San Francisco Bankruptcy Lawyer | Credit Debt Management | Debt Settlement | Debt Consolidation

If you are experiencing financial difficulties, approach credit debt management companies (aka debt settlement and debt consolidation companies) with caution. Speak with a San Francisco bankruptcy lawyer before committing yourself to their costly plans. A significant portion of our clients come to us after having spent hundreds or thousands of dollars on these companies, only to find that they have been sued, and these predatory businesses are not responsive to their questions and needs.

Moreover, many of these debt settlement, debt consolidation or credit management companies have been sued and/or shut down by the Federal Trade Commission and attorney generals in various states for numerous violations against consumers. Many of these businesses require exorbitant amounts of “good faith” money paid up front, and substantial monthly payments with no guarantees of settlement. JC Law Group thus recommends that those suffering financial distress approach these companies with heightened caution. It is recommended that anyone considering employing such a company speak with a San Francisco bankruptcy lawyer to explore all options before entering into a contract with a credit management company.

A far too typical scenario we see is someone like Justin. He owns a home and earns $50,000 per year at his job. Justin has $80,000 in credit card debt spread out over 12 credit cards. As Justin struggles to make the minimum payments of $1,000 per month, he starts to miss payments. The credit card companies respond by raising Justin’s interest rate payments to default rates at 30%. Justin can no longer make the monthly minimum payments that total $3,300. He starts missing payments and receiving calls from creditors.

Justin approaches a debt settlement management company to settle the debts. He agrees to pay them $2,000 up front in “good faith” money, and agrees pay the company $500 per month with $200 going to the debt settlement company for “maintenance fees” and $300 per month into a settlement escrow account for 30 months to settle with the credit card companies. 14 months and $7,600 later, the debt settlement company has settled with five of the credit card companies. Justin will thus receive a 1099-C from each credit card for the amount written off in the credit card settlement and pay income tax on this. Two of the credit card companies that did not settle sue Justin. The debt settlement company cannot handle the lawsuit, and Justin now faces a potential lien on his home, wage garnishment, and tax liability for the settlement amounts.

Justin could have eliminated all credit card debt, liens, garnishment and tax liability for settlement by filing bankruptcy in the first place.

Contact a San Francisco bankruptcy lawyer from JC Law Group to discuss alternatives to debt management and debt settlement companies.

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