Debt Consolidation Scams

Please beware of debt consolidation scams
I have seen many of them and they usually do nothing more than bilk funds from unsuspecting families.  We have all heard the commercials that promise to help debtors avoid bankruptcy by consolidating debt – but these debt consolidation scams are very expensive and highly suspect. It is important for debtors to understand the many pitfalls of using debt consolidation companies. Before you sign on with a debt consolidation company give us a call an let our team of experienced professions explain what can be dome with a 100% secure chapter 13 plan. Here are some of the dangers of companies that claim they can help you get out of debt by consolidating your debt.

1. High Monthly Service Fees for Little Work
Most debt consolidation scams will require debtors to pay monthly fee just for using their “services.” These services are generally no more than pulling money from the debtor’s bank account and waiting for money to amass, meaning the company gets paid each month but the debtor’s financial situation has not necessarily improved at all.

2. Little Accountability
Whereas attorneys can be held accountable for failing to assist debtors most debt consolidation companies structure themselves in such a way that debtors can only recover from them them with great difficulty.

3. Monthly Payments Are High
Creditors are more apt to settle for pennies on the dollar if they can receive funds immediately. Therefore, most debt consolidation companies require that debtors make very high monthly payments into the company's account so that they can amass funds to pay creditors in a lump sum payment. If debtors cannot afford to do this within a very quick time frame, they are left with paying the very high monthly “service” fee (see above) while their money slowly accrues. The debtor’s money is occupied at the debt consolidation company and is no longer available to the debtor to be used for food, utilities, emergency costs, and other monthly living expenses.

4. While You Amass a Lump Sum, Your Creditors Are Not Paid
Debt consolidation scams will not begin negotiations until a great amount of the debtor’s money is amassed in the company’s bank account. Even then, debt negotiations take time and the debt consolidation company has little incentive to speed up the process because it gets paid its “service” fee for each month that it works on the debts. While the company is gathering money, the creditors are not getting paid. This sets in motion a snowball effect of accruing interest, harassing phone calls, and harassing letters to the debtor.

5. They Draw Funds Directly From Your Bank Account
Most scams require that the debtor allow the debt consolidation company to draw directly from the debtor’s bank account. This becomes problematic when the debtor struggles to pay other monthly bills and/or the debtor suffers a loss of income. Also, most companies will not cease the direct withdrawals upon the debtor’s request. Rather, the debtor is often forced to close the bank account to stop the automatic withdrawals.

6. The Company Doesn't Necessarily Pay Any of Your Debts
At the end of the day, if the consolidation company has not started any negotiations, or has not successfully completed any negotiations, you will be stuck with all of the debt that you started with -- and will have lost all of the monthly “service” fees you have paid. Also, if the company keeps all of the money that it has taken from the your bank account, due to low accountability (see above) there is little that you can do to recover the funds.

7. Creditors Continue to Call
Even though the creditor is working with the consolidation company, creditors can continue to call the debtor and demand payment. This can be very frustrating for the debtor because the debtor is paying for the consolidation company’s “services” yet still continues to receive these phone calls.

8. Creditors Can Still Sue
Again, even though the creditor is working with the consolidation company, creditors can still sue the debtor if the consolidation company has not paid the debts. If the creditors are successful, the debtors can face wage garnishment, bank levies, and possible repossession of secured property.