Debt Settlement Services – Buyer Beware!
My colleague, California bankruptcy lawyer Cathy Moran, has written an interesting blog post about debt settlement companies. I regularly meet with clients who pay debt settlement services fairly hefty fees to "negotiate" debt settlements.
Often, the debt settlement company can do little to actually resolve the debt, especially if the debtor has limited cash resources. Cathy brings up a point that I had not previously considered – some of these debt settlement companies market their services as an "alternative" to bankruptcy and may prey on the natural aversion many hard-working consumers have to the entire idea of bankruptcy.
Most of the clients I see make statements like "I never in a million years thought I'd be talking to a bankruptcy lawyer." No doubt the sales training in the debt settlement industry encourages the sales operators to emphasize that their solution is not bankruptcy.
Unfortunately, as Cathy points out, when a debt settlement plan does not work, the debtor is not only out a large fee, but he may have multiple judgments, pending garnishments and other problems that would never have happened if the debtor had been steered to bankruptcy in the first place.
Because of its power, bankruptcy can address advanced debt problems like judgments, foreclosures and garnishment, but make no mistake – cases that require multiple motions to avoid lien, complaints for turnover or other litigation will be most costly, time consuming and stressful.
Forums like Cathy's blog (and a new multi-lawyer bankruptcy blog where both Cathy and I participate) are designed to remove the mystery from the bankruptcy process and allow debtors to make informed decisions. One of the themes you will see over and over on this blog has to do with timing – begin your research into bankruptcy and non-bankruptcy alternatives before your situation becomes an emergency.
Technorati Tags: debt settlement companies, Cathy Moran, bankruptcy blogs, debt negotiation
Filed under Consumer protection, General consumer bankruptcy info by 
Please post your comments here. Please do not use the comment form to ask for legal advice.
Jonathan Ginsberg
Comments on Debt Settlement Services – Buyer Beware!
I feel just like bankruptcy that debt settlement has its place. Many people have no option but to go through a bankruptcy that is why it was put there. Settlement on the other hand is a nice alternative to bankruptcy for someone who is in position to settle. Both routes have there pros and their cons. I lean more towards settlement, but for a lot of people even that is out of question leaving bankruptcy as the only option. And to give credit to bankruptcy it is not the end of the world like many people believe. You will be able to get credit again. In fact many of the credit card companies prey upon people how have claimed bankruptcy because they know they have a higher chance of getting into financial difficulties again and owing them a lot of money. For those that do not believe me check out the documentary "Maxed Out" very informative.
I agree with Steve. I represent a law firm that does both bankruptcy and debt settlement and I feel that is if the consumer is honest with us then we can pick an appropriate course of action. We would never recommend to a client to go into a debt settlement program if they have no means (income) to settle. That being said, there have been numerous occasions that a client is in over $100k in debt and has already fallen behind therefore tarnishing his/her credit and the minimum payments there are making are over $1,500 a month. In this instance, a debt settlement program I feel is the way to go taking all circumstances into account of course. You have to also remember that a great amount of people are just "morally opposed" to bankrupcy and they would rather try any alternative first. We do not "PREY" on any individuals, we give them there options and they can choose from there.
Does anyone represent a law firm in the Atlanta metro area that does debt settlement?
Yes.