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Why All the Upfront Fees for Debt Resolution Services?

If you’ve fallen behind on credit card or loan payments, you may be curious about the direct mail advertisements you’ve been getting from companies calling themselves “debt resolution services.” They promise to help you settle your debt for significantly less than you owe. It sounds great until you find out you have to pay them thousands of dollars first!

Most debt resolution or debt settlement businesses contract with you to handle settlement negotiations with your credit card companies. How can they get the banks to agree to settle for less than what you owe, you might wonder? They hope to have leverage when you stop paying your bills and instead put that money into a separate bank account that they control. The longer you go without paying your bills, the more willing the credit card company will be to settle for less. Or so the reasoning goes.

Great, you think. You’re not paying any more than you would if you met your bills, and you’ll pay them off even faster in the end. But when you look at the debt service’s schedule of fees, you realize that most of their very expensive fees are front-loaded. This practice has been controversial for years, and the Federal Trade Commission has written rules against it, but debt settlement companies keep finding ways around the law. So, for the first six months or more, you’re not accumulating any funds to pay down your credit cards; almost every cent is going to the debt service’s fees!

Meanwhile, during the first six to nine months, your credit rating tanks and credit card companies are threatening to sue. When they do sue, you find out that none of those fees you’ve been paying go to legal representation. If you want an attorney to file an answer to the lawsuit, that’s going to cost you extra. And what happens if your credit card company decides it’s not going to play ball with the debt settlement company? Once your creditors get a court judgment affirming the amount you owe, they can ask the court for an order to garnish your wages. Eventually, your creditors are taking payments directly from your paycheck but you’re still paying your high monthly fees to the settlement company.

There is a better way. At DebtStoppers, our Atlanta bankruptcy attorneys can help you discharge much of your burdensome debt and get a fresh start. Our fees are very reasonable, especially when compared to the thousands of dollars that debt settlement companies charge. Plus, we give you highly personal and responsive legal representation throughout every step of the process.

Find out if filing for bankruptcy is the right choice for you.  Call DebtStoppers at 404-796-7161 or contact our office online to schedule a free consultation.

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