4 Signs of Debt Settlement Scams: What You Need to Know

August 20, 2015

When people are overwhelmed with debt, one option for debt relief can be debt settlement. Typically, with debt settlement, companies offer “programs” through which consumers may be able to reduce their overall debt obligations. These programs generally involve consumers depositing money into a designated account for a certain period of time while the company attempts to negotiate with creditors to “settle” the debt for a fraction of its total value.

While this sounds good on paper, unfortunately, however, the debt settlement industry is home to some unscrupulous companies that, rather than helping people resolve their debt issues, will only end up making them worse.

If you are considering debt settlement as an option for resolving your debt issues, keep reading to learn the signs of scams so that you don’t end up being the victim of one.

Red Flags of Debt Settlement Scams

  1. Considering a debt settlement program? If so, make sure you know the signs of scams first, a Colorado Springs bankruptcy attorney explains.

    Considering a debt settlement program? If so, make sure you know the signs of scams first, a Colorado Springs bankruptcy attorney explains.

    A company charges you fees before settling any of your debts – By law, debt settlement companies are not permitted to charge their full fees before having provided any services. In other words, these companies are only allowed to charge a portion of their fees for each debt settled. So, if you are asked to pay for debt settlement services in full, upfront and before any of your debts have been settled, you are likely dealing with a company that is not looking out for your best interests/may be scamming you.

  2. A company guarantees that it will resolve your debt issues – There are no guarantees in the world of debt settlement because creditors are by no means obligated to agree to a settlement. While creditors are usually more likely to negotiate a settlement when the alternative is not getting paid at all, be suspicious of guarantees and the companies that throw them around.
  3. A company fails to explain the potential impacts of not communicating with your creditors – Oftentimes, debt settlement companies will tell people to not directly communicate with their creditors as the company works on negotiating a settlement. This can have some downsides for debtors, such as creditors possibly pursuing legal action against them. When debt settlement companies do not explain such potential downsides to consumers, again, they can be misrepresenting their services – and possibly scamming debtors.
  4. A company tells you that it will stop all creditor communications and lawsuits against you – The only way to definitively stop creditors from communicating with you or suing you (or trying to repossess your property/garnish your wages) is to file for bankruptcy (because a court injunction known as the automatic stay will take effect once a bankruptcy petition has been filed). Debt settlement companies that promise this will, at the very least, be misrepresenting their services. More likely, however, they will be trying to scam you.

For more extensive info about debt settlement scams, check out the FTC’s info about them here.

Contact a Colorado Springs Bankruptcy Attorney at the Law Office of Jon B. Clarke, P.C.

When you want to legitimately and effectively resolve your serious debt issues, contact a trusted Colorado Springs bankruptcy attorney at the Law Office of Jon B. Clarke, P.C.

To find out more about your best debt relief options, as well as how we can help you obtain the financial fresh start you need and deserve, contact us today by calling (303) 779-0600 or by emailing us using the contact form on this page. We also encourage you to complete our Business or Consumer Debtor Analysis Form so that we can provide you with professional advice that is as specific and helpful as possible.

From our offices based in Denver and Greenwood Village, we provide people throughout Colorado with the highest quality debt relief legal services.

Categories: Debt Settlement