How To Avoid Debt Settlement Scams

Not all Debt Settlement Companies are created equal. Do not make a bad financial situation worse by falling for debt settlement scams. This is definitely a situation for buyers beware.

The Good, the Bad and the Ugly

There are specific elements you should look for if you are considering using a debt settlement company. Do your homework. Look at more than one company, before making a decision. Check out any company you are considering with your state’s attorney general’s office, the division of consumer affairs, and the better business bureau to see if there are any complaints. Find out if your jurisdiction requires a debt settlement company to be licensed. Ask for a list of licensed companies in your state. Check the company’s non-profit status, a company seeking to make a profit could be a problem. Be aware that the IRS can consider any portion of your debt that is forgiven by your creditors as income for tax purposes.

Red Flags

If the debt settlement company you are considering makes any of the following claims, avoid that company like the plague.

Make a guarantee to remove your unsecured debt
Guarantee unsecured debts will be paid off at less than half their value
Charge large monthly service fees
Base the fees for their services on the percentage of savings they get for you
Insist that communications to your creditors be made through them, don’t allow you to make direct payments to your creditors or that monthly payments for your debts be made through their company.
claim their system will protect you from suit by your creditors for unsecured debt
assure their system will improve or have no negative impact on your credit report
Claim that they can remove negative information from your credit report even if its accurate

Remember that old saying “If it sounds too good to be true, it usually is.” This is especially true of debt settlement companies in these hard economic times. The Federal Trade Commission is also a good source of information about legitimate debt settlement companies.

Do You Need a Lawyer?

A lawyer experienced in bankruptcy law can of great help guiding you as to which option to choose to resolve your financial problems. They may be able to help you with debt management and help you choose a legitimate debt settlement company if you chose to use this option to resolve your financial problems. This is an area of the law where it is best to have good legal counsel.

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