You hear it on TV. You hear it on the radio. You may even hear it from your friends. “You don’t need bankruptcy; you can settle your debts for pennies on the dollar!” There is just enough truth to this statement to make it dangerous for people who are considering bankruptcy or other ways to resolve debt problems.
Most debt settlement companies that I’ve run across use this idea to take money from hard working people who are looking for any way possible to avoid bankruptcy and offer almost nothing in return. To make matters worse, from what I see, the result usually leaves you worse off than when you started with these companies in the first place and you end up with a bankruptcy lawyer anyway. How? Keep reading.
No one wants to file bankruptcy. Americans are hard working and proud and it’s difficult or us to admit that we might need help. Couple that with the anti bankruptcy remarks often made by well meaning friends and family and you have a potent opportunity for scam artists. Here’s the pitch.
“There’s no need to file bankruptcy and completely ruin your credit. All you have to do is stop paying your credit card bills and divert the money to us. We will let the money accumulate and when there is enough, we will contact your creditors and start settling your debts.”
There are several dirty little secrets that are conveniently left out.
- Before any money accumulates, the debt settlement firm takes what money you pay in the first months to cover their fee for providing the debt settlement service.
- They also fail to mention that the phones calls from the debt collects will start in just a couple of months of not receiving their payments. And even though there are laws against it, these agencies regularly call people multiple times a day; they will call you at work, and they will sometimes even call your friends and family. They get away with it because the violations are rarely reported in a way that will allow the courts to punish them.
- Credit scores take a huge hit for late payments. They often can cause more damage to a credit score than a bankruptcy with no late payments.
If these reasons aren’t enough, there’s one more thing. In the year or so that it takes to get enough money to try and settle with the first creditor, the others start to file lawsuits against you. It’s usually at this point that people realize they’ve been taken for a ride, and they finally call a Georgia bankruptcy lawyer.
Once a lawsuit is filed against you, bankruptcy is often the only option. As I mentioned above, sometimes you can resolve a debt for pennies on the dollar. But there can be a huge difference between 10% of a debt and 50% of a debt. They are both pennies on the dollar, but if your debt is $50,000 – pennies on the dollar may not be such great a deal.
If you are trying to find a way out of debt, you owe it to yourself to take some time and learn about all of your options, both in and out of bankruptcy. A knowledgeable and honest Georgia bankruptcy lawyer will help you understand all of the options and explain the advantages and disadvantages of each bankruptcy and non bankruptcy option. In some cases, it does make sense to try and settle debt rather than file a bankruptcy case. But buyers beware of any company that sells you pipe dreams for “pennies on the dollar.”