Debt Settlement Firms Peddle Relief But Actually Put Debtors In Deeper Hole

New York Times:

For the companies that promise relief to Americans confronting swelling credit card balances, these are days of lucrative opportunity.

So lucrative, that an industry trade association, the United States Organizations for Bankruptcy Alternatives, recently convened here, in the oceanfront confines of the Four Seasons Resort, to forge deals and plot strategy.

Read the whole story: New York Times

Comments

[johnsonb2005]

10:18 PM on 06/22/2010

A buddy of mine is a Sacramento Bankruptcy Attorney Michael Noble says don't be fooled by these debt reduction scams. There are legal ways to get help. Chapter 7 Bankruptcy and Chapter 13 bankruptcy are not always a last resort option. They are there for a reason. If you need help and you're in the Sacramento area check him out. www.MichaelNobleBankruptcylaw.com He even provides free consultations.

[angrymanspokane]

11:44 AM on 06/21/2010

Companies DO NOT want to help you - PERIOD! Businesses are in business to help themselves, and to take whatever they can get from you.

[DebtNavigation]

10:54 AM on 06/21/2010

In a nutshell, debt settlement companies are 90% scammers and 10% legitimate but nearly-pointless (because your information is on Persolvo's system for all creditors to see ... your cards are face-up, which is a dumb way to play poker). Consumer credit counseling companies are different because you're going to pay all your creditors back all their principal, only saving on interest and penalties. Neither is necessarily a good way to go, nor is formal bankruptcy always the answer.

And getting sued by a creditor lacking strong proof or whose claim has aged past the statute of limitations can be a GOOD thing (provided you show up in court and defeat them). When you win in court, it's usually GAME OVER.

Don't take my word for it. Let 267 footnotes make the case. If you've been pushed under, you can read every other page of my book for free: http://www.scribd.com/doc/25443175/Debt-Hope-Down-and-Dirty-Survival-Strategies-Evaluation-Version-Complete

[eilish]

12:13 AM on 06/21/2010

Not all bankruptcies are due to credit cards and 'overspending on stuff'. We had a son who was badly wounded in Iraq while he was in the National Guard. He did not receive full time pay while he was in hospital for 9 months waiting for benefits, so we supported his family. Another son ran out of unemployment for several months before he got a great job.

Having just retired, my husband spent all our savings and yes, a couple of credit cards, supporting first the blind son's family and then the next. It's been two years of sheer nightmares and I certainly didn't put the money first.

There are so many in this economy who are having to claim over medical bills, people losing their homes - which they can keep if they file bankruptcy on all their other debts. These relief companies simply pile on more stress and financial woes that burgeon.

We're not all irresponsible. We didn't all owe massively more on our mortgages than they are worth, nor did we spend on vacations and cars. I know more people driven to bankruptcy court for unavoidable economic reasons than for frivolous ones.

The credit 'counselors' smelled off to me from years ago when a friend first used one. It's been a decade, she's still paying, and she has lousy credit today even though she has paid faithfully.

[pbinh]

09:57 AM on 06/21/2010

Thank you for sharing your story. Medical bills are the #1 reason people go bankrupt in this country. Medical bankruptcy is a phenomenon that no other industrialized country has because they all have single-payer health care.

I wish you and your family the best of luck.

[graffitijoe]

09:03 PM on 06/20/2010

Caveat Emptor - words to live by.

[FoonTheElder]

08:39 PM on 06/20/2010

The credit industry of the U.S. just wants your money. They don't care how they get it.

If your financial situation is recoverable, negotiate with the credit companies yourself, especially unsecured creditors. Many won't be cooperative, as they are so greedy they will refuse to accept 50 cents on the dollar even though there is a good chance they will end up with zero. Why pay for a debt settlement firm, they don't have any magic solutions. All they do is hold your money for three months and wait for the settlement letters from your debtors.

If your creditors aren't cooperative, look at declaring Chapter 13 or Chapter 7 bankruptcy. If you aren't making payments and you are behind, your credit report is already shot for seven years. You have the choice of having bad credit and still having a load of debt or having bad credit and most or all of the debt discharged.

The credit agencies try to scare you from bankruptcy, but when you are unable to handle the debt that is often the best alternative for the individual.

[DebtNavigation]

11:02 AM on 06/21/2010

I would argue that a Chapter 7 or 13 isn't necessarily always the best answer even for non unrecoverable debt. There's no guarantee that anybody is going to sue, and in most cases not everybody is going to do so. Depending on the state you live in, it's hard or easy for them to sue, hard or easy for them to get post-judgment remedies, hard or easy for you to avoid the effect of the latter. In short, in some states what professors Dawsey and Ausubel call "Informal Bankruptcy" may be a good choice. And you can move to those states.

Some debtors take it a step further, flyspecking every letter and recording and analyzing every phone call for FDCPA violations then turning on (and suing) the collectors and creditors for thousands of dollars. They make lemons not into lemonade, but into a fermented toxic counter-weapon.

There are also a lot of other techniques debtors can use. Paying 100 cents on the dollar as soon as you possibly can is the Gomer Pyle way of doing things...

[coolaid8]

08:34 PM on 06/20/2010

The 2005 bankruptcy law requires people to go to these firms before filing for bankruptcy. The government is good intentioned, but everything it does seems to come out wrong.

