Helping With Your Financial Future

Be aware of these common debt settlement scam tactics

On Behalf of | Aug 17, 2023 | Chapter 7 Bankruptcy

If you are like many others in California, you struggle with debt. If you have trouble paying even after taking a variety of measures, you might be a good candidate for debt settlement. When considering this option, it’s crucial to be aware of these common scams.

Understanding debt settlement

Debt settlement is a way to alleviate your financial obligations if you are reluctant to file for Chapter 7 or Chapter 13 bankruptcy. It requires entering into an agreement with a debt settlement company and ceasing payments to your creditors. Instead, you make payments to the company so the funds go into an escrow account. The company then negotiates a lower payment amount with your creditors to settle the debt. If your creditors agree, the debt settlement company makes payments on your behalf over a period of two to three years.

Debt settlement scam tactics

If it seems too good to be true, it often is. This is the case with debt settlement scams. Your guard should immediately go up if you get any guarantees from a company saying that you can lower your debt or completely eliminate it.

Robocalls from a debt settlement company are fraudulent. A legitimate company will not call you with a recorded message, nor will it require your personal information during an initial phone call.

Another red flag to look out for is an upfront fee. No legitimate debt settlement company requires such a payment; this is also illegal per the Federal Trade Commission. It’s also a scam if the company tells you to avoid all contact with your creditors. Although you are supposed to stop paying them once you enter into an agreement with a reputable company, you don’t have to stop all contact.

A legitimate debt settlement company is easy to find online. If you can’t find any information about a particular one and the services it offers, it’s probably a scam.