How To Distinguish a Debt Settlement Scam

Debt settlement companies have become a popular phenomenon with the downturn in the economy. Debt settlement companies typically promise to remove anywhere from 30-60 percent of your unsecured credit card debt and consolidate the remaining debt into one low monthly payment. However, there are a number of different debt settlement scams and in some cases you may end up owing even more than you did beforehand, or you may find that your credit has been ruined by unscrupulous debt settlement agents. Fortunately, there are several ways to detect a debt settlement scam before you sign on the dotted line.

Upfront fees are the first sign to look for when it comes to determining whether a company is legitimate or not. Debt settlement companies that are legitimate typically do not charge up front fees because they know that your money is best put towards settling your debt, and they will make their money from the consolidation process. If a company is asking for large amounts of money up front, you should be suspicious.

A second warning sign of a possible debt settlement scam is false promises. Certain kinds of debt – student loans, car loans, mortgages, and other secured debt – cannot be negotiated or settled, so if a company promises that they can effectively lower your debt on these types of items, you should be very suspicious. The only type of debt that can typically be settled is the unsecured credit card debt that is likely the reason you have contacted them in the first place. Tax debt, such as fines and levies for unpaid taxes, are typically negotiated by tax lawyers, not debt settlement companies.

You will also want to check for reviews online regarding the debt settlement company that you are planning to use. Typically, other customers will have commented on whether or not the company is legitimate and how they have fared through the settlement process after having chosen that company. If you find very few reviews, or mostly negative reviews, you may want to reconsider choosing that company as your debt settlement agent.

It is a good idea to also check with recognized organizations in your community such as the Better Business Bureau, Chamber of Commerce, or the state’s Attorney General’s office in order to see if there are any complaints or pending actions against the debt settlement company you are considering.

Getting Legal Help

If you are not certain if a debt settlement company is legitimate, it is best to err on the side of caution and stay away. One of your better options may be to be find a licensed and experienced debt settlement attorney. Attorneys are held to a high code of ethics by the American Bar Association and state licensing board, and so you can be sure when you work with an attorney you will not fall victim to a scam.

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