Many clients come to use seeking to file bankruptcy whom have entered into a contract with a debt settlement company. Many times, people believe that signing up with a debt settlement company can help them get out of debt and have little impact on their credit score. Many assume that debt settlement won’t hurt a credit score as bad as a bankruptcy would. This is false. Credit card companies won’t even negotiate debts until you have fallen behind atleast 90 days. Debt settlement companies offer to negotiate debts for a lump-sum payment for a fraction of the price. However, they fail to tell consumers that as their accounts continue to go into delinquent status, the impacts on their credit score can be severe. Debt negotiation can take anywhere from 36 to 48 months. This is almost three years of accounts being in delinquent status. During this time interest, fees and penalties continue to accrue. Most consumers can’t keep up with these payments and thus, never make it to the end of any debt settlement plan.
More importantly, debt settlement companies fail to inform consumers about the risks of being delinquent on their credit cards. Once a credit card is delinquent for so long, creditors have the ability to sue and get a judgment. A judgment can last up to 20 years and can allow creditors to garnish wages, lecy property and freeze bank accounts.
The FTC (Federal Trade Commission), the organization that protects consumers, has issued rules to regulate debt settlment companies. They have enacted rules to ban deceptive telemarkeing acts by debt settlement companies. There is a list of things that debt settlement companies are required by law to tell you before you sign up. Some of the requirements that debt settlement companies must tell you are:
- The price of the debt settlement.
- That you have the right to cancel the debt settlement contract at anytime without any penalties.
- That any of the funds that are placed in escrow account are your funds that you are entitled to unless they were earned by the debt settlement company.
- The length of time you will be in the debt settlement program.
- The amount that you will have to pay when your debt is settled.
How Can I Cancel My Debt Settlement Contract
When someone asks us if they can cancel their contract with the debt settlement company, they are relieved to hear that they can. We always recommend that they should cancel their contract with the debt settlement company immediately to prevent anymore fees being taken. We also tell them that any money paid into their escrow account is theirs. Many consumers will tell us that the debt settlement company automatically takes the payment from their bank account each month. Our advice is to contact the bank, and let them know that you are canceling your contract with them. Some people become worried that the debt settlement companies will continue to draft the fees. In that case we recommend closing out your bank account completely to prevent any debt settlement company from taking it.
If the debt settlement company refuses to return the money that is legally yours, you can sue the company. Also, we recommend filing a complaint against the company with the New York Attorney General’s office or the New Jersey Attorney General’s office.
Debt Lawyer
If you are falling behind on your bills, it is best to speak with a bankruptcy lawyer who can help you determine which route is best for your financial situation. Keep in mind, that filing bankruptcy is usually the better option when you are in debt. If you have questions about debt settlement, filing bankruptcy in Staten Island or filing bankruptcy in New Jersey give Karra L. Kingston Esq. a call today.