Minnesota Debt Settlement Schemes

24 Oct Minnesota Debt Settlement Schemes

If you are thinking about doing debt settlement in Minnesota you should be aware of the pitfalls associated with debt settlement. The debt settlement industry by its own admission states that 2 out of 3 of their clients will fail in the debt settlement process. The actual number is actually below 10% of debt settlement clients will achieve a successful conclusion to their debt issues.

The following link is a PDF article written by the National Association of Consumer Bankruptcy Attorneys

http://www.nacba.org/Portals/0/Documents/NACBA%20Docs/NACBA%20debt%20settlement%20trap%20consumer%20alert.pdf.

This article goes in depth about the problems with debt settlement.

I have seen the problems with debt settlement first hand from working from the perspective of a creditors attorney and bankruptcy attorney. When I worked as a collections attorney most people were shocked to find out that they were being sued. They always thought that the debt settlement company was handling their debt issues. In reality the debt settlement company would simply write a letter to the creditor saying they could not contact the debt settlement companies clients. This meant the only option open to the creditor was filing suit to attempt to collect the unpaid debt. What this lead to for the person in debt was the debt settlement company just made a bad situation worse. They went from having an unpaid debt with a collection agency to being sued for the unpaid debt.

In most cases the debtor would not respond to the creditors lawsuit resulting in a default judgement. Once the creditor has a default judgement in Minnesota they are able garnish wages, bank accounts, and request personal financial information to aid in the collection of the debt. I have talked to clients after they are garnished and in most cases they are no longer able to afford the most basic living expenses. Once they lose 25% of their wages they have to choose between the home mortgage, food, and other basic expenses. Most clients I see do not have any reserve fund for emergencies and are the most susceptible to wage garnishments.

Most of the before mentioned problems could be avoided in the debtor would have sought proper advice about their debt situation prior to hiring most debt settlement companies. If a client seeks legal advice they are then able to make an informed decision about bankruptcy vs debt settlement. Most attorneys who do bankruptcy will also be able to help with debt settlement. In my experience bankruptcy is a much better option for 95% of the clients I see than debt settlement. This does not mean that debt settlement is never a good option, since some client do benefit from debt settlement. The problem with debt settlement is that it is often more expensive than bankruptcy (cost of debt settlement service and cost of settling the debt), and the debtors who want to settle the debt are the ones least able to afford the service.

I am in the business of helping people get back on their feet financially, so I do not like seeing people get ripped off by these debt settlement companies. Most debt settlement companies prey on people who are desperate to get rid of the debt and the phone calls, and do not give proper advice about how they can actually help their clients. If you are thinking about debt settlement you need to talk to a bankruptcy attorney at the same time, to determine the best option for you.