MAKING the decision to file bankruptcy is never an easy one. Usually, it is a last resort in dealing with debt problems. So a lot of people put it off until they are completely out of options. I understand. Over the last 12 years, I have seen it all. Some people, instead of filing bankruptcy, choose to hire a debt settlement company, thinking that this is the solution to their problems. Is it really? Let me share a story with you and then you can decide for yourself.
The other day, a lady came to my office and told me that about a year ago, she started paying her debts through a debt settlement company. The company told her "to avoid bankruptcy at all costs because it is the worst mistake you could ever make". She owed about $60,000 in credit cards and had fallen behind on payments so some of the accounts were close to being turned over to collections. The debt settlement company promised her that she could pay them only $600 per month for 5 years and that they would deal with all the creditors.
This lady paid $600 monthly for a year as agreed. Two months ago, however, one of the creditors sued her for $18,000 and the creditor is threatening to garnish her wages. She came to me to find out what her options were. In going over her situation, I found out that she had no assets and that she qualified to file Chapter 7 to just wipe out her debts and not pay at all. The debt settlement company was only able to pay 1 debt out of almost 8 debts she had and they charged her about $4800 in fees. In short, hiring the debt settlement company provided almost zero benefit and in the end, she ended up filing bankruptcy anyway after she got sued by a creditor.
This person could have filed bankruptcy a year ago and discharged all her debts. If she had done this, her bankruptcy would have been a year old by now and she would have been on her way to rebuilding her credit. So she put her life on hold for a year and wasted more than $7,000 for nothing. Do you see now how a person can be misled by not consulting with an attorney to find out what their legal options are before trying to do things on their own? Don't get me wrong, I think there are very few cases where a trustworthy debt settlement company may be a better option than filing bankruptcy but these cases are very rare, in my opinion. A lot of these debt settlement companies are just out to get your money and not do anything for you. If you are not careful, you can make your situation worse instead of better. This is not what you want, is it?
The common problems I see with hiring a debt settlement company are: (1) There are a lot of unscrupulous, "fly by night" companies out there who simply cannot be trusted with your hard-earned money. I hear "horror stories" from people every day who have fallen prey to these vultures. In a lot of cases, they take your money to pay their fees but don't settle a single debt until the day you quit the program. (2) A lot of them will tell you that they will settle your debts over a 3-5 year period. Listen. Creditors will not wait this long to get paid. Most of them will sue you within the first 12 months of not getting paid. (3) They are not attorneys and cannot advise you or protect your wages or property if you are in fact sued. (4) The effect of debt settlement on your credit, doing it the way these companies suggest, is actually worse on your credit than a bankruptcy.
Don't be a victim. You may already be in trouble as it is. Be a smart consumer by finding out what your legal rights are. If you are in debt and need to find the best solution for your situation, call toll-free 1-866-477-7772 to schedule a free consultation. We have offices in Glendale, Cerritos, West Covina and Valencia.
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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 April 28, 2010 in Asian Journal Los Angeles p. B3 )
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