The truth is that the debt relief industry is riddled with deceptive and abusive practices. These companies prey on the financially weak and often appear as the only light at the end of the bankruptcy tunnel.
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New York, NY (PRWEB) January 31, 2012
As the economic recession continues, consumer debt is on the rise and Americans are struggling to pay their credit card bills. In response, thousands of debt settlement or “debt relief” companies have emerged. These for-profit businesses lure consumers by claiming that they can successfully renegotiate or “consolidate” consumer credit card debt to a much lower balance and therefore allow consumers to pay off debt, improve their credit score and avoid bankruptcy. The Law Firm of Imbesi Christensen & Michael explains in depth below how these companies will actually cause a consumer to be financially worse off than when they first started.
The truth is that the debt relief industry is riddled with deceptive and abusive practices. These companies prey on the financially “weak” and often appear as the only light at the end of the bankruptcy tunnel. Jeanne Christensen, a Bankruptcy attorney with the Law Firm of Imbesi, Christensen & Michael, says that most clients that contact her for a consultation have already attempted to cure their debt with these companies and are worse off than when they first started. “There is little evidence demonstrating that creditors negotiate with debt settlement companies or that consumers are able to avoid bankruptcy through a debt negotiation plan. In fact, there have been thousands of claims that these companies fail to do precisely what they promise.”
Debt Settlement companies have literally popped up all around the United States such as: Credit Solutions, Care One Debt Relief Services, Debt Solutions USA, Legal Helpers Debt Resolution, LLC, Safe Trust Financial, Inc., Global Logistics Enterprises, In Charge Debt Solutions, Lifeguard Financial, LLC, Lighthouse Credit Foundation, Morgan Stevens Financial Solutions Company, National Financial Freedom LLC, Nationwide Consumer Advocacy Group Financial Network, LLC, Freedom Debt Relief, Global Financial Services, Safe Trust, Superior Debt Services and U.S. Debt Associates.
Why Debt Settlement Does Not Work
Under the terms of the plan, the consumer is instructed to open up a separate account through a servicing company so that they can deposit money on a monthly basis. The debt settlement company is supposed to use this money to pay off the creditors.
However, this process rarely takes place. Here’s why: The servicing companies charge excessive monthly fees to the consumer for the account on top of the already excessive monthly fees charged by the debt settlement company. In the meantime, consumers have stopped making any payments and have ceased communications with their creditors as per the debt settlement company’s instruction.
The debt settlement companies will not even attempt to negotiate with a creditor until sufficient funds have accumulated in the servicing account. It can take 12-24 months before a creditor is even contacted by the debt relief company.
This delay in negotiating results in the following: (1) increasing debts already owed through accumulated fees and interest; (2) debt collection harassment; (3) delinquencies reported to credit reporting agencies; (4) lawsuits and default judgments entered by creditors for the delinquent accounts; (5) garnishment of wages or levied bank accounts; and finally (6) the inevitable bankruptcy filing.
Although the Federal Trade Commission (FTC) prohibits debt settlement companies from charging fees until a settlement is obtained, the relief companies violate this rule repeatedly. There is little or no incentive to settle debts for consumers when the companies and their servicers are making huge profits on the monthly fees alone.
The above chain of events leaves the consumer worse off than before the consumer entered into contract with debt settlement companies.
The Warning Signs (“Red Flag”) List
**Consumers should be extremely cautious before signing up for services with debt settlement companies especially when the following warning signs exist:
1. The company charges up-front fees or unreasonably large fees through payments.
2. The company claims that it will significantly reduce the total amount of consumers’ debts by as much as “50 to 60 percent” (or “fifty cents on the dollar”).
3. The company claims that it will settle consumers’ debts over a shorter period of time if consumers deposit as much money as they could towards their trust accounts.
4. The company advises consumers to stop paying debts and communicating with creditors.
5. The company claims that lawsuits against consumers will be rare because creditors are willing to negotiate with it on behalf of consumers.
If you are currently in a debt relief “plan” with one of these companies and believe that you are a victim of predatory and deceptive practices, contact the Law offices of Imbesi, Christensen & Michael for a FREE consultation at 212-736-0007 or go to http://www.lawicm.com.