Debt Consolidation Scam Center by Mr DebtBuster

What is Debt Consolidation? The answer to this question, depends on who you ask. While Debt Consolidation may seem like a “quick fix” for all of your debt problems, the term can be misleading. Debt Consolidation is making national news everyday.  Unfortunately, millions of hard-wokring Americans have fallen victim to the alluring promises of ‘easy fixes’ that have left them deeper in debt and more desperate then ever.

Some Debt Consolidation companies employ deceptive scams, such as setting up a hollow payment plan and luring their clients into making the first payment on the “plan” immediately. Typically, they take their fee off the top and THEN negotiate with creditors. In our experience,  these consolidation companies will try to work out a plan while your payments are building in an “escrow account” for months. Problem is, creditors may not be “on board” with their plan and frequently opt-out of the negotiations. It only takes ONE uncooperative creditor to ruin a debt consolidation plan. This creditor can and will sue you in lieu of the debt consolidation “plan” and there there is little you can do to defend. If you have been sold on a plan from a TV commercial, radio ad, or internet solicitation preaching financial freedom, but now you feel like a “leaf in the wind”- you know what it is like to be a victim of a Debt Consolidation scam.

The good news is, we can help. Foster Law Offices is a local bankruptcy law firm, who will take the time to get to know you and become familiar with your personal financial situation. We can help you determine whether bankruptcy is the right choice for YOU by informing you of all of your options, BEFORE you get sucked in by the slippery slope of debt consolidation schemes, balance transfers and other empty promises.

Sadly, we have seen MANY of our past clients SCAMMED by debt consolidation companies BEFORE they sought our services. This mistake can be VERY costly and usually results in thousands of dollars lost. It is very difficult to recover these lost monies and it is unlikely that a legitimate refund policy exists.

We invite you to take our Debt Consolidation Scam Quiz and read some of our suggested articles before you go “all in” with a debt consolidation company. YOU have options and if you play your cards right, you won’t bust.

Bankruptcy or Debt Counseling?

Certainty and the “Wildcard” Creditor:

Debt Consolidation: There is no court order protecting you and creditors cannot be stopped from collecting on the debt if they choose. Your creditors may or may not accept a payment plan for your debt. There is absolutely no way to know this until the prospective debt consolidation company COLLECTS THEIR FEE FIRST and “negotiates” LATER.

Conversely, an aggressive, “wildcard”, creditor can, and usually does, ruin the entire debt consolidation scheme. Many of my past clients have described entering a debt consolidation company and felt like a “leaf in the wind”. Some creditors may even demand payment in addition to what the debt consolidation company has “negotiated”, even years down the line. There is absolutely no certainty in the debt consolidation process.

Bankruptcy: A bankruptcy filing triggers Federal protection from your creditors, called the Automatic Stay provision of the Bankruptcy Code. This Court injunction is very powerful and prevents almost ALL debt collection activity.

The Automatic Stay has the power to stop minimum payments, lawsuits, foreclosures, repossessions, garnishments, license suspensions, and general creditor harassment. Bankruptcy relief provides certainty with your future. You will know exactly where you stand in relation to your creditors when the case is filed.

In most cases, all creditors are addressed the same way and it is normally not a “negotiation” process with each individual creditor. This normally eliminates the possibility of a “wildcard,” aggressive creditor who absolutely refuses negotiation and demands payment in full.

Zealous Representation and Regulations:

Debt Consolidation: Believe it or not, some debt consolidation companies are sponsored, or even created by the credit card companies themselves. They “sell” their service as “better than bankruptcy” and like. In reality, this is one last attempt at gouging your budget and household income.

Some debt consolidation companies do not have your best interests in mind when “negotiating” with your creditors.

Frequently, payment plans are created to minimize the loss for the credit card companies on a defaulted account, before the inevitable bankruptcy filing. Though government regulation has somewhat improved, debt consolidation still feels like the “wild west” to many of my past clients.

Bankruptcy: You can rest assured that Foster Law Offices is a licensed, experienced law firm that always puts your best interests first. We have no obligation to your creditors and we will do what is best financially for you and your family. There are strict ethical rules in Pennsylvania that govern attorneys and Courts in general.

One of the most basic attorney rules is “zealous representation”. This ensures that Foster Law Offices consistently works to put you and your family in the best financial situation possible. You will never need to worry about your best interests being compromised.

Exorbitant Interest Rates:

Debt Consolidation: Normally the reason someone would even consider debt consolidation would be based on the credit card industries outrageous interest rates. Rarely are these rates completely eliminated in debt consolidation. Some creditors may agree to a marginal decrease in a rate, some may not. Either way you will never see a true end to the “interest circus”.

Bankruptcy: Bankruptcy almost always eliminates the interest component of an unsecured debt, whether it is Chapter 7 or Chapter 13. In a Chapter 7, not only is the interest component eliminated, but usually the entire unsecured debt is eliminated completely with no repayment.

In a Chapter 13, normally a percentage of the principal balance is re-paid over three to five years, however, ongoing contractual interest is eliminated. This creates certain elimination or repayment of the principal balance of the unsecured creditor under either Chapter.

Debt Consolidation Fees:

Debt Consolidation: Many debt consolidation fees are hidden in a lengthy fee agreement or structure. The fee for debt consolidation can be several hundred or several thousand dollars as there is little or no regulation on their fee structure. Debt consolidation companies almost always take their fee first, even before the negotiations start. They usually “hustle” a potential customer into a payment scheme with no real certain results.

More often than not, the first several months of payments go directly to the debt consolidation company and your creditors receive very little out of the gate. This payment scheme obviously does not go over well with the creditors and can get you sued in short order.

Bankruptcy: Attorney fees in general and the fees associated with Foster Law Offices are closely monitored by the United States Trustee, the Courts and the Pennsylvania Bar. In other words, you can be assured that fees will be reasonable and there will be certainty. In general, Bankruptcy attorneys cannot “hide fees” or create misleading fee agreements like some debt consolidation companies.

If you retain a competent, licensed attorney, your hard earned money won’t be wasted on an illogical payment plan to your creditors. Unfortunately, MANY of my past clients have sought out my bankruptcy services AFTER they have lost several thousand dollars through an unsuccessful debt consolidation experience. Recouping any of those lost funds is normally very difficult and time consuming to say the least.