Don’t Be Misled By Debt Settlement Companies

The Federal Trade Commission recently announced new rules to prohibit debt settlement firms from collecting up-front fees from their customers.  The FTC's new rules take effect October 27, 2010, and apply to telemarketing by for-profit debt settlement services, credit counseling services and debt negotiation companies.  Under the new rule, for-profit companies may not charge customer fees until a debt is successfully renegotiated, settled, or reduced.

This prohibition comes after the Better Business Bureau issued a warning to consumers regarding the misleading practices of debt settlement companies.  The BBB has received more than 3,500 complaints since 2007, many from consumers who paid hundreds of dollars in upfront fees to debt settlement companies, but ultimately fell deeper into debt after the process failed.

In an article posted to the BBB website, Stephen A. Cox, President and CEO of the Council of Better Business Bureaus said, "[T]he truth is that the [debt settlement] process doesn't work for many consumers, it has potentially serious negative consequences, and should primarily be used as a last ditch effort[.]"  The debt settlement process can significantly damage your credit report (sometimes more than a Bankruptcy filing), increase balances from fees and interest, and will not stop creditor harassment or litigation.  Any forgiven balance that exceeds $600 is also considered taxable income by Uncle Sam.      

Because of the problems associated with debt settlement schemes, consumer Bankruptcy is often a better option, as it can fully discharge your legal obligation to pay certain debts under Chapter 7 of the U.S. Bankruptcy Code, or provide time to pay what you can afford through a repayment plan under Chapter 13 of the U.S. Bankruptcy Code.  Bankruptcy is the only solution that completely ends creditor harassment, collection efforts, and potential lawsuits against you. The discharge of debts will also not create a tax debt upon the discharge and elimination of your liability on the debts.

If you are struggling with overwhelming debt, it is important to research all legal options before paying a debt settlement or debt consolidation company.  Most of these companies will not meet with you (since most are located in other States), and many will not fully explain your legal rights regarding your debts.  You really need to meet with a licensed attorney who concentrates on debt relief to understand your legal options.  The Law Office of Nicholas R. Westbrook understands your difficult situation.  Mr. Westbrook is an experienced and dedicated Houston Bankruptcy lawyer who wants to help you.  He will fully explain the advantages of the federal Bankruptcy laws and how this legal option can erase your debts, as opposed to debt consolidation and debt settlement.  Hones and reliable debt relief is a phone call away.  Please call our office today at (713) 893-6204 and schedule your FREE consultation.  Stop letting debt ruin your life.