September 9, 2010

Why Bankruptcy Can Be Better than Debt Settlement

Bankruptcy%20clock.jpgWe see many clients who have tried working through debt settlement companies to avoid bankruptcy, only to discover that bankruptcy was the better solution for them after all. Why? There are several reasons.

Debt settlement costs you more. Even if a debt settlement company says they can settle your debt for half of what you owe, they do not do this for free. You still have to pay the debt, plus a fee – usually 15 percent of the total debt.

Creditors don’t have to settle. A debt settlement company cannot guarantee that all your creditors will agree to a settlement. If they do not, you are still responsible for the debt.

Your credit score will go down. A major portion of your credit score is dependent on paying your bills on time. If you are paying through a debt settlement company, even with the agreement of your creditors, your payments are still reflected on your credit report as late.

So how is bankruptcy a better solution than debt settlement? First, it will cost you less. You are not paying any fees to a middle party to settle your debt.

If you file bankruptcy, your creditors are obligated to follow bankruptcy law. If you file Chapter 7 bankruptcy, you pay nothing to your creditors. If you file Chapter 13 bankruptcy, the court will decide, based on your current income, what you can pay creditors and the process will be managed through a court-appointed trustee.

And even though bankruptcy does affect your credit score, once the bankruptcy has been discharged, you can start rebuilding your credit immediately – which is usually easier to do when you have the financial resources available now that your debt has been wiped out through the bankruptcy process.

Posted by David A. Wolf | | Email This Post

Posted In: Debt Settlement

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August 14, 2010

FTC Places New Rules on Debt Settlement Companies

Past%20due%20notice.jpgThe Federal Trade Commission has announced amendments to its Telemarketing Sales Rule that will prohibit debt settlement companies from charging fees in advance for settling or reducing a consumer’s unsecured debt.

In addition, the FTC imposed additional rules that will require debt relief companies to:

• Make specific disclosures to consumers, including precise details about the service they are providing, how much it will cost, how long it will take and any negative consequences a consumer may suffer by settling his or her debt through the service.
• Cease making misrepresentations as to success rates and purporting to be a nonprofit entity as well as providing evidence to consumers when making advertising claims.
• Require dedicated consumer accounts for fees and savings at an insured financial institution.

The new rules extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

The new rules go into effect on Sept. 27, 2010, and are in response to consumer complaints ab out debt settlement relief company fraud and misrepresentation. To date, the FTC has filed 259 cases to stop debt relief providers from using deceptive and abusive practices targeting financially distressed consumers.

Before you consider working with a debt relief provider, you should consider speaking with a Jacksonville bankruptcy attorney to learn about all your options for debt relief.

Posted by David A. Wolf | | Email This Post

Posted In: Debt Settlement

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May 13, 2010

Jacksonville Bankruptcy Attorney Highlights GAO Report on Debt Settlement Industry

According to a report out last week by the U.S. Government Accountability Office on the results of an investigation of the debt settlement industry:
GAO's investigation found that some debt settlement companies engage in fraudulent, deceptive, and abusive practices that pose a risk to consumers. Seventeen of the 20 companies GAO called while posing as fictitious consumers say they collect fees before settling consumer debts--a practice FTC has labeled as harmful and proposed banning--while only 1 company said it collects most fees after it successfully settles consumer debt. (GAO was unable to obtain fee information from 2 companies.)

In several cases, companies stated that monthly payments would go entirely to fees for up to 4 months before any money would be reserved to settle consumer debt. Nearly all of the companies advised GAO's fictitious consumers to stop paying their creditors, including accounts that were still current.

GAO also found that some debt settlement companies provided fraudulent, deceptive, or questionable information to its fictitious consumers, such as claiming unusually high success rates for their programs--as high as 100 percent. FTC and state investigations have typically found that less than 10 percent of consumers successfully complete these programs.

If you have questions about debt settlement options -- including bankruptcy -- in Florida, contact our Jacksonville, Florida bankruptcy law firm.

Posted by Keith Maynard | | Email This Post | Comments (0)

Posted In: Common Bankruptcy Concerns , Debt Collection , Debt Settlement

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April 12, 2010

Jacksonville Bankruptcy Attorney Examines Businesses on the Brink of Bankruptcy

One recent Investopedia article detailed five major companies “on the brink of bankruptcy”, and one Jacksonville bankruptcy attorney says these companies can provide a cautionary tale for other businesses.

