In the movies, you’ll see a con artist, often played by an unusually handsome actor, tricking wealthy people (who deserve it) out of their money. It often makes for good entertainment. Will the victim con the con artist; what if the con artist develops a conscience, etc.?
In real life, though, scammers target the poor, not the rich. People with large amounts of debt are vulnerable, and that makes for prime marks. The best weapon the con artist focusing on the indebted has is people’s fear of bankruptcy and the shame they wish to avoid by filing it.
The preferred tool for extracting money from those with large amounts of debt? Debt settlement companies.
The concept is simple: the debt settlement company offers to broker a deal with your creditors to pay them a lump sum in exchange for keeping you out of bankruptcy.
Here are eight reasons to go the bankruptcy route instead:
(1) Credit card companies are willing to settle, but they prefer lump sum payouts (naturally) to installment plans. Debt settlement companies will require you to send them money before they even contact your creditors. Therein lies the scam. You sacrifice your income and hand it to a company that isn’t obligated to do anything until you send it more money.
(2) Their written agreements usually do not contain the promises made on their websites, or they charge more for them. Bait and switch.
(3) Your creditors will not wait for you. If you default, they will sue you and the debt settlement company will do nothing. Worse, the debt settlement company may encourage you to pay it before the banks with which you owe debt in the first place. It may even tell you to stop paying your banks entirely. Bad move.
(4) Debt settlement companies are routinely located out of your state. They cannot represent you in court if your credit card companies sue you to collect on your debts. Being out of state also makes it harder for you to sue them or demand a refund. For that you’ll have to hire a lawyer from their state, and lawyers may decline your case as there may not be enough money in it for them. If you’re lucky, you may benefit from a class action lawsuit against the debt settlement company, but don’t expect to get even close to a full refund.
(5) Debt settlement companies often charge their fees up front. The Federal Trade Commission barred them from doing that in fall 2009, but that won’t stop some of them. Moreover, the FTC rule exempts Internet sales and in-person transactions. They’re out of state, and they’re often found on the Internet. This makes for easy debt settlement income, none of which is held in trust.
(6) Debt settlement companies will almost never explicitly tell you that you will pay income tax on any forgiven debt.
(7) Your credit rating will become worse as your debts mount than if you’d filed bankruptcy.
(8) In many cases, people who pay money to debt settlement companies end up filing bankruptcy anyway. Debt settlement delays the inevitable, but it makes the situation worse.
By contrast bankruptcy attorneys are officers of the court. They are bound by rules of professional conduct that are rigorously enforced by bar authorities. Those who feel their attorney wronged them can use the attorney grievance system for redress.
For these reasons, consulting a bankruptcy attorney is a far better alternative to debt settlement.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 702-880-5554 today!