Debt Settlement Scams

Debt can often be a scary and overwhelming concern for many people. Creditor harassment can make a person desperate to make the problem go away. Many people, lured by promises that debt will go away, turn to debt settlement companies for help. Unfortunately, many debt settlement companies are running scams that only lead to more problems for a person struggling with debt.

Signs of traps

Debt settlement companies that run scams are a new threat to consumers. Basically, these companies promise consumers the impossible - a debt free life with very little effort and money put forth.

The companies making these promises, however, are having an extremely difficult time keeping them. When reality hits, consumers take the fall and sometimes end up having to pay more than their original total debt.

Signs exist that can give consumers warning that the company they are interested in is committing fraud. One of these signs is that the company encourages its clients to default on their current debts. When this happens, the person defaulting can find himself or herself facing fines and higher charges. Defaulting may not be a sound tactic and will not be a solution to the problem.

Another sign that a company is not trustworthy is if it asks for a high monthly service fee, or possibly a percentage of the money that they have already "saved" the consumer. These companies also tend to state that they can remove negative information found on credit reports. This simply cannot be done and is a way that companies lure in unaware consumers.

When the company behind the debt settlement scheme is found to be committing fraud, it may end up taking the person's money and disappearing without moving forward on any steps towards curing the individual's debt.

Bankruptcy as an option

A way to avoid these fraudulent companies altogether is to consider bankruptcy as a viable option.

Filing for bankruptcy no longer has the negative stigma that it once had. In fact, with a declining economy and difficult times, many Americans understand the need to file for bankruptcy. Bankruptcy gives a person struggling with debt the opportunity to have a fresh start and can be filed in a number of ways.

If a person files Chapter 7 bankruptcy, also called a liquidation bankruptcy, most types of his or her debts will be discharged as soon as the bankruptcy petition is approved by a judge. Although it is a common misconception that people who file bankruptcy have to surrender all of their property, most people who file bankruptcy are able to keep all of their property.

Filing a Chapter 13 bankruptcy is also an option. Under a Chapter 13 bankruptcy, filers agree to pay off all or part of their debt in a monthly payment plan that lasts from three to five years. After the time period, most of the filers remaining debts are discharged.

Chapter 11 bankruptcies are restructured payment plans and typically apply to businesses and those individuals with excessive debt.

Struggling with debt and facing fraudulent companies are challenges that no person should have to face alone. Contacting an experienced bankruptcy attorney is a wise choice and gives individuals the opportunity to discuss their options with a professional.