A fellow local banker and I got talking about how local banks can often help borrowers who get into mortgage repayment difficulty if only the borrowers will come in and talk to us. That’s true.
Many struggling borrowers do come in. Some don’t. But ignoring problems usually makes things worse.
Or things can get dramatically worse, as that other local banker saw when a borrower went to a debt relief company instead of talking to their bank. Everything became much more problematical for that borrower from there.
To someone who’s finding it hard to pay their bills and possibly starting to feel very anxious, the words “debt relief” undoubtedly give them hope. The reality is that all too often after contacting a for-profit debt relief company, their situation gets very tricky.
The Consumer Financial Protection Bureau (cfpb.gov) warns in the clearest possible terms that “debt settlement may well leave you deeper in debt than you were when you started.”
Talk about the exact opposite of the relief a struggling borrower is looking for!
The Consumer Financial Protection Bureau spells it out – “Most debt settlement companies will ask you to stop paying your debts in order to get creditors to negotiate. This can have a negative effect on your credit score and may result in the creditor or debt collector filing a lawsuit. If you stop making payments on a credit card, late fees and interest will be added to the debt each month. If you exceed your credit limit, additional fees and charges may apply. This can cause your original debt to increase.”
There are other possible problems with going to a debt relief company. According to Forbes Advisor, “Debt settlement done through a debt relief company comes with significant risks. The hard truth is that creditors may reject your settlement offer. It often takes two to four years to complete the debt settlement process. Debt settlement companies typically charge 15-25% to tackle your debt. And the IRS views forgiven debt over $600 as taxable income.”
“All that’s as long as the debt relief company doesn’t drop the ball when it comes to performing the services or doesn’t simply take off with your money,” legal publisher NOLO says. Because unfortunately there are plenty of debt relief scammers out there.
So what can you do if you (or someone you love) is having significant trouble paying a mortgage or other debts?
First and most important, start talking with your lender and/or creditors. No matter what your situation, chances are they have seen it before and they will have procedures in place to help you work things out.
(Having gotten your mortgage from a local lender that writes loans for their own portfolio can be a real help in this sort of situation because they have the ultimate say over modifications made to a loan they hold.)
There are local non-profits that help people figure out their debt relief options. Canton is very lucky to have the excellent and truly altruistic Canton Help Line which is there for Canton residents who do not know where to turn for assistance or what resources are available to them. Many local people have come up with plans to get on their feet again thanks to the Canton Help Line. The Canton Help Line can be reached at 781-828-6666.
If you’re struggling with debts, remember that others have recovered from debt problems. With some time, consistent efforts and not digging the hole deeper, chances are you can too.
Nick Maffeo is the President & CEO of Canton Co-operative Bank – right next to the Post Office – in Canton. Have a question? Email to info@cantoncoopbank.com.