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Debt Relief Companies May Not Be Safe Choices

Debt relief sign

If you’ve been facing mounting consumer debt and are not sure how you’ll find a way out, you may have begun researching ways to reduce the amount of debt you’re facing. You may have come across debt settlement or debt relief companies, touting their ability to reduce your debt so that you ultimately pay only a portion of what you owe without having to go through the bankruptcy process. These companies may seem as though they’re offering something too good to be true—and in many cases, that’s precisely what they’re doing. Learn more about debt relief companies below.

Debt Relief Explained

The debt settlement and debt relief companies you may have encountered doing internet research offer a service that can be a valid alternative to filing for bankruptcy. The company will make an offer to settle your debt with your creditors for a lump sum lower than the total amount you owe. Typically, the debtor will then make monthly installment payments over the course of at least three years on that lump amount. Debt settlement companies often require that participants not make payments on these debts directly to their creditors during this period, instead making payments only to the debt settlement company. They do not, however, always explain the risks involved in these types of arrangements.

What debt settlement companies may not be telling you

While settling your debts is a legal alternative to bankruptcy, it isn’t an option for all debtors. Some creditors refuse to settle, even though the debt settlement company guaranteed success to the debtor prior to enrolling. Other times, the debtor cannot meet the monthly payment set for them by the settlement company, and eventually fails out of the program. Unfortunately, these settlement companies do not always mention that late fees can continue to accrue, damaging your credit severely, and that creditors can still sue you for your unpaid debt while you’re participating in a debt settlement program. Additionally, some debt settlement programs charge exorbitant fees for these services.

Watch out for signs of a dangerous debt settlement company

If you notice any of the following when considering a debt settlement company, steer clear:

  • The company guarantees the success of the program, and that you’ll pay only a fraction of what you owe.
  • The company provides no warnings of the risks entailed in debt settlement. Such warnings are required under federal law.
  • The company charges you fees before it has settled any of your debts. This is illegal, as fees can only be imposed once the company has reached a settlement with at least one of your creditors.

Rather than take a risk on a possible scam, find a reputable and trustworthy California attorney to attempt to settle your debts on your behalf. A licensed attorney can negotiate with even greater authority with creditors and determine whether they have behaved in accordance with the law while attempting to collect your debt, and if debt settlement fails, you will already have a lawyer you can trust to help you file for bankruptcy.

For assistance with excess consumer credit debt from medical expenses or credit cards, contact the knowledgeable and experienced Ventura bankruptcy and consumer law attorneys at Rounds & Sutter for a consultation on your case, at 805-650-7100.