Debt settlement companies seem to be everywhere lately. You can’t watch your favorite TV show without seeing an ad. They make it sound so easy! And they seem so nice!
But there’s a huge problem with these companies. They are largely unregulated. Some of them have nothing more than an website and a few phone lines. And plenty of consumers have been ripped off.
That’s why the Federal Trade Commission just banned debt settlement companies from taking advance fees, as Gini reported in a recent post on this subject. As FTC Chairman Jon Liebowitz said: “Too many of these companies pick the last dollar out of consumers’ pockets.”
So what’s different about using a lawyer? Can’t a lawyer rip you off, too? The obvious answer is “yes.” Of course there are dishonest lawyers our there. But I’ve practiced law now for 15 years and never known one who would take a client’s money and disappear. Why? We have a license at stake. Misappropriating client funds is a big no no. The penalty is almost always disbarment. We’re regulated. Debt settlement companies, by contrast, well, that’s sort of like the Wild West. (And I know you folks in New Mexico know what I mean by that!)
There are some decent debt settlement companies out there, but it really only makes sense to use the ones who set up DMPs (“Debt Management Plans”). A DMP is when you repay your debts over a period of years. If you want to explore this option–which requires significant cash flow for the payments–seek help from a local non-profit. Above all else, DO NOT send your money to someone you learned about on the internet! I’ve seen too many clients get burned doing this.
For a bankruptcy lawyer, settling debts is an extension of what we do. We deal with creditors every day. We also know when debt settlement makes sense and when it just won’t work. Debt settlement is not for everyone. And you need to get legal advice from a lawyer who know your rights and who can explain your options.
Thanks to Allegan, Michigan bankruptcy lawyer, John Van Elk for this guest post. His firm, DeMott & Van Elk, P.C. helps people negotiate settlements with creditors as well as file bankruptcy, if appropriate. If you have financial problems, and are in the Kalamazoo or Grand Rapids, Michigan areas, I’d recommend you contact John.