Being overwhelmed with debt can make someone feel like they are figuratively drowning, causing that person to look for any way out of his or her stressful financial situation. It is for this reason that so many individuals fall prey to debt relief scams.
However, like so many things in life, if it sounds too good to be true, it likely is. Below are a few tips that can help someone identify the legitimate debt relief services from the scammers.
Payment of Lump Sum Upfront
One of the biggest red flags for a debt relief scam is a demand for a large lump sum payment upfront before the servicer will do any work for the debtor.
Most legitimate debt relief services do not require the person to pay a large fee before doing any work. Most of the common debt relief scams reported involve a company that took the customer’s money, promising to negotiate settlement of the debts. Then the company did nothing after receiving payment.
It is a classic “take the money and run” situation. By the time the individual who paid the money realizes it, he or she is already too late to do anything about it.
Many of these companies also inform the customer that they will negotiate on their behalf directly with the lender, telling them to no longer make their monthly payments directly to the lender or creditor.
However, with no contact and no payment from the debtor or the debt relief service, the creditors are forced to pursue collections and even a judgment against the debtor. All the while, the “debt settlement company” never communicates this fact to the debtor. This usually results in a major decline of the debtor’s credit score.
Making Impossible Promises
Debt scammers also often make promises they have no way of keeping. For example, many will make statements guaranteeing that they will be able to eliminate all of the person’s debts.
Their hope is that they will catch the person when they are at his or her most vulnerable point, hoping that he or she will believe everything that is being told.
However, it is important that the debtor realize that no one has the power to make a statement guaranteeing that they can make all of that person’s debt go away. Creditors are under no obligation to settle on their debts. Many choose to work with the debtor because they would rather receive some type of payment in lieu of receiving nothing and having to take the debtor to court.
Remember that creditors often will work directly with the debtor himself or herself in coming up with these debt settlements or repayment plans. In fact, it is often easiest and best for the debtor to pursue payment alternatives with the creditor rather than giving all of his or her money to a debt relief company.
Do the Research
After being contacted by a debt settlement company, it is extremely important that the debtor first does his or her research into the company. What is the company’s BBB rating? Where is the main center of operations, and how many employees work for the company? By whom is the company sponsored? What is their success rate? What kind of reviews have been posted by former customers?
The Internet can be the best resource for someone faced by these types of decisions. Get the name of the company reaching out to the debtor and spend a little time researching that company to see if there are any reviews of the company. Look into whether any reports or complaints have been made on the company with the Federal Trade Commission (FTC) or state attorney general’s office.
Never trust a company the first time communication is made. Get the contact information for the company. If the representative resists in providing this information, this reaction should similarly raise a red flag that perhaps the company is not as legitimate as they pretend to be.
If a debtor runs into a situation where he or she is contacted by a company and any of the above red flags are present, it is important that this information be communicated to the FTC and Texas Attorney General’s Office.
CONTACT AN ARLINGTON BANKRUPTCY ATTORNEY FOR A FREE CONSULTATION TODAY
An experienced Texas bankruptcy lawyer can help you with any questions you may have about avoiding debt relief scams. Call the Law Office of Marilyn D. Garner NOW at (817) 505-1499 for a free consultation to discuss how bankruptcy may help you.