Warning: Never hire a debt settlement company

From: Asian Journal

May 13, 2020

By: Atty. Raymond Bulaon

 

A LOT of people who are burdened with credit card debt often don’t know where to turn for help. They see all the ads on TV, internet, etc. by so-called “debt consolidation” or “debt settlement” companies hoping that this will get them out of debt without filing for bankruptcy. More often than not, however, they end up either getting scammed or disappointed when those companies cannot deliver the big promises made. Buyer beware: Hiring a debt settlement company can actually make your debt problems worse and keep you in debt forever. I am sure this is not what you want, is it?

What a lot of people don’t realize is that when they hire a debt settlement company, it doesn’t mean that they are now legally protected from their creditors as long as they are making their monthly payments to the debt settlement company. The debt settlement company, after deducting their fees, simply saves the money in a trust account and will only be able to settle with creditors one by one as money accumulates. So, if they put you on a 3-5 year plan, that means there will be a very long wait for creditors to get their money if they even do.

Most of your creditors will not wait that long to get paid. So, what happens? They will sue you! And if they do, the debt settlement company is not going to be able to represent you because they are not lawyers. In the meantime, your debts are still growing because of the added interest, penalties and other collection costs. This is NOT the best way to consolidate your bills. While you are on their program, the creditors will also continue to report damaging information on your credit report until the debt is paid. This is not what you want, is it? Of course, the debt settlement companies will not tell you that.

In my opinion, if you wish to consolidate your bills, there is nothing better than doing it through a Chapter 13 bankruptcy. Here are the advantages: (1) You pay 0% interest on credit cards and other unsecured debts. This means all your payments go towards principal. (2) You can be totally debt-free in 3-5 years, (3) In most cases, you only pay based on what you can afford, not based on how much you owe, (4) Your monthly debt payments can be slashed by at least half in most cases, allowing you to have extra money for other expenses, and (5) All kinds of debts can be included in Chapter 13, not just credit cards. So if you have unpaid taxes, medical bills, payday loans, personal loans, student loans, late mortgage payments, etc., all of these can be included in one affordable monthly payment.

So if you are struggling every single month even just making minimum payments, you’re probably feeling frustrated because you realize that there is just no way that you can pay all your debts anytime soon. Some people get stressed out once they realized that they owe so much that it is simply not possible to ever become debt-free with the amount of debt they have accumulated given their monthly income.

Well, Chapter 13 can be a game changer for you. If you have not explored this legal option, perhaps you should.

Finally, the greatest advantage of filing Chapter 13 vs. hiring a debt settlement company is that in Chapter 13, you are 100% protected from all creditor lawsuits, judgments, liens, garnishments, etc. Once your creditors are notified of the filing, they also cannot report you as being late to the credit bureaus anymore. Your credit report will show that your debts are being paid through Chapter 13. Seven years after filing a 13, the bankruptcy will be deleted from your credit report. If you need to purchase a home or a car while in Chapter 13, this is also possible provided that you obtain court approval for the purchase. This is quite common.