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How “Debt Resolution” Can Get You Deeper into Debt

You may have seen ads or received direct mail from a “debt resolution” service promising they can settle your credit card debt for a fraction of what you owe. That may sound like just the solution you need, until you discover how they intend to do it. They want you to challenge the banks to a game of “chicken,” where you face all the risks and they get paid huge fees up front. If the scheme fails, you still have all your credit card debt, plus penalties and interest, and you’ve paid the debt resolution firm several thousand dollars in the bargain.

Here’s how it works. You sign a contract with the debt resolution firm, whereby you agree not to pay your credit card debt. Instead, you deposit an amount roughly equal to your total credit card payments into an escrow account. The plan is to withhold payments to leverage a settlement from the bank that you can quickly pay off with the funds piling up in escrow. Unfortunately, the first nine months or so of those payments go to cover the firm’s fees, as does 15 percent or so of your payments afterward. So, you’re not really piling anything up during the first year.

Meanwhile, your bank is getting impatient. They report your nonpayment to the ratings companies, so you credit rating falls through the floor. Then they sue you. That’s when you learn that court representation is not one of the services your debt resolution firm offers. If you want them to file an answer to the complaint, that costs extra. The bank easily wins a court judgment for the amount of money you owe on your credit card.

The banks holding your other credit cards take the same stance. You’ve got more lawsuits. More judgments against you. You played chicken with the banks, but the banks didn’t blink. In the meantime, you’ve paid the ineffective resolution service four to five thousand dollars. They advise you to “stay the course. The banks are bluffing.” That’s when the first bank petitions the court to garnish your wages.

Now you need real protection from your creditors, the kind you can only get from bankruptcy laws. If only you’d considered bankruptcy first, you wouldn’t have lost an additional $4,000 to $5,000. But you can’t even think about that, because you need effective assistance now. That’s when you call DebtStoppers.

Our firm provides consumers with effective debt resolution through Chapter 7 and Chapter 13 bankruptcy. If you’re searching for the best option for resolving your debt, we can advise you on the best course of action for your circumstances. Call us today at 312-913-0630 or contact us online to schedule a free consultation.

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