Don't ignore warning signs of a debt settlement scam
Image by Tyler B via Unsplash
When debt piles up on Wilmington consumers, there are many solutions to try. Some things to try include cutting back spending, tightening the belt, taking a second job, considering bankruptcy, or a debt settlement plan. The most problematic of these options may be the latter.
As you fall behind on bills, you might be desperate for a way out, and might turn to a solution that could make things harder on you in the long run. Debt settlement isn’t a quick fix and could produce negative outcomes, lower credit scores, and greater debt – the opposite of what you want.
Take care with debt settlement plans
Slashing unmanageable debt is important, but you should take care when engaging with a debt settlement or credit counseling firm. For-profit firms may be particularly prone to poor results. Even more troubling than poorly performing settlement plans, there are those that are outright scams.
An unwelcome outcome is that you still have all the debt you already have. On top of that, you might be worse off because you paid fees and interest piled up on your unpaid bills so that you’re in deeper and still need a solution.
When evaluating a possible debt settlement program, be on the lookout for scams. Also, do your homework and check reviews on the firm and look for trusted review sites like Yelp (among others) rather than just trusting reviews on their website.
Here are five warning signs to look for when considering a debt settlement option:
1. Excessive claims
If a debt relief firm promises specific and incredible results, you should be wary. No outcome of a debt settlement plan is guaranteed. In fact, results will vary widely by the unique circumstances of the debtor, their income, assets, specific creditors, and other factors. Anyone who promises everyone a specific outcome isn’t being transparent or honest – and it might be a scam.
2. Fast fixes
When you’ve got debt collectors hounding you, you’re living paycheck-to-paycheck, and your life revolves around the next bill or phone call, you have no quality of life. The allure of a fast fix will be tempting, particularly if it’s combined with the excessive claims mentioned above. That’s what scammers are counting on – your desperation to break the debt cycle. Debt settlement programs take time and they are never offer a rapid resolution.
3. Money up front
In Wilmington (and the rest of North Carolina), it is illegal for debt settlement negotiators to accept cash up-front without producing any results. Any debt settlement firm that asks for money in advance should trigger the alarm bells in your head. Companies that take your cash ahead of time have no incentive to deliver and usually produce mediocre (if any) results and leave you with more problems than before.
4. Specific credit score results
No debt relief firm can raise your credit score by a certain number of points or clear off a certain number of negative items. Any claims that are specific or preposterous should raise a red flag that you might be dealing with a scam firm. The only time negative items can come off your credit report is if they’re inaccurate. Otherwise, most items linger for seven years from the date the debt went bad.
5. Cut off contact with creditors
Debt settlement firms often offer the terrible advice to cut off lines of communication with your creditors and stop paying your bills. Their logic is that they need leverage to get the creditor to come to the table to negotiate. However, it might also be a sign of a scam because if you’re not talking to your creditors, you won’t know whether the debt settlement firm is working on your behalf with them.
Bankruptcy may be better
If you do want fast and sweeping debt relief that will set you on a path to rebuild your credit score faster than you might think, bankruptcy might be a better solution for you than a debt settlement plan. If you qualify for Chapter 7 bankruptcy, you can discharge unsecured debt like credit cards and medical bills, among others, in just two to four months (on average).
To find out more, read reviews from our clients then contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now to schedule a free Wilmington bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.