How Commonly Do Debtors Consider Hiring A Debt Settlement Company?
No one likes to file for bankruptcy, consequently debt settlement companies using the marketing wonders available to those of us living in the 21st century, are able to make it seem like they are the best option available. They make it seem very easy and as though all your creditors will go away once they handle your situation. They make it seem that not only will they settle your creditors’ claims for pennies on the dollar, but that somehow cutting such deals with your creditors will result in an increase in your credit score. The allure is quite effective . . . no bankruptcy, one easy payment and life will be wonderful. Nothing is that easy.
The potential problems are many. There are no guarantees that they will settle any of your outstanding claims. You will, however, usually pay them a monthly fee for the services they render. Oftentimes, they will either have you deposit a sum certain into an account your open or into an account they maintain. Ostensibly, the monies that you accumulate in these accounts will be used to settle the claims that the consolidation companies are handling.
So, you’ve fallen for their “pennies on the dollar” spiel. You have $50,000 in debt, debt that you can probably discharge in a Chapter 7 by just paying a legal fee and filing fee, but you hope to settle it. After six (6) months, you’ve accumulated some gelt in your “escrow account,” and they finally settle a $5,000 claim for $500. Wonderful, but you still have $45,000 in debt. While you are working with the debt settlement company, there is no “automatic stay” stopping direct creditor contact, lawsuits and post-collection remedies available to creditors holding a judgment. This only occurs with a bankruptcy filing. Now it is one (1) year later, you’ve paid the debt consolidation company a nice fee for their efforts, but the only other claim that was settled was a $2,500 claim which was settled for $750. The dough is starting to run low in your escrow account, yet every month you’re paying a fee. How long are you going to be waiting for a miracle. It is usually at this point, that the debtor realizes there may be another less costly way and a bankruptcy attorney such as myself is called.
What Is The Process For A Debtor To Sign Up For A Debt Settlement?
Many ads that you will see online will talk about an individual having to “qualify.” In, if you’re ambulatory and have a pulse you will qualify. Their process is open to everyone who has debt and the income to pay the costs of the debt consolidation company’s program. Applicants are generally interviewed and a representative inquires about the applicant’s financial situation. Once the applicant has been vetted and decides to move forward, to insure your commitment they set the applicant up to make the necessary payments through an auto-debit from the applicant’s bank account. And as I noted in the prior section, what happens if you have $40,000 or $50,000 worth of debt, and the debt settlement company after a number of months manages to settle $5000 or $10,000 of your claims. How you get out from under the rest? Continue to wait for the debt settlement company to settle the balance or consider something else. After all, what have you really accomplished. Yes, you may have settled a small amount of your debt for “short dollars,” but you may be left with having to file a personal bankruptcy to get rid of the remainder. In my opinion, why take an intermediate step that may help, but more than likely will not, when you can file a personal bankruptcy and get all of your dischargeable debts discharged and, in so doing, get the fresh start they promised you, and start rehabilitating your credit.
Are Debtors Required To Provide Authorization To Debt Settlement Companies To Start Those Automatic Withdrawals Or Payments Each Month?
There is a relatively easy form that needs to be filled out to begin the process, giving the particular debt settlement company the right and authorization to take however much money you’ve decided to put into their program out of your account every month. It’s relatively simple to set up, but freeing yourself from one of these automatic debit programs can often be challenging. For whatever reason, giving the authorization is easy, withdrawing the authorization oftentimes takes creativity. There is one tried and true way to terminate the debt settlement company’s account access, that is by closing the account. Alternatively, you can leave your account open, but never have enough in the account to cover the automatic withdrawal. Interestingly, whether or not you use a bank account or credit card to set up the automatic withdrawal, their representatives are the ones who usually suggest closing one account and opening a new one. This is something that occur far too regularly.
What Happens When Someone Defaults On These Debt Settlement/Consolidation Agreements?
When an individual defaults on their settlement or consolidation agreement, the debt settlement company will probably pester the participant to resume current payments and, if that does not work, they will in all likelihood stop working on the participant’s behalf. All too often, I encounter either dissatisfied participants or those who’ve become fed up. Ironic, that they may have settled some claim and of course they paid the debt settlement company well for that privilege, and yet they have to file a bankruptcy anyway.
For more information on Debt Settlement Companies, an initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (978) 355-1177 today.
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