What’s the Problem with Debt Settlement?

Today I got yet another client who was disgusted to have wasted his money with a debt settlement company. Why was he so eager to file bankruptcy? Just like many other clients before him, he was upset because he had just been served with a lawsuit from one of his credit card companies. This happens time and time again. In the fine print of his debt settlement contract, it states very clearly that the debt settlement company does not represent the client in the event of a lawsuit. Obviously, this is a tough thing because the client had already paid nearly $3,000 to the debt settlement company.

So, this particular client has now hired me to represent him in a Chapter 7 bankruptcy filing. After analyzing his case, I told him that I don’t anticipate any problems and that his case will be finalized within 4 to 5 months. And we’ll obviously be able to stop his credit card lawsuit in its tracks and wipe out that debt as well.

The reason we’re able to stop that lawsuit is the “automatic stay” of the bankruptcy case. It’s the law that stops all creditor activity against the person in bankruptcy.

Contrast that to the clients who are still working with the debt settlement companies who can’t protect them from creditor phone calls and harassment. What does this point to? It’s all in the automatic stay. It’s my office policy that once you retain my office with a signed attorney-client agreement, then you refer all creditor calls to me.

The bottom line is that the lack of an automatic stay is where the “debt settlement” process falls short.

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