also, you can use the online dispute system on the credit bureau’s website to report errors at no cost.

By contrast, a “credit consolidation” company might be able to help you avoid bankruptcy. Such companies negotiate down your debt balance and put a reasonable payment plan in place. Be aware that a creditor is not obligated to reduce the amount you owe, so you should verify that all of your creditors agree to a plan before you start making payments. You might find yourself in a worse position if you can’t complete the plan, too. Not only will you still owe the debt, you’ll have paid fees to the consolidation company, as well.

Bankruptcy attorneys can also negotiate your debt with your creditors, and have the added benefit of understanding the tax ramifications resulting from debt forgiveness. Finally, a bankruptcy lawyer will be in the best position to advise you if filing for bankruptcy is a better option for you.

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