Saturday, October 3, 2009

Debt Adjustment Company Fraud

Economic conditions in North Carolina and throughout the Nation are putting a strain on consumers’ ability to repay their debts in a timely fashion. Many households are weighed down by an enormous amount of debt and falling further behind by the day. Not surprisingly, many companies have sprung up in the recent months promising to negotiate with creditors and create a debt repayment plan. Typically, the consumer pays a portion of his debt directly to the company as an engagement fee and then continues making payments to the company under the assumption that the money will indeed go to his creditors. Unfortunately, many of these corporations are scams and leave the consumer with more debt and ruined credit.

Under North Carolina Law, it is a criminal violation for any individual other than an attorney to negotiate a debt adjustment. Additionally, corporations can be in violation of Federal Law if the corporation gives advice on whether or not to file for Bankruptcy. Under the Bankruptcy Reform Act of 2005, anytime bankruptcy advice is given, the consumer is required to sign several disclosures. These disclosures are typically not provided by debt adjustment companies.

Michael A. Dye, Esq., a bankruptcy attorney in Wake County and partner at The Ward Law Firm stated, "For years I have seen people fall victim to these scams. Typically, the debt adjustment company tells an individual to pay them up front on a payment plan and to ignore their creditors. They reassure the client that while the collections department is harassing him, 'behind the scenes,' they are really negotiating the debt. I've never met anybody who was actually helped by one of these companies. I've never met anybody who's debts were actually settled by these companies. If a consumer really needs to reorganize his or her debt, usually a Chapter 13 Bankruptcy is the best form of relief. Fortunately, there are remedies and under many circumstances a consumer who has fallen victim to this scam is able to get his or her money back." Source: Michael A. Dye.

Warmest Regards,

Bob Schaller

Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm

Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.

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