AURORA, Colo. — It’s not that Randy Prade of Aurora was irresponsible with his money. His credit card debt mounted after his television repair business went bankrupt.
“We had 25 employees and we decided to keep their payroll much longer than we should have,” Prade said. “That’s a big, heavy burden when you go to bed at night. You’re worried about how you’re going to make ends meet.”
And he’s far from alone. According to a recent survey by Lending Tree, Colorado ranks 7th in the nation for credit card debt.
“With inflation being a problem in recent years, people have used their credit cards as a stopgap measure, as an extension of their income, to make ends meet,” says Thomas Nitzsche, financial educator at the nonprofit organization Money Management International (MMI).
MMI debt counselors are increasingly hearing from people turning to high-fee debt settlement companies, who often advise consumers to contact a debt collection agency.
“They will actually encourage them not to pay their debts in order to reach an agreement,” Nitzsche said.
While there are legitimate debt settlement companies, the Federal Trade Commission (FTC) has warned about debt scammers who take people’s money without ever paying off their debts.
Prade did some research and decided to seek credit counseling. MMI negotiated lower interest rates (average 7%) and a lower rate.
After 5 years, Prade had paid off about $79,000 in debt and improved his credit score by about 150 points. The key, Prade said, is to make a plan and stick to it.
“The longer you wait to find a way out of something that’s killing you, the worse it is,” Prade said. “So if you have a credit card monster hanging over your head, you have to deal with it. You can’t just say, ‘Next month.'”
If you’re looking for ways to get out of debt, the FTC offers these tips to help you avoid debt relief scams:
- Cold calling: All those robocalls promising debt settlement are a red flag. Most companies don’t make unsolicited offers.
- Upfront fees: Never pay someone who wants to take money from you before they take action to help you pay off your debt. This is illegal
- Absurd promises: Anyone who promises new “government programs” or little-known legal loopholes without checking your financial data is not serious.
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