A friend of mine recently attempted to go though debt consolidation. He received a phone call and was offered really good terms to consolidate his current debts. A promise was made that the company would negotiate with the creditors and reduce their debt by nearly 60%. This included 30k in Student loan debt and about 15k in other debt.
They were advised to stop making payments on their debts and send the money instead to the debt consolidation company. The company said it would then pay off the debts and issue the a loan for the reduced amount. Well 2 months went by with them sending the required payments via certified check. In this time they defaulted on their car loan and their student loans. The company said they would take care of it not to worry. Even took contact information for the companies.
Finally the company told them they were sorry they were not able to help them. That the money they had sent was for the application and approval process. The company is now out of business and the AG is investigating but the investigators said that any recovery was unlikely. What steps can people take to be sure that the debt consolidation offer is real?