Here is how the Debt Settlement Scam Works
*You owe bills to multiple creditors, typically credit card companies.
* A debt settlement company tells you that it can help you pay off all of your bills.
* The settlement company tells you to stop paying all of your bills, and make a monthly payment to it.
* The company will tell you that the monthly payments will be collected in an escrow account, to be used in the future to pay off your debt. However, typically, during the initial payment period, such as 24 months, most of the money will be used to pay the settlement company its fees, up front.
* Therefore, it can take over 24 months for you to have enough money to pay off more than one creditor. The company may settle some smaller debts, in the first few months of the payment period.
* Unfortunately, because you are not paying your bills, when you pay the debt settlement company, it is likely that some larger creditor will sue you.
* Because you will likely have little money to pay the larger creditor when you get sued, you will get a judgment against you, and the creditor can then take collection action on the judgment – such as a wage withholding order.
The debt settlement agency want most of its money up front, when you start to make your monthly payments. The debt settlement company tells you to stop making payments to creditors, knowing that you are likely to be sued at a later date, and not have enough money in escrow to pay for any future judgment.
Often, after using a debt settlement company, a debtor ends up being sued and is forced to later file for bankruptcy. To make matters worse, you may not be able to sue the debt settlement company, as the contract can provide for binding arbitration.
If you are having problems with your debts, please feel free to contact
Attorney Robert M. Singer, 2572 Whitney Avenue, Hamden, CT 06518