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In recent years, debt settlement companies offered people in financial distress what appeared to be a no-stress, easy and quick way to reduce or eliminate their consumer debt. But the reality was, unfortunately, far from what was advertised. The past year has seen some momentum in curbing these destructive practices by setting up new ground rules promulgated by the FTC that are forcing Debt Consolidation and Debt Relief companies to disclose the true nature of their proposals.Many people who engaged debt settlement companies found the results counterproductive to the goals they intended to achieve-reducing their overall debt and avoiding bankruptcy. They paid large payments, often upfront, and found paying off the debt took years. Further, they also discovered that using the debt settlement company to help manage their debt was destructive to their credit scores.Simon and Resnik LLP often advises Clients against using the debt settlement company route as a method of creditor relief. The process is often times mired with unsavoury individuals and/or companies that would ultimately just cost the consumer thousands more than if they were to file bankruptcy. In fact, disgruntled consumers have increasingly lodged complaints to the FTC and Better Business Bureau and therefore it came as no surprise that complaints against debt companies rose 18 percent from 2008 to 2009.

FTC Attempts to Rescue Consumers from Debt Settlement Schemes

Last month, the Federal Trade Commission (FTC) instituted new rules that will now force debt settlement companies to be more frank and honest with consumers who utilize their services.

Under the new rules, debt settlement companies are:

  • Banned from lying to consumers with guaranteed results including offering to cut debt in half or affordable payments
  • Required to provide consumers an upfront estimate of all costs involved in settling their debt in writing
  • Required to indicate the timeframe needed to reduce the debt to achieve the results as promised
  • Required to inform consumers of anything that may reflect negatively on their credit or FICO score

The new rules go even further in that they allow consumers to avoid paying the debt settlement company anything unless the company ultimately reduces, or even settles their debt.

As indicated above, “Debt settlement” often is far from what consumers think when they first venture in and trust the Debt Relief Consultant. We have found that Consumers are often misled and while attempting to avoid filing for bankruptcy, ironically, end up getting themselves deeper in debt and an endless slide of their credit scores.

Contact a Bankruptcy Attorney

Filing Bankruptcy may be the most effective and quickest way to immediately obtain Creditor Relief and start rebuilding your Credit. Today, many people in all demographics are turning to bankruptcy protection for help. It is a prompt resolution to the financial turmoil many people have found themselves trapped in.

If you are overwhelmed by your debt and you are considering bankruptcy, there is no better advice than to speak with an experienced bankruptcy attorney. A qualified and knowledgeable lawyer can answer questions and help determine if bankruptcy is right for you.

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