04 Feb Debt Settlement Plans Examined
That bastion of conservative financial thought, the Wall Street Journal, has a telling piece about the effectiveness of debt settlement plans.
Mr. Bowman paid hundreds of dollars in up-front fees and made regular monthly payments of $249 to Hess Kennedy, but the Coral Springs, Fla., firm never settled any of his debts, he says. By the time he dropped out of the program this summer, Mr. Bowman says, his debt had ballooned to about $20,000, due to interest and late fees, and creditors were threatening to garnish his wages. Finally, he filed for bankruptcy last month.
“I wish I had done that to begin with,” Mr. Bowman says. “I’d have been much better off.”
As the economy weakens, a growing number of consumers are paying big money for services from debt-settlement companies that purport to help them settle their debts for a fraction of what they owe. But as Mr. Bowman’s experience shows, customers can end up wishing they hadn’t sought such help.
If you are considering such a plan, read the entire article. The Journal makes clear the difficulty of navigating through the scam artists and even the well-meaning but ineffective plans. The journal points out that even non-profits are under scrutiny. To my mind, the worst of these are the ones that masquerade as legal services:
And though many debt-settlement companies are set up to look like legal services, “usually it’s a sham,” says Norman Googel, an assistant attorney general in West Virginia. Consumers often don’t receive any legitimate legal services, “and the lawyer is like the Wizard of Oz back there behind the curtain,” Mr. Googel says.
(Okay, how could I resist quoting a lawyer named Googel? The Journal couldn’t.)
Before deciding to try one of these services, do your research, and consult with a real lawyer. That way you’ll have a better idea of what to expect, and you’ll be better prepared to decide whether debt settlement or debt management is a good idea for you.
Bankruptcy Law Network (BLN)
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