If you are reading this you are probably considering doing Debt Settlement and wondering if it is the right decision for you or is it a scam. My first piece of advise before signing up to any debt settlement program is to consult with a bankruptcy lawyer. It is hard to say whether or not doing debt settlement is the right decision for you but in some cases it’s not.
What is Debt Settlement
Many times Debt Settlement companies will try to get you into their programs by telling you that bankruptcy is a bad choice for you and that filing bankruptcy will ruin your credit forever. It is important to understand that THIS IS NOT TRUE. Many of these people are sales people who are trying to get you into a program and take your money. Do your research. Bankruptcy is supposed to give you a fresh start and allow you to start over. If you are in this situation the chances are your credit is already ruined and filing bankruptcy isn’t going to ruin it that much more. Moreover, in some situations your credit may even go up!
How Does Debt Settlement Work
In order to determine whether or not Debt Settlement is right for you, you need to understand what it is. When you sign up for these companies you are allowing them to negotiate your debts for you for a lesser amount. So how does this work? Each month they will have you put money into an account. Once you have enough money in the account they will start to begin settling the accounts for you. Sounds great right? So why is this a scam? Debt settlement companies fail to tell you that not all of the money in your accounts goes to settling them. The debt settlement companies take their money out first. No one does work for free right? So if you put $400 into an account each month depending on your contract with them $200 of that money could be going to just fees. Additionally, Debt Settlement companies fail to tell consumers that they can’t stop a lawsuit if one is filed against you. This means that unless you have enough money in your account the credit card company will not stop suing you.
Let’s look at an example:
Let’s say John has $20,0000 of credit card debt. He has an American Express credit card with a balance of $6,000 he has a discover card with a balance of $10,000 and a citi card with a balance of $4,000. Let’s say each month after fees he has about $400 in his account to settle his debts. After months of saving John was finally able to settle his Citi Card for $2,000 which is 50% of the balance. That’s great! But one problem now American Express and Discover have commenced lawsuits against him because they haven’t gotten paid. Now john has no money to make a large enough settlement offer to American Express and Discover. This means that John will now either have to defend two lawsuits which costs money or file bankruptcy. Remember, Debt Settlement companies are not lawyers which means you will have to hire outside counsel to actually defend a lawsuit. People who sign up for these companies end up in these situations and wasted months of paying money to ultimately have to end up filing bankruptcy. If these people had filed bankruptcy at the beginning they could have already began saving and started to rebuild their credit.
What happens if I don’t Answer a Credit Card Lawsuit?
If you don’t answer a credit card lawsuit then you run the risk of being sued. This means that if the creditor gets a judgment against you they can garnish your wages, Levy your bank account, or put liens on your property. Many times people think that since it’s been a few months and they have not heard from the creditor they are in the clear. This is simply not true. Sometimes the creditor can take a little while to begin the process of garnishing your wages or levying your bank accounts. It’s always best to speak with an attorney if you are trying to decide between doing a debt settlement program vs filing bankruptcy.
Speak with a Lawyer before Entering into A Debt Settlement Program
Karra L. Kingston Esq. is a five star law firm in New York and New Jersey. Customer service remains a top priority. Karra L. Kingston handles bankruptcy, debt settlement and foreclosure Defense in Staten Island and New Jersey. If you are in debt and are wondering what your options are call today for a free consultation. Karra and her team will work with you to try to come up with a solution that will be right for you.