Where the Scammers Have Landed Now...
We thought we’d seen it all with the mortgage broker scams and then the loan modification scams, where some poor schmuck is told something too good to be true, pays for said miracle to the unscrupulous vendor (never reading the paperwork to see if it matches what is being said), and then ends up losing everything. Well, the scammers have just moved on to the latest hotbed of activity: the Debt Settlement Solutions Scam.
This occurs when a Debt Solutions Company approaches someone with high credit card or other debt, offering to slash that amount to less than half, stating the debtor will only have to make small monthly payments to pay off the negotiated amount. The Debt Solutions Company writes all the creditors advising them to only contact Debt Solutions Company and leave the debtor alone. (This is at first a welcome relief for the debtor, but if the company is being unscrupulous about what settlement activity is – or isn’t – being achieved, then they have now cut off the ability for the debtor to be noticed that a lawsuit is coming.)
Next, Debt Solutions Company has the debtor set up a bank account which the debtor funds monthly. Their contract provides the settlement comp-any get paid a percentage of the savings (usually 25% to 35% of what they “saved” you), and that they get paid first. So in essence, Debt Solutions Company draws out all their fees from that account that was funded monthly long before any creditor gets paid. In the meantime, as the creditors aren’t getting paid a thing, they often do not enter into settlement arrangements and instead proceed with litigation against the debtor. This then forces the debtor to pay large sums of money to defend litigation which should not have occurred. The debtor often incurs the expenses for the creditor’s attorneys fees which are usually written into the original credit terms and conditions.
Many times I’ve had clients come in with lawsuits that were filed during the time period they were allegedly represented by the Debt Solutions Company who said they would protect them from having this happen. Most of the contracts I’ve read from Debt Solutions Companies, paint a very different story than what they have verbally told the client will happen. They tell the client the settlements will be entered into right away, so the client starts funding the account. The Agreements usually state the Debt Solutions Company have three to five years to enter into these agreements with the credit card companies. There is never a written guarantee that a lawsuit won’t be filed or the creditors won’t come after you during this time.
Although debt settlement can be done ethically – wherein your total debt amount is reduced and the creditors get paid, without it costing you a fortune in legal fees – you must be cautious about whom you engage on this. An ethical negotiator will charge you by the hour for the time put in on a case. Or, they will get a small deposit up front, and then get paid a specified bonus amount for each creditor who executes a settlement agreement with you. They will keep you apprised of the progress, or lack thereof, so you can strategically plan for alternatives in advance of a lawsuit being served on you.
Another stark reality is, that debt settlement is only successful if all the creditors get on board. If one creditor won’t play, it will sue, and get a judgment to levy against the debtor’s wages and bank accounts, thereby thwarting the ability to fund the settlement for the rest of the creditors who would play ball.
If you would like a free telephonic consultation regarding bankruptcy or any other legal matter, please contact us at (714) 331-1014 or email us at: info@locklearlaw.com.
Written by: Tina Locklear