[ckinsobe]

11:53 PM on 06/20/2010

I think you are confusing shady debt settlement companies with credit counseling services who actually negotiate better rates for you. NOT the same thing at all. I have one card with a credit counseling co and they reduced my interests to 0 and they never want you to miss any payments. All they keep is 18 dollars per payment.

[eilish]

11:55 PM on 06/20/2010

My unemployed son didn't have to go to one, nor will we according to our attorney. We do have to go do budget counseling online. The worst of the George Bush bill made it nearly impossible to do without an attorney, which, after tightening bankruptcy laws, is really a goldmine for them.

[pbinh]

09:58 AM on 06/21/2010

Biden voted for that law, by the way. He is owned by the credit card companies.

[Aerows]

08:03 PM on 06/20/2010

A lot of people don't realize this. If you are in debt, YOU have to negotiate. When you put someone else in charge of negotiating your finances, prepare to be destroyed. It is, and has always been that way. These firms are sharks - they are there to profit over misfortune - they aren't there to help people, by and large.

Negotiate your OWN finances.

[Harrier]

07:37 PM on 06/20/2010

If you need to pay someone to hep you reduce or get out of debt, you are being taken for a ride.

[Aerows]

08:03 PM on 06/20/2010

No kidding.

[coolaid8]

08:34 PM on 06/20/2010

Unless they let you do it on credit.

[GlenRast]

07:27 PM on 06/20/2010

These companies are merely parasites living off of people who have gotten themselves in debt. Since most of their clients were dumb enough to bury themselves with credit cards they're more likely to be gullible enough to think that these kinds of companies offer an easy way out. The very fact that they exist and are profitable speaks volumes about the lack of personal responsibility a lot of people have.

[Scent]

07:16 PM on 06/20/2010

WHAT?!?!?!?

You mean piling all your debt into one heap for a fine does NOT magicaly reduce your debt?!?!?!?

Who would have guessed?

Oh, I know who: the same morons who though privatization would improve services, create jobs, and increase incom. - Us, the people.

And why did we believe that?

Because our politicians told us so.

You know what I call someone who swears to serve and protect the people and then goes and does the opposite?

The same our law names him / her:

traitor

[TimHS]

04:35 PM on 06/20/2010

Put Freedom, Liberty, America, Justice, United States, and/or Truth in your company title and you can get away with beating little old ladies to death in a dark alley for their Social Security checks. You could then form a trade group, hire lawyers and lobbyists and get Congress to pass laws to make your business more profitable by making little old ladies carry locator beacons. But try to organize a Union that would help those who lose their income and you’re an evil Socialist. For years the United Auto Workers kept a fund that was used for just that purpose, people helping people. What a twisted up mess. Of course conservatives believe that those losing their homes and being sued are guilty of making bad decisions. And as one of my conservative friends says, “I refuse to help people who make bad decisions.” Apparently it’s also OK to lie to them and to cheat them out of whatever they have left. Most of the 2000 members of the United States Organizations for Bankruptcy Alternatives and Association of Settlement Companies are about as honest as the old Mafia protection rackets. 150 years ago Financial Freedom’s Corey Butcher would have been tarred and feathered and run out of town on a rail. Now the members of the Congressional Committee will hem and haw, agree to disagree, and do nothing.

[breakingpoint]

02:31 PM on 06/20/2010

the vortex
http://www.youtube.com/watch?v=Zw3i5Rzpx5A
worth your while

[jinjinpinti]

04:50 PM on 06/21/2010

Thanks for the link. Eye opening.

[bruinlover09]

12:59 PM on 06/20/2010

Americans need classes on nutrition and personal finance. The credit cards, debt management schemes, ponzi schemes and fraud are able to flourishes because the average American is ignored about the basic finances. The diet industry flourishes because of Americans' ignorance about basic nutrition laws. The general assumption is that this type of education will be taught by the parents or other family members. The general assumption is wrong.

[treetracker]

01:15 PM on 06/20/2010

Some help on identifying fraud in various segments of our society can be found here:

www.fightfraudamerica.com

[procrustes13]

01:32 PM on 06/20/2010

I think it will take more than that. By the way, the bankruptcy "reform" includes mandatory personal finance classes as the expense of the bankrupted person, often someone who is or was very sick, talk about twisting the knife...

The real issue is that people with less money are given very few alternatives and they always must pay more when they are in a tight spot, and also they have lost ground with regard to wages and have more expenses so this has become worse.

[bruinlover09]

02:05 PM on 06/20/2010

I was thinking about classes before you graduate high school. The bankruptcy reform classes pissed me off because it doesn't take into account extending circumstances. Individuals and families that have to file bankruptcy for medical reasons, should be excluded.

I agree with your second point. The new trend of walking away from your mortgage is a good example. Wall ST and Washington doesn't have a problem when multi-million dollar corporations do it but all hell breaks out when individual do it.

[GlenRast]

07:34 PM on 06/20/2010

I don't know what the percentages are these days but prior to the last couple years most people who got themselves into trouble with credit card debt did so because they refuse to live within their means. They HAVE to have this new toy. They HAVE to go on a cruise. Credit card companies have been more than happy to oblige them and debt settlement companies are more than happy to feed off of them.

[The Catalyst]

12:17 PM on 06/20/2010

How is this any different from Madoff's actions? How is their business model any different from Goldman Sachs'?? This is a result of over unrestrained consumerism!

[coolaid8]

08:35 PM on 06/20/2010

The difference is that the law now forces you to do it before you can declare bankruptcy. At least Madoff's victims went there on their own free will.