How Helpful Are Debt Settlement Companies?
Debt Settlement Agencies are companies that will communicate with a debtors creditors in order to reduce one’s debts. These companies reduce the need for the creditor and the debtor to interact which is alluring to debtors who wish to end phone calls from their creditors. These companies often quote their clients a small fee and that their debts will be greatly reduced if not irradiated.
Debt Settlement Companies seem to have the solution to debt with their promises of completely eliminating debt while only collecting a small fee. When the solution seems so simple, and cheap why would someone opt for bankruptcy? Bankruptcy attorneys, unlike debt settlement organizations, are able to protect their clients from wage garnishments, liens on their property and lawsuits by their creditors. Filing for bankruptcy can also ensure that you will not face trouble once you have reached the bargaining stage in your settlement process.
In some states debt settlement organizations are not legally allowed employ certain legal strategies during bargaining that attorneys are able to. If a debt settlement company uses these methods to attempt to reduce or discharge your debt the contract you have with the settlement company may not be acknowledged in court. Another path through which your contract with a debt settlement agency would be seen as void in a court is if your state has a law that only allows for “debt adjustment” to be done by a certified nonprofit organization or an attorney. Losing the validity of your contract with a settlement agency would undercut all that you have paid the settlement agency for their services and they would not be allowed to aid you any longer in your settlement process. Filing for bankruptcy can protect you from this unpleasant turn of events during the bargaining stage.
Another reason to chose bankruptcy is that it is a cheaper alternative to a debt settlement agencies. Bankruptcy attorneys base their fees on the complexity of your case and the type of bankruptcy you are filing for while debt settlement companies take a percent of your debt, usually 15-20%, as a fee for their services. This can greatly increase your financial woes for if your debt settlement agency is unable to reduce your debts you owe another large amount of money to the settlement company.
Debt settlement agencies promise to discard your debts however the federal trade commission states that these claims are not backed by facts. Debt settlement agencies are not given any additional powers by the law, especially not any that can pardon you from your debts. Bankruptcy is a process that was created by the law to aid those in debt which gives you a structured procedure to reduce your debts. If the law were to favor any one channel to reduce or eliminate debt wouldn’t it be the one it be the one that involves an attorney, someone the law has granted power to, and the process that the law created?