The “on the brink” companies include:

Blockbuster – a once-robust business model that failed to change with consumer habits has lost major share to Netflix and Redbox and is burdened by debt.

Rite Aid – an ill-advised acquisition has buried this drug store chain under debt and competitors continue to steal share.

Borders – another victim of changing consumer habits, away from printed books to digitized book readers and content that can be purchased online at a much lower cost.

Palm – the former leader in smartphones has failed to keep pace with competitors like Apple and Research in Motion; a buyout may be its only hope.

YRC Worldwide – this Fortune 500 trucking company faces intense market competition and pricing pressure and has not posted a profit for four years.

The Investopedia article posits that if these companies cannot undergo a major restructuring (which can be accomplished through a Chapter 11 bankruptcy filing) or an acquisition by a competitor, they may collapse before the end of the year.

If your business needs information on debt restructuring or reorganization options, contact our Jacksonville, Florida bankruptcy law firm.

Posted by Keith Maynard | | Email This Post | Comments (0)

Posted In: Chapter 11 Bankruptcy , Debt Settlement

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April 6, 2010

Jacksonville Bankruptcy Attorney Cites Lack of Regulation for Increase in Debt Settlement Fraud

Florida residents burdened with large consumer and credit card debt often consider engaging debt settlement companies to help them pay off their debt at a reduced rate, but one Jacksonville bankruptcy attorney says that the lack of regulation in the debt settlement industry has led to greater increases in fraud and cautions consumers to be wary of promises that seem too good to be true.

Debt settlement companies often lure desperate Florida residents with promises of eliminating their debt or reducing it substantially in a short period of time, with no impact to their credit score.  These companies usually require a large fee upfront, before any work is done on the consumer’s behalf, which should be a red flag.

The Federal Trade Commission has recently brought suit against a number of debt-settlement companies, and is considering regulation to ban advance fees.  However, states are usually responsible for policing the practices of debt-settlement companies, and only a few have acted to date.  Florida is not on that list, even though the highest number of consumer complaints to the Florida State Attorney General’s office last year was about debt settlement companies.

While some debt settlement companies operate legitimately, Florida residents with burdensome consumer debt should examine all the choices, including credit counseling and even bankruptcy.

If you have questions about the options available in Florida to help you reduce your consumer debt, contact our Jacksonville, Florida bankruptcy law firm.

Posted by Keith Maynard | | Email This Post | Comments (0)

Posted In: Common Bankruptcy Concerns , Debt Settlement

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April 4, 2010

Jacksonville Bankruptcy Attorney Says Bankruptcy Often Better Than Waiting Out Debt

Every state has a statue of limitations – the period of time that creditors have to file a lawsuit against you -- for old debts, and one Jacksonville bankruptcy lawyer notes that it may be better to file bankruptcy than try to wait out your old debt in hopes that it will go away.

In Florida, the statue of limitations on open accounts, which include credit cards, is four years.  The period begins on the date you made your last payment or the date you last used the credit card.  For written contracts and promissory notes, the statue of limitations is five years, and for oral contracts it is four years.

Most consumers who have a large amount of credit card debt and cannot make payments believe that creditors are not likely to sue them.  This is not necessarily true.  Creditors take various factors into account when deciding whether or not to sue, including your age, employment status, property and marital status.  If you are still earning income or own property, and still have years of earning potential in front of you, that means that you could eventually pay off the debt – which would make a creditor more likely to sue you.

If you are eligible to file for Chapter 7 bankruptcy, your legal liability for these bills would be wiped out.  If you are not eligible, you can consider filing for Chapter 13 bankruptcy, which would allow you to restructure your debt and pay it off over a period of time, usually three to five years.

If you have a large amount of consumer debt and need help in making a good decision about your financial future, contact our Jacksonville, Florida bankruptcy law firm.

Posted by Keith Maynard | | Email This Post | Comments (0)

Posted In: Chapter 13 Bankruptcy , Chapter 7 Bankruptcy , Common Bankruptcy Concerns , Debt Settlement

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