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Why Debt Settlement Services Rarely Deliver

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You’ve seen the commercials on TV. Debt settlement companies promising to get rid of your debts for pennies on the dollar. They claim to know the “secret” way to negotiate with your creditors, making your debts magically disappear. All you have to do is call and they’ll take care of the rest. Does that sound a little too good to be true? Well, you know what they say about things that sound too good to be true and debt settlement programs are no exception. Let’s look at how these snake oil promotions actually work.
 

What is a Debt Settlement Program?

So, you’re unable to pay the bills and decide to meet with one of these debt settlement programs. When speaking to them, they claim they can negotiate with all your creditors. Somehow, they can get them to accept a payoff that’s just a fraction of what you really owe. For example, if you owe $20,000 on your Visa card, they’ll get Visa to “settle” your debt for the amazing sum of $5,000. All you’ll need to do is stop paying your bills and start paying the debt settlement program each month. Are you scratching your head now? You should be.

The sneaky way these debt settlement programs work is to convince you it’s in your best financial interest to stop making any payments on your bills. Instead, you are asked to take that money and deposit it into a checking account that they have access to. They promise to pool your money until it reaches an amount that will be appealing to your creditors. Once you’ve saved up a nice chunk of money, the debt settlement program claims they will negotiate on your behalf and settle your debts.

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There are so many problems with this scenario. One of the largest and most pressing issues is that while you are handing over your hard-earned money to the debt settlement program, your bills keep piling up and collecting late fees. The program is not working with your creditors, so you are still being harassed by collection agencies. Your credit rating is also taking a hit every month that you don’t pay your bills. And to top it off…you have to pay the debt settlement program to do nothing in the meantime!

Once you sign up with a debt settlement program, they charge you a monthly “maintenance fee” for their “services.” The charges and additional fees vary, but generally cost you around $300 a month. Since they have legal access to your checking account, they simply take out their fees and never really do anything to help you. Creditors generally end up suing before anyone saves up enough money for the program to “negotiate” a settlement. In the end, most people end up losing between $3,000 to $6,000 to debt settlement programs and never get the “pennies on the dollar” settlements they were promised.

There are so many people who have tried working with a debt settlement program in an attempt to avoid filing bankruptcy, only to spend thousands of dollars and still end up filing bankruptcy in the end.

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North Carolina Fights Back

In an effort to protect NC consumers, Attorney General Roy Cooper decided to go after a Charlotte debt settlement firm that charged upfront fees for services that were never delivered. Cooper charged Advantage Debt Solutions and its owner, Anthony Krysinski, with operating an illegal debt relief scheme. According to the charges, North Carolina customers lost over $140,000 and out-of-state customers lost around $1 million doing business with the Charlotte-based debt relief company.

Advantage Debt Solutions charged customers around 15 percent of their total debt, but rarely provided any settlements. They also refused to provide refunds to customers who cancelled the service. Luckily, in the state of North Carolina, it’s illegal to collect upfront fees for debt settlement services.

“Steer clear of anyone who tells you to stop paying your bills and give them your money instead. Outfits that promise debt relief for an upfront fee most often end up driving consumers even deeper into debt,” Attorney General Roy Cooper said a statement. “Thanks to North Carolina’s strong laws we’re able to take action to stop these harmful schemes.”

If you are struggling with unmanageable debt, don’t risk losing more money to unscrupulous debt settlement programs. Speak with a local NC bankruptcy lawyer and find out if filing a Chapter 7 or Chapter 13 bankruptcy can help.  

Dedicated to helping residents of North Carolina find the best solutions to their debt problems. Don’t waste another day worrying about your debt. Call 1-888-234-4181 today to schedule a free initial consultation to discuss your bankruptcy options.

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