My colleague, California bankruptcy lawyer Cathy Moran, has written an interesting blog post about debt settlement companies. I regularly meet with clients who pay debt settlement services fairly hefty fees to "negotiate" debt settlements.
Often, the debt settlement company can do little to actually resolve the debt, especially if the debtor has limited cash resources. Cathy brings up a point that I had not previously considered – some of these debt settlement companies market their services as an "alternative" to bankruptcy and may prey on the natural aversion many hard-working consumers have to the entire idea of bankruptcy.
Most of the clients I see make statements like "I never in a million years thought I’d be talking to a bankruptcy lawyer." No doubt the sales training in the debt settlement industry encourages the sales operators to emphasize that their solution is not bankruptcy.
Unfortunately, as Cathy points out, when a debt settlement plan does not work, the debtor is not only out a large fee, but he may have multiple judgments, pending garnishments and other problems that would never have happened if the debtor had been steered to bankruptcy in the first place.
Because of its power, bankruptcy can address advanced debt problems like judgments, foreclosures and garnishment, but make no mistake – cases that require multiple motions to avoid lien, complaints for turnover or other litigation will be most costly, time consuming and stressful.
Forums like Cathy’s blog (and a new multi-lawyer bankruptcy blog where both Cathy and I participate) are designed to remove the mystery from the bankruptcy process and allow debtors to make informed decisions. One of the themes you will see over and over on this blog has to do with timing – begin your research into bankruptcy and non-bankruptcy alternatives before your situation becomes an emergency.
[tags] debt settlement companies, Cathy Moran, bankruptcy blogs, debt negotiation [/tags]