LAST week, I wrote an article about how many consumers become victims of debt settlement scams. I think this struck a chord with a lot of readers and I have had a lot of people coming to our office attesting to the truth of what I had written. There is currently a pending bill in California aimed at providing stricter and tougher regulations for debt settlement companies to operate in this state. Of course, the purpose of the proposed legislation is to protect unsuspecting consumers who are desperate for a solution to their debt problems.
One reason many consumers hire a debt settlement company is because their debt amounts have become simply unaffordable to them and they would like to avoid bankruptcy as much as possible. They see an ad by a debt settlement company on TV, in the newspapers or on the internet and it promises to get them out of debt for "pennies on the dollar." These consumers are fed up with the fact that the credit card companies have increased their interest rates to as high as 28-30% and they realize that with these outrageous rates, they are bound to remain in debt forever. So hiring a debt settlement company looks like an attractive option. Unfortunately, for a lot of people, it becomes their worst nightmare.
As I mentioned last week, most people who enroll in a debt settlement program usually get sued by one or more creditors before their debts are actually settled. As their accounts go to collections, their credit continues to get trashed with the credit bureaus and they continue to get collection calls from their creditors in spite of the fact that they have hired a debt settlement company. And when they do get sued by a creditor, only then do most people realize that the debt settlement company is actually not able to protect them. This is often in the written agreement that they signed with the debt settlement company but at the time they enrolled in the program, most people didn’t even read or understand what they had signed. They were simply desperate for a quick fix so they signed up in a hurry.
WARNING: When speaking to a debt settlement company, be very careful as there are a lot of companies out there who just want to make money off your misfortune with no real intention of helping you. They will say anything that pleases you so that they can sign you up. Their usual tactic is to set a monthly payment amount to whatever you want. They set the payment very low but extend the time for you to pay, usually over 3 to 5 years. For most creditors, this extended period is unrealistic and a lot of them will refuse to work with the debt settlement company and sue you instead.
A lot of debt settlement companies also tell you that once you sign up with them, they will stop all collections against you. Usually, they ask you to send a "cease and desist" letter to stop all the letters and harassing phone calls. When this happens, this leaves the collector no other way to contact you to collect the debt. So at that point, they will just serve you with a lawsuit and have you appear in court.
As I said last week, there are some legitimate debt settlement companies out there but you need to do your homework. Check with the Better Business Bureau and find out how long the company has been in business. If the company you are hiring is a law firm, find out from the State Bar if there have been complaints against any of the firm’s attorneys.
In my opinion, debt settlement may be a good option in cases where bankruptcy is not advisable but from what I have seen, these cases are rare. Bankruptcy is often a quicker way to get out of debt and rebuild your credit over a much shorter period of time. For a free office consultation, please call Toll-Free 1-866-477-7772. We have offices in Glendale, Cerritos and West Covina.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
( Published on August 15, 2009 in Asian Journal Los Angeles p. C2 )
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