Common Debt Settlement Scams

Debt settlement scams pray on those people who believe that they are in over their heads in debt. While there are some legitimate debt settlement companies, others will make promises they can't keep, charge high fees and even ruin your credit. Before working with a debt settlement company, make sure you understand exactly what you are going to be getting for your fees and exactly what the debt settlement company is going to do.

Possible Debt Settlement Scams

Charging high fees in exchange for promising to "settle your debt for pennies on the dollar." While it is often possible to settle your debt for less than what is owed, you generally have to be in default to do this. Even then, a credit card company will generally settle with you only if they believe that you are likely to not pay the debt at all or declare bankruptcy. The debt settlement company will begin collecting your monthly payments form you, but instead of sending them to the creditors, they will put that money into an account. Your account will become late, and then the credit card company will be willing to negotiate- but your credit will be hurt in the process. In addition, you don't need a debt settlement company to do this for you- creditors will negotiate with you or with an attorney once you are behind in payments, and if you do this without working with a debt settlement company, you save the high fee that the debt settlement company is likely to take off the top.
Promising they can remove negative items from your credit report. Debt settlement companies may try to do this through disputing the debt. However, in reality, if the negative report is accurate, it is not likely to come off your report. Disputing correct or accurate information could be constituted fraud, even if it does work.
Promising a clean slate. Some debt settlement companies will try to establish a new credit profile for you by using a tax ID number (TIN) or employer ID number (EIN) they apply for from the IRS for you instead of your social security card number. This too could be considered fraud if you are trying to just abandon your old social security number and the bad credit that goes along with it.

Get Legal Help

If you are having problems with debt, your best bet is to speak with an experienced debt settlement attorney. Attorneys take the Bar exam and take an oath of morality. They are also legally bound to help their clients and follow an ethical code. When you work with an attorney, this means you know they will be your advocate- unlike a debt settlement company.

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