Beware of Debt Settlement Plans

As a Fort Lauderdale bankruptcy attorney,  I have repeatedly seen clients attempt debt settlement plans where they pay for months to a company who first retains large sums of moneys as fees and  then holds  funds to try and settle at discounts, one creditor at a time.  Credit is still ruined, the clients often cannot continue to make payments, and the clients need to file bankruptcy after having  wasted their hard earned income.  If you can save money to settle, you can try this on your own.  (Be aware if you do settle you will receive a 1099 for taxable income for forgiveness of debt.)

On July 31, 2010, the Sun Sentinel reported that the Federal Trade Commission is cracking down on debt settlement companies.  Some of these companies have actually stolen client’s funds.  The new rules will prohibit companies from charging a fee prior to a settlement, require safeguarding of client funds in separate accounts, and disclose the time period it will take to settle.  Hopefully, these new rules will prevent abuses that have led to state attorney generals in over 20 states to sue debt management companies.   If you chose a debt management company and plan, be sure you understand the terms of the plan, consider whether the payment terms make sense, and attempt to verify the legitimacy of the company.

Consult an attorney prior to entering any debt management plan.

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