Facing serious financial difficulties is a highly stressful life event. When bills are mounting and each month you’re falling deeper and deeper into debt, it can be debilitating. During such a difficult time, it is easy to fall prey to a debt relief scam. These scam artists run a compelling game, purporting to offer a solution to your debt problem as well as hope for relief from debts, find out how to avoid debt relief scams.
We take debt relief very seriously. At our law firm, we see firsthand the negative effects of unmanageable debt. Many of our clients do all that they can to avoid filing for bankruptcy, and many fall prey to a debt relief scam prior to meeting with us. These scammers are criminals and it boils our blood when they take advantage of people just trying to get a handle on their debt.
Read on so you know what to look out for so you don’t become a victim of a debt relief scam.
The Problem with Companies Offering Debt Relief Services
Be caution in dealing with any company that offers debt relief services, including law firms. We urge you to always do your research on any company or firm you’re considering hiring.
Debt relief service providers generally offer to settle a consumer’s debt with creditors for significantly less than the amount owed. These companies will collect a monthly payment and hold the funds in escrow. The idea is that they will use those funds to settle debts, one by one, as they work out settlements with each creditor. However, many of these companies not only fail to fulfil their promises but fail to offer any services at all.
- In most cases the majority of the consumer’s monthly fee goes to pay the company’s up-front fees, leaving a little left in the escrow account to settle debts.
- The consumer’s monthly payments are not paying down their debts and during this time creditors can still attempt collection through lawsuits, wage garnishments, and bank levies.
- Most often the company never actually settles any debts with creditors.
- Even if the company did settle one or two debts, the consumer does not get true relief from debt because not all debts are handled.
Tips for Spotting a Debt Relief Scam
First, be especially cautious if you are asked to pay a company for debt settlement services up front. According to the Consumer Federation of America, the consumer should not pay more than $50 for the set-up fee and $25 for a monthly account with a company offering debt settlement services.
Second, debt settlement cannot be guaranteed. If a company offers a guarantee, it is a major red flag. Further, the following will help you in spotting a debt relief scam:
- Fraudulent debt relief companies often make claims of being able to negotiate a one-time settlement with creditors that will reduce your principle debt by 50% or more.
- The Consumer Federation of America warns that such a promise is a virtual impossibility.
- If a company claims they can negotiate a one-time settlement with all of your creditors that will reduce the amount of your debt by 50% or more and will reduce your monthly payments, it is probably a scam.
- Legitimate credit counseling services tailor a consolidation plan to each consumer’s unique needs. Companies offering a one-size fits all solution are likely not offering legitimate debt relief services.
- Watch out for companies that advise you to stop communicating with your lenders or creditors.
- Do not rely on a company’s website―because they may make fraudulent claims on their site and in their advertising. Always conduct your own independent research of debt relief service companies. Check with the Better Business Bureau and your state’s consumer protection agencies.
- For-profit debt settlement companies are almost never worth the money. They are not offering you a service that you cannot do for yourself if you have a lump sum of money up front to settle your debts.
We urge you to exercise extreme caution in dealing with any company offering debt relief services through debt settlement. If you fall victim to a scam, you could lose hundreds of dollars or more in fees and end up in a worse financial situation due to additional late fees and penalties from your creditors.
Exploring Your Legitimate Debt Relief Options
At the Law Office of Barbara B. Braziel, we are committed to helping people get out of debt and gain the financial freedom they deserve. We invite you to learn more about who we are here. If you live in Savannah, GA or the surrounding areas and have questions about your debt relief options, let’s meet for a free consultation.
Find out more about being debt free in our guide: All About Debt Relief
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.