Looking for Help in All the Wrong Places…

November 6, 2007 7:51 pm Published by

        I remember a song that was popular maybe twenty years ago called "Looking for Love in All The Wrong Places".  As a bankruptcy attorney in Indiana I’ve worked for years and years with people who have credit problems.  Believe me, I can more than understand how many folks would snatch at any straw to avoid the "big, bad B word", namely b-a-n-k-r-u-p-t-c-y.  Sometimes people hear a commercial on TV or radio or read a sign or an advertisement, and in desperation turn for help with their money problems to "debt settlement agencies".

      The idea of a debt settlement agency is that such a firm has the person who needs debt help pay them money every month to be deposited into a trust account.  When the person has accumulated enough money in their account, the agency tries to work out a deal with the creditors for a reduced lump sum payment.  Say a client owes $2000 to Credit Card Company ABC.  The general idea is that the debt settlement agent would try to get ABC to settle for a payment of $1000, just to get that customer to pay something and get them off the books.

 Even without me telling you, you can probably see what some of the problems are with this situation.  While the money is accumulating in the client’s debt settlement account, the credit card account continues to pile up late charges and interest, making the situation even worse.  ABC has not guaranteed to anybody that they’ll settle for less money than they are owed.  (And, as you know, there’s no bank or investment account today that can earn as much interest as the credit card charges!)  So the debt settlement route could very well turn out to be a win-win situation only for the debt settlement company, and a definite lose-lose for the client.

      On another day, I’ll write a little bit about credit counseling agencies and bureaus, which  represent another way people try to put off a solid plan of getting out from under and starting to rebuild their financial lives.  The main thought I want to leave you with today is that some of these alternatives are often much riskier that bankruptcy and they don’t spell what debtors really want — R-E-L-I-E-F!

      If what concerns you is being charged for getting advice, take advantage of our free consultation policy, which allows us as experienced bankruptcy attorneys to go over all your options with you, one by one, including settlement offers to creditors.  The best plan for you may or may not include filing a bankruptcy petition.

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This post was written by Mark Zuckerberg

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