Great article about the dangers of debt settlement from
Yahoo!
The Naked Truth Behind Debt Reliaf and Debt Settlement
Companies
New York, NY
(PRWEB) January 31, 2012
As the economic recession continues, consumer debt is on the
rise and Americans are struggling to pay their credit card bills.
In response, thousands of debt
settlement or "debt relief" companies have emerged. These
for-profit businesses lure consumers by claiming that they can
successfully renegotiate or "consolidate" consumer credit card debt
to a much lower balance and therefore allow consumers to pay off
debt, improve their credit score and avoid bankruptcy. The Law Firm
of Imbesi
Christensen& Michael explains in depth below how these
companies will actually cause a consumer to be financially worse
off than when they first started.
The truth is that the debt relief industry is riddled with
deceptive and abusive practices. These companies prey on the
financially "weak" and often appear as the only light at the end of
the bankruptcy tunnel. Jeanne
Christensen, a Bankruptcy attorney with the Law Firm of
Imbesi, Christensen & Michael, says that most clients that
contact her for a consultation have already attempted to cure their
debt with these companies and are worse off than when they first
started. "There is little evidence demonstrating that creditors
negotiate with debt settlement
companies or that consumers are able to avoid bankruptcy
through a debt negotiation plan. In fact, there have been thousands
of claims that these companies fail to do precisely what they
promise."
Debt Settlement companies
have literally popped up all around the United States such as:
Credit Solutions, Care One Debt Relief Services, Debt Solutions
USA, Legal Helpers Debt Resolution, LLC, Safe Trust Financial,
Inc., Global Logistics Enterprises, In Charge Debt Solutions,
Lifeguard Financial, LLC, Lighthouse Credit Foundation, Morgan
Stevens Financial Solutions Company, National Financial Freedom
LLC, Nationwide Consumer Advocacy Group Financial Network, LLC,
Freedom Debt Relief, Global Financial Services, Safe Trust,
Superior Debt Services and U.S. Debt Associates.
Why Debt Settlement Does Not
Work
Under the terms of the plan, the consumer is instructed to open up
a separate account through a servicing company so that they can
deposit money on a monthly basis. The debt settlement company is
supposed to use this money to pay off the creditors.
However, this process rarely takes place. Here's why: The
servicing companies charge excessive monthly fees to the consumer
for the account on top of the already excessive monthly fees
charged by the debt settlement company. In the meantime, consumers
have stopped making any payments and have ceased communications
with their creditors as per the debt settlement company's
instruction.
The debt settlement companies will not even attempt to negotiate
with a creditor until sufficient funds have accumulated in the
servicing account. It can take 12-24 months before a creditor is
even contacted by the debt relief company.
This delay in negotiating results in the following: (1)
increasing debts already owed through accumulated fees and
interest; (2) debt collection harassment; (3) delinquencies
reported to credit reporting agencies; (4) lawsuits and default
judgments entered by creditors for the delinquent accounts; (5)
garnishment of wages or levied bank accounts; and finally (6) the
inevitable bankruptcy filing.
Although the Federal Trade Commission (FTC) prohibits debt
settlement companies from charging fees until a settlement is
obtained, the relief companies violate this rule repeatedly. There
is little or no incentive to settle debts for consumers when the
companies and their servicers are making huge profits on the
monthly fees alone.
The above chain of events leaves the consumer worse off than
before the consumer entered into contract with debt settlement
companies.
The Warning Signs ("Red Flag") List
**Consumers should be extremely cautious before signing up for
services with debt settlement companies especially when the
following warning signs exist:
1. The company charges up-front fees or unreasonably large fees
through payments.
2. The company claims that it will significantly reduce the total
amount of consumers' debts by as much as "50 to 60 percent" (or
"fifty cents on the dollar").
3. The company claims that it will settle consumers' debts over a
shorter period of time if consumers deposit as much money as they
could towards their trust accounts.
4. The company advises consumers to stop paying debts and
communicating with creditors.
5. The company claims that lawsuits against consumers will be rare
because creditors are willing to negotiate with it on behalf of
consumers.
