Debt Settlement Scam

Along with the genuine debt settlement companies, there are plenty of scams out there. Any company who does not fulfill the points mentioned in "how to choose a debt settlement
company" article, would definitely be a company that you are not looking for. These scams prey on you and earn as much as they can leaving you in a distress.

The debt settlement scam companies charge you high fees. They take monthly payments but don't make payments to the creditors each month; instead they make lump sum payments when there are enough funds in the debt settlement fund account. The creditors don't wait for that long and sue you. Scam companies don't negotiate with creditors to stop late fees and over limit fees from accruing. During the negotiation your balance keeps up increasing. These companies keep the program secret too and tell you a little or no information about how they will work with the creditors before you sign the agreement with them.

What will happen if you choose a scam company?

For example, you have hired a debt settlement scam company and you have $20,000 in unsecured debt. You have three creditors to whom the debt amount payable is $10,000, $6,000 and $4,000 respectively. You have signed on a 5 year plan where you will have to pay $250 to the settlement company. They say that you will have to pay $250 each month for 5 years. The total amount that you will pay towards the debt is $15,000 and so you save $5,000 at the end of debt removal.

At the start, the debt settlement comapany takes the the first three payments that is $750. From the fourth month onwards the settlement company charges you a fee of $50 dollars and the rest $200 dollars are added to the settlement account. They say that they will get you a 50% settlement as well. Now, we take your lowest debt i.e. $4,000 and work with it. Your scam company gets you a 50% settlement on it and it becomes $2,000. It should take 10 months at $200 per month to pay it off. Since the first three payments went to the company, the total time to have this much amount in the funds account will be 14 months. Creditors don't agree on half payments until or unless it is paid in full, other wise the monthly payments have to be made. To get 50% settlements you will wait for more then a year and will stop paying the creditor the monthly payments to collect the amount i.e. $2000. What will happen is that they will take you to court for defaulting garnishing your wages as the creditors are quite rushed in reacquiring the money lent.

Relating to the other creditors to whom you owe larger debts, would they wait for an even longer period of time. The credit card debt of $6,000 will take 15 more months and what about $10,000 debt. The fact is that these scam companies don't negotiate properly with the creditors and the one who suffers badly is you. Hundreds of such scams are investigated by Federal Trade Commission. In case you have suffered such a loss, you must file a complaint against them with your Consumer Affairs or Better Business Bureau.