You’ve seen the advertisements on TV: “Let us help you resolve your debt by negotiating with the credit card companies for you. We can consolidate and reduce the debt you owe by sometimes as much as 50%!!!”
Sound too good to be true? It probably is. We recently had a client who had all the best intentions of paying off his seemingly insurmountable credit card debt. About a year before he came to see us he entered into a debt consolidation program with another “law firm”. He paid them a hefty retainer fee and then was instructed to discontinue paying his credit card bills. He was required by the program to open a new and separate checking account from which the debt consolidation company auto debited a monthly sum to pay his creditors. For the next nine months monthly payments were auto debited by the debt counseling agency upon the promise of negotiation with the credit card companies. The debt counseling agency claimed they would be able to resolve all debt issues within three years. The amount our client was ultimately to pay the debt counseling agency exceeded half of what he owed the credit card companies. Nine months into the program our client was served with a civil summons and complaint by one of the credit card companies that the debt consolidation company was purportedly in negotiations with. The debt consolidation company told our client that it was just a “scare tactic” and reaffirmed their active role in negotiations. In fact, lawsuits are not just a scare tactic. They are very real and binding on the debtor. One month and thousands of dollars later our client withdrew from his agreement with the debt consolidation company upon finding out that the company was being sued by a state attorney general for fraud.
After a life long history of good credit, a home and business owner with every intention of doing the right thing, our client filed bankruptcy to finally resolve his debt and paid our firm’s attorney fees at a fraction of what he was going to pay the debt consolidation company.
The important distinction here is that debt consolidation companies cannot guarantee their “promise” to resolve consumer credit card debt. However, the bankruptcy laws are designed to protect the consumer by discharging unsecured debt through either a Chapter 7 or Chapter 13. In this economy bankruptcy does not discriminate—bad things happen to good people. If you are contemplating hiring a “too good to be true” debt consolidation company to resolve your debt you may want to consult an experienced bankruptcy attorney at the Alford Law Firm www.alfordlawfirm.com before doing so.