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How Can I Protect Myself from Debt Relief Scams?

Debt is big business.  Companies and individuals use your debt as way for them to make money, but tend to leave you in further debt. Debt consolidation loans in Illinois, which compile all of your debt into one monthly payment, are often used in this manner.  These loans lure homeowners into using their houses as collateral to payoff unsecured debt—if you fail to make all of your payments or timely payments, you could lose your home.

The Illinois Attorney General recently reached a settlement agreement with a Chicago-based debt relief firm with nationwide operations.  The company, posing as a law firm, charged people who were struggling financially with expensive and illegal upfront fees for debt relief services that never materialized. The company agreed to pay $2.1 million in restitution to Illinois residents and further agreed not to solicit new customers in Illinois.

Unfortunately, there are many other debt scams in Chicago and Illinois.  The following are descriptions of how scammers typically operate:

  • Fake loan company scam – This scam guarantees that anyone can get a loan, but you have to pay upfront fees to get approved. Sometimes the fees are disguised as processing fees, taxes, insurance or collateral. The fees can add up to thousands of dollars.  Charging upfront fees for a loan is against both federal and state laws
  • Approved without application scam – This scam guarantees to provide you a loan before you apply. This is not the way a legitimate lender operates
  • Debt-negotiation program scam -In this scam, a company claims to make arrangements to pay off your credit card debt for pennies on the dollar.  During the negotiation period, the company requires you to make your monthly payments to them. In fact, the company doesn't negotiate or fails in its attempts, but keeps your payments.  In the meantime, you fall behind on your credit card payments and accrue late fees and ruin your credit.
  • Credit repair scam – These companies claim to erase bad credit or even create for you a new credit identity. Under the Credit Repair Organization Act, it is illegal for companies to charge upfront fee to repair credit.

Don’t let scammers put you further into debt.  If you are looking for debt solutions, contact DebtStoppers, Bankruptcy Law Firm. We help you through the means test process to determine if you qualify. Even if you fail the Chapter 7 means test, you may still qualify for bankruptcy under Chapter 13. DebtStoppers, Bankruptcy Law firm can help you determine which chapter will fit your needs.