Riverside County Bankruptcy Lawyer Blog
Consumers these days cannot help but be tempted by companies that are constantly advertising that they can save you 50% on the dollar for the debts that you have.
Debt settlement companies have multiplied like ants over the past few years and although some can get good results for their clients, many are just offering false promises. Some things that they might not tell you or you’ll find in the small print.
Your credit card balances won’t necessarily settle at 50% of what you owe currently. You will continue to get finance charges, late payments, potentially over the credit limit charges etc while you are falling behind on your monthly bills and waiting for a settlement. These charges can add up quickly.
Even on small debts the costs can be astronomical.
For example I had a client that had a Capital one card that was around 5000 in October and by April the account was 7500. They settled at 3200 but that is above 60% of what was owed and a good offer from Capital one who is notoriously stingy in terms of their settlements. The debt settlement companies would like you to believe that this is a 40% offer while in my mind its not. I have a fiduciary duty to my clients to explain how the process works and guide them through it or its my license on the line.
The same thing goes with putting your money in an escrow account with a debt settlement company. If they spend too much money on employees, advertising etc and you don’t get any benefit from their program, well your fees have been eaten up and your unlikely to get them back.
With me, you are putting your money in an attorney/client trust account, the majority of the money I make is once we settle your debt so you can rest assured that your getting the benefit of the bargain. Also, with an attorney client trust account, if anything is managed right with that money, once again its my license on the line. As an attorney I have a lot more fiduciary duties and responsibility to my clients and the amazing thing is I can charge less then most debt settlement companies and yet offer you a much better service. Why a bankruptcy attorney will be more versed in dealing with your creditors for debt settlement. Knowing the bankruptcy laws is extremely important in dealing with creditors during debt settlement negotiations.
Many times a creditors tactics is to have you make a payment immediately(many times that day or within a few days in order to take advantage of a settlement). They know that it will bring you to the table quicker than paying another creditor as well as other benefits they receive from these tactics. I never play these games, although it is typically true that you have to make at least one payment in the month you make a settlement, most times it just has to be there by the end of the month, every once in a while I’ll see the 15th, but its not typical. Here is one instance where I have used the bankruptcy code to help a debt settlement client. I had a client miss a payment (I give ample warnings, but it happens).
So what happens when you miss a scheduled payment? The money you’ve been paying towards your settlement goes to the principal balance and the settlement is void. I had a creditor try to strong arm me into paying a higher amount for the settlement because of the mishap on my clients end. I let him know that my client would be filing for bankruptcy and that all the payments that were made would be considered preferential payments to them and taken back by the trustee and redistributed equally amongst all the unsecured creditors. In a bankruptcy petition any payment over $600 within 90 days of filing bankruptcy is considered preferential and the trustee can take it back and equalize the playing field by redistribution.
That is the whole point of certain bankruptcies is to make sure unsecured creditors are paid equal portions. The creditor didn’t like that option so much so they reinstated the settlement on the original terms. This is just one way that I have used the bankruptcy code on behalf of my debt settlement clients .