Consumer Beware!

Christian consumers beware! We are warned to stay away from them by debt relief experts on radio, television and the internet! They have an “F” rating at the Better Business Bureau! Laws have recently been passed to prevent them from scamming us! Hundreds of them have been shut down by the Attorney General in the past two years.

Irrespective of these warnings, we continue to be deceived by them; thus setting ourselves up for lawsuits, excessive tax liability, and harassment.
Who are they? Debt settlement, often referred to as debt negotiation, companies and law firms.

If debt settlement companies are deceptive, why are we still buying into their sales pitches? Unfortunately, debt-settlement salespeople have been able to convince us that creditors and debt collectors will settle – in other words, agree to an amount less than what we owe – for fear that they may not get anything from us if we declare bankruptcy.

In reality, it is estimated that less than 70% of consumers are able to qualify for Chapter 7 bankruptcy, the form of bankruptcy that provides for discharge of debt. Moreover, consumers who have filed in the past are not eligible to file again for 8 years. Consumers who have filed for Chapter 13 bankruptcy repayment plans are also subject to waiting periods prior to filing for Chapter 7, dependent upon state bankruptcy laws.

The remaining 30% of consumers who are able to qualify for Chapter 7 may object to a requirement to liquidate property or other assets. They may also decide against filing for a Chapter 7 so that they can preserve credit scores in order to obtain employment or stay employed with the government or military.

Creditors and collectors are well aware of these bankruptcy filing restrictions! They are also aware that defaulted student loan debt can rarely be included in bankruptcy cases.

Consequently, contrary to the claims of debt settlement salespeople, most creditors and collectors are not easily convinced to settle debts because by doing so they give up a portion of their profits.

Think about it! If you were a creditor, why would you agree to less profit if (1) you could be assured of collecting attorney’s fees and court costs, in addition to the full balances of debts, and (2) your collection efforts were aided by court-approved liens of property, levies of bank accounts and garnishments of wages?

In Romans 13:8, we are encouraged to settle our debts, but, as Christians, how do we settle our debts if creditors and collectors are not agreeable or even violate the law?

Most creditors and debt collectors become highly cooperative when confronted with penalties resulting from their violations of our rights as spelled out in the collection and truth-in-lending laws.

For example, creditors and collectors of credit cards and student loans routinely violate the Telephone Consumer Protection Act (TCPA), which carries a $500 fine for each violation. That is $500 in your pocket every time a creditor or collection makes your telephone ring!

Attorneys in all 50 states are willing to bear expenses in filing lawsuits against violators of this Act. The goal of the suits is to accumulate monetary penalties in excess of debt obligations in order to compel the credit card and student loan banks to excuse the obligations, discontinue collection efforts and remove negative entries from credit reports. Consumers receive a portion of the settlements with, once again, no money out of pocket.

A secondary strategy is to challenge the banks that originate credit cards and student loans based on the fact that they have not been honest in their extension of credit and procurement of profits. This strategy does not require the involvement of an attorney or an appearance in court.

These two strategies have lengthy track records of success on behalf of struggling consumers. As such, they are far more effective than traditional debt settlement in motivating the banks as creditors, or attorneys as collectors, in agreeing to settle your debt.

If you’d like more information, contact me.

-Doug Johnson