An important part of my job as a debt consolidation lawyer offering Indiana bankruptcy help is reading. Remember, I need to offer Indiana bankruptcy information to clients and readers, and I have to stay informed. The Journal of Consumer Bankruptcy News is especially helpful, because it keeps me informed of all the court cases that have to do with personal bankruptcy in Indiana and all across the country. Today I want to share an article that reinforces my warnings about debt settlement firms.
A Kansas debt settlement company named Persels enrolled 681 debtors in debt settlement programs. More than half the debtors terminated within six months, and by the end of the year, 485 had dropped out.
- What was this all about? A debt settlement company signs up a person who needs debt help and has that person pay them money each month to be deposited into a trust account. When enough money has accumulated, the agency tries to work out a deal with creditors for a reduced lump sum payment.
So, what do I, a debt consolidation lawyer with more than 25 years’ experience offering Indiana bankruptcy help, find so wrong with such an arrangement? A LOT. Just so that this would not all be coming from me, I asked my colleagues in three of the five Indiana Zuckerberg bankruptcy law offices what they find wrong with it.
From the Columbus bankruptcy lawyers:
While the money is accumulating in the trust account, the creditors continue to pile on the penalties and late charges and interest, making the debtor’s problem worse.
From the Richmond, Indiana lawyers for bankruptcy:
The creditors have not made any promises to settle the debts for less than the amount owed. The debt settlement company cannot guarantee that the creditors ever will settle!
From the Bloomington bankruptcy attorneys:
The upfront fees charged by the debt settlement company eat up a large part of the money, prolonging the period before any money at all can build up in the account. Money used to settle one debt may leave nothing to settle on other debts.
My own summary of the situation: Looking for help in all the wrong places!
“Peddling relief, firms put debtors in deeper trouble,” wrote the New York Times.
The specific story in the Consumer Bankruptcy News article shos every one of these drawbacks to debt settlement plans:
Mr. K. had $14,000 of credit card debt.
He was told to pay to the Persels debt settlement company $100 up front, then 15% of his debt.
- Mr. K’s payments would be $162 a month, of which $140 would go towards Persels’ fee for the first five months, then $100 fee per month for the next 13 months.
Bankruptcy in Indiana readers – do the math! How could this possibly succeed??
Over the first few months of the debt settlement plan, Mr. K. paid $1,115 into his plan, with $915 of it going to the debt settlement company. Two creditors then sued Mr. K.. Since the debt settlement company hadn’t “settled” anything at that point, Mr. K. was forced to file bankruptcy Chapter 7.
Can you see why I keep trying to get across the message that legal advice, not debt settlement, should be the first stop, never the last resort for anyone whose debt is beginning to get out of control?
Categorised in: Bankruptcy Indiana
This post was written by Mark Zuckerberg