Debtors Call Credit Counseling After Debt Settlement Fails |
By Kenneth Long on April 13, 2011
.jpg.aspx) The calls for help are so familiar. The caller states "I enrolled in a debt settlement plan last year. After paying over $1,000 in fees, they have done nothing to help me. Now I am facing a judgment. Can you help me?"
Debtors who turned to debt settlement companies for help with debt now find that they paid hundreds or thousands of dollars for services that never materialized. All they have to show for it is wrecked credit, an empty bank account and a sherriff's deputy at the door delivering a summons.
The hardest part about these calls is telling the client that a debt management program likely could have helped them avoid the mess that they are now in. Instead, they are past the point of no return, having seen their creditors charge their debts off and sell them to collections agencies or law firms.
They then find out that debt settlement companies do not protect them from legal action. Only a bankruptcy filing can provide protection from creditors.
Had the clients qualified for and enrolled in a debt management program before their accounts were charged off, they probably could have enjoyed an improved credit rating, shrinking debt and relief from creditor calls. Instead, they believed the false claims made by one of many debt settlement scams that flooded late night television with deceptive advertising.
People mistakenly think that the government will protect them from charlatans that prey on the desperate. The reality is that government only gets involved once a large enough number of victims come forward with formal complaints. Even in the case of massive debt settlement scams (Allegro, Hess Kennedy, Debt Relief USA), the time to complete an investigation, take legal action against the firms, seize any remaining assets and provide partial refunds to victims took well over 2 years in each case. Meanwhile, tens of thousands of clients were defrauded by these and similar schemes.
Had these debtors attempted credit counseling while there was still hope, they could have used the hundreds or thousands of dollars in fees towards actually paying off their debt. A simple check with the Better Business Bureau would have tipped them off to the futility of debt settlement plans. Instead, they may have discovered how credit counseling has many reputable options for debt relief.
Once one of these debtors who are long in default asks me for help, I generally provide the following response:
You paid all of that money in fees. Now it is time to pressure the firm to provide the services that they promised. Make them earn it. If they fail to satisfy you, file complaints against them with your state's attorney general, the Federal Trade Commission and the Better Business Bureau. Most important, learn from your mistake so that you never repeat it again. |
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