RIPPING OFF DEBTORS

Everywhere there are TV, radio, and newspaper ads touting the benefits of debt settlement. Companies are offering their services to help Americans deeply in debt. The enticements offer “pennies on the dollar” for the cash strapped. There was one radio ad which carefully parsed words like bailout, debt and settlement inferring there had been Congressional monies set up for the debtor to take advantage of. It sounded enticing. It even sounded like you’d be a fool not to take them up on this offer, but it also sounded like a standard infomercial come-ons including a “call to action” and an “act now, don’t delay”.

With names like Christian Debt or Debt Reduction or Debt Busters or Freedom From Debt or even Government Debt Bailout, these companies assert their willingness to help cash starved families. It is a booming business, especially in these tough economic times. For the family struggling with nasty phone calls, threats and mounting pressures, this a service that sounds too good to be true. Guess what? In most cases it is. Here is how far too many of them work.

Like many sales gambits or even cons, there is the pitch. The pitch is a ‘come on’ that sounds easy and attractive. Just let us help you and all will be well. It is constructed to get a person to nibble. The nibble is to phone them. Then it is up to the “trained representative” to land the sucker, er, I mean customer. This is the early stages of how debt settlement companies work, pitch and catch.

Knowing that anyone undergoing the trauma for debt looks for relief, debt settlement companies are taking advantage of financially and emotionally vulnerable people. Blandishments about looking to the future while the company deals with past transgressions, is attractive. Putting it all behind makes it easier for the debtor to imagine themselves getting on with their lives. Those either desperate enough or foolish enough, do sign up.

the debtor to place money into a special account. When the account gets big enough, the company will call the creditor and offer a lump sum settlement. Of course, the first person to get paid is the debt settlement company. So immediately upon signing up, the debtor is now 20% deeper in debt, and it can get worse.

While money accrues in that special account, the companies have not gotten the creditors to agree on a moratorium on payments. The debt remains unpaid with penalties and interest accruing. Many of the creditors aren’t even informed that the debtor ha a plan and is delaying payment. Meanwhile, the debtor is assuming the settlement company is talking to all the creditors. They probably aren’t, but the debtor still remains responsible. This lack of communication has a tendency to anger the creditors even more and in some cases initiates unexpected legal action.

To make matters even murkier, there is no guarantee the companies will actually eliminate the debt and there is no guarantee the creditors will accept a settlement. Working with debt settlement companies is swimming in dangerous waters. They will not help as much as they suggest they will. They may even hurt the situation. Debt settlement companies have a formula. It is a formula for them to make money off the misfortune of others. If that formula runs into resistance of any kind, they will punt rather than fight for the debtor. Debtors signing up for one of these companies is not getting an advocate. They are losing money they don’t have.

But the biggest flaw, is the simple reality that debtors can do all the debt settlement companies do and not pay anything except with some courage and some hard work. This can be extremely challenging, but it can be done. Financial difficulty requires an objective look at the situation followed by tough decisions. To find a one way of doing this, please refer to the Frugal Yankee article 5 EASY STEPS OUT OF DEBT.

Bottom line when it comes to debt settlement companies: don’t believe them, believe in yourself. If you need help, find a trusted source for information and support.