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There are many Debt Consolidation Services available. These services generally provide you with a friendly and personable “Credit Counselor” (who is being paid on commission) to meet with you and convince you to make monthly payments to them, as a way of paying off your debts. I strongly urge you not to go to these Debt Consolidation Services without the assistance of an attorney, as I have met with numerous individuals who have been misinformed, defrauded, or otherwise cheated by these organizations.
These people are very sophisticated and experienced operators who have vast experience in convincing individuals to use their services. The individuals who go to them for assistance are people who are honestly trying to avoid Bankruptcy, are upset about their financial situation, and are especially vulnerable to these operators. When you go to them for assistance you are like a sheep walking into a den of wolves. You will be fleeced very quickly.
The first thing that will happen to you is that your counselor at the Debt Consolidation Service will get you to sign a Contract that you will absolutely not understand, and which will allow the Debt Consolidation Service to take much of your monthly payment as their fee. These fees do not reduce your debt, but are taken as their profit from you. Often, many of the payments that you make, along with a percentage of all other payments made by you, will be taken by the Debt Consolidation Service, and will not reduce your debts. Debt Consolidation Services also receive fees from the Credit Card Companies for managing your plan. Often, these services will not even clearly tell you how many payments you will be required to make under the plan. This is why many people notice that after making numerous monthly payments to the Debt Consolidation Service, that their debts have barely been reduced. Of course by then, it’s too late.
The following are common questions from clients:
Question – I was told by the Debt Consolidation Service that they are a Non-Profit Corporation. Doesn’t this mean that the United States Government regulates them and makes sure that I will not be cheated?
Answer – Absolutely Not. The only reason that these services are Non-Profit, is because they want you to believe that they are a charitable organization that is licensed by the government to help you. There is no reason for them to be a Non-Profit organization except that they do so in order to make you feel comfortable about using them and giving them money. Many of these organizations have sister for-profit corporations that they send their profits to, in the form of inflated rental payments and consulting fees, which eventually end up in the hands of the owner. Also, the fact that they are a Non-Profit corporation does not in itself offer you any protection from being cheated.
Question – I signed up with a Debt Consolidation Service to pay off my $10,000 in debt. They agreed to accept $500 per month for three years. I made the payments for one year, but now one of these creditors who was accepting my payments changed their mind and has now sent my account to a collection agency who has refused to accept the monthly payments. This Creditor has now demanded full payment immediately, and has now sued me. What do I do now?
Answer – This is another major problem with Debt Consolidation Services. The contract that you signed with them but did not understand, required that you make payments to your creditors, and to pay many fees to the Debt Consolidation Service. The contract did not obligate your Creditors to continue to accept your payments. They can always change their minds and sue you in court, and freeze your bank accounts. This may come as a surprise to you after you made most of the monthly payments that were required of you. Of course by then, it’s too late.
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