As I was raking leaves this fall and listening to the radio, I heard an advertisement for a debt management company.  The company promised that consumers burdened with debt could work with the company to reduce their debt and avoid bankruptcy.  The company also promised that the consumers could protect their credit rating and enhance their ability to get credit in the future.

 The problem with the debt management company's claim is that it was false.  At a deposition recently taken of a senior management officer of a major credit reporting organization, the officer acknowledged that debts listed on a credit report as "settled", or "in collection', or "charged off" all resulted in negative credit reports.  A notation of "bankruptcy" on a credit report also was considered a negative notation, but no worse than any of the other notations.  So, a debt management company's advertising that it can improve someone's credit rating by making payments on debt through the company is misrepresenting the effect of their "payment plans" to consumers.  Any payments on debt or settlements of debt would not help the consumer improve his or her credit rating.

 While it is good to try to pay debt, a person burdened by significant debt should not be misled into thinking that debt management companies can achieve ay real benefit for them.  It may be better to file bankruptcy and have a "bankruptcy discharge" noted beside each debt to obtain new credit faster in the future.  If debt management company representations sound too good to be true to you, you should consider the bankruptcy option to address your debts.