Are you thinking about turning to a debt settlement agency instead of a debt settlement attorney? If so, there are some harsh facts you need to know about debt settlement companies and how they operate.
In the Wall Street Journal, Michelle Singletary wrote this about debt settlement service companies, “Clients still end up paying as much as 75% of what they owe. Only about one in ten consumers who use a debt-settlement company end up debt-free in the promised period of time.”
According to a consumer alert issued recently by the nonprofit National Association of Consumer Bankruptcy Attorneys, “debt settlement attorneys seem to have a much higher success ratio.”
Not surprisingly, Wikipedia lists bankruptcy as the major tool for debt relief by consumers. According to Wikipedia debt settlement companies themselves claim a 50% failure rate. The CFPB and other sources claim it is a higher rate.
Using a Debt Settlement Company vs a Debt Settlement or Bankruptcy Attorney
What happens, according to Ed Boltz, president of NACBA is this, “These particularly vulnerable consumers usually end up getting sued. Clients are stuck with outrageous fees, more deeply in debt, and far worse off in terms of their credit score (than if they filed bankruptcy).
The problem with debt-settlement programs is they encourage consumers to default on their debts.” Additionally, debt settlement attorneys often have the authority of a federal court order from a federal judge. On the other hand, debt settlement companies have to beg which is not effective.
⎆ How debt settlement companies work to take your money.
Debt Settlement companies encourage clients to default to make money from the debtor. However, often, the company holds payments and fails to pay the creditors. These debt settlement companies often file bankruptcy themselves (as Ameridebt did.) Other debt relief companies include Freedom Debt Relief.
Again, they pay themselves from the first payments made. Then, little or nothing is paid to the creditors. Unfortunately for the debtor, over 90% of the time they cannot finish the plan. In most cases, the majority or all of the funds the debtor pays goes to the debt settlement agency instead of the creditors.
Now the debtor is in default because his debt to the creditors is not paid. Then, they are often sued for the entire debt since nothing was paid. For most of these people, bankruptcy offers the ability to pay nothing back or at a lower percentage. Also, it is often with less impact on their credit score.
⎆ Federal rules for debt settlement companies that they largely ignore.
Federal rules now make it illegal for debt-relief services to charge upfront fees. Unfortunately, debt settlement companies often misrepresent what they can do and charge up-front fees regardless of the rules. What’s more, they do it because they plan to fold the company and start back up in a new state.
However, all companies have to make specific disclosures about the length of the plan, costs, and consequences. One major reason the debt settlement companies can never do a good job is that they can’t sue the creditor.
At our office, we have over 25 years of experience providing debt relief and bankruptcy services since 1988 as a Debt Settlement and Bankruptcy Attorney.
⎆ Work with an attorney with experience in debt settlement options.
In our office, we work with you to educate you and act with you to solve the problem. By staying connected with you we can answer your questions and provide you the solutions you were looking for. We understand you are busy and you don’t want to pay extra fees for an answer to a simple question. This is why we have flat fees for services.
Instead of the debt settlement company that makes false promises with no positive results, use an attorney for about the same cost. The results are better and it takes less time.
A professional bankruptcy or debt settlement attorney often has a background in accounting, tax, and finance, and years of litigation skills. On the other hand, the employee you talk to at a debt relief company probably just got out of prison last week from his last job scamming consumers.
⎆ Debt settlement companies do not offer the benefits you need.
As we stated before, one very good reason for not using a debt settlement company is because they have absolutely no power over the creditors nor can they sue them. In fact, debt relief companies rarely hire attorneys. But, you will see them using words legal or law in their company name and advertising. However, it’s only there to mislead you.
There is another excellent reason for using a bankruptcy or debt settlement attorney. When a debt is forgiven through a debt settlement company, you will get a 1099-c tax bill from the amount of debt that is unpaid. That’s because debt settlement companies have no capacity for avoiding that. Conversely, bankruptcy avoids this. Moreover, a creditor who fails to work with the court in bankruptcy can lose the right to collect.
⎆ The advantage of working with a debt settlement or bankruptcy attorney.
If you wish to settle your debt and you are being sued, we can make an offer to the creditor’s attorney. This offer is often for %50 to 70% of what you owe. If the creditors reject the offer, we use the retainer you already paid us as part of a fee to file bankruptcy. This way, we earn the fees for attempting a debt settlement offer. Moreover, it shows that you are making every effort to settle the debt.
But, if the settlement option doesn’t work, we will help you file bankruptcy. Again, we use the fees you pay us for the debt settlement towards filing your bankruptcy. Normally we are successful at debt settlement and obtaining a workable offer for you. For instance, in 2017 we made four offers, and all four were accepted.
So, when we make an offer, the collection attorneys know they were dealing with a bankruptcy attorney that can and will file bankruptcy or sue the creditor back. This is the advantage we offer all our clients!
If you are thinking about filing bankruptcy, don’t delay because timing is crucial. I am here to help you. So, contact my office right away to start the conversation. Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905.