When Consolidating Debts, Read the Fine Print

Posted on May 3, 2011 at 1:27pm by

At The Sader Law Firm, we see debt consolidation horror stories all the time. If you’re considering a debt settlement company, give us a call first for a free consultation. We can help provide you with immediate relief and real financial freedom through Chapter 7 or Chapter 13 bankruptcy.

Interesting commentary by Emily Brannen –

If you’re like me, you sometimes fall asleep with the television on, only to be blasted awake by a voice screaming, “Are you drowning in debt? Can’t pay your bills?” Through squinted eyes, you see the 1-800 number flashing in red. An actor feigns horror while looking at a handful of bills. Then, a soothing voiceover announces that there is “hope.” Just call the 1-800 number “now” and kind, beautiful people will make your debt disappear by putting it into a hat and waving a magic wand called “debt consolidation.”

Never mind that you are unemployed, your house is under water, you have no health insurance, your car is broke and so are you. The kindly voiceover man gives you hope that impossible things can happen. You call the 1-800 number. It seems too good to be true, but you vaguely recall there is a law about “truth in advertising,” and you tell yourself that you would certainly know if this was a scam.

Unfortunately, it’s all in the fine print, my friends. Pages and pages of really, really fine print.

I work for a bankruptcy attorney, and every day I talk to people who fall into this trap. They are well-intentioned people who want to “make good” on their promises. For six months or a year, they send checks to the debt consolidators, believing their money is being distributed to creditors through some mysterious agreement that satisfies everyone.

Then the sheriff shows up at their door with official court papers – a lawsuit filed by one of their original creditors claiming that it hasn’t received a dime since… well, since our client signed up with the debt consolidators. What happened to the thousands of dollars our client sent out faithfully? The consolidators pocketed all of the money to cover their fees and didn’t distribute any of it. To add insult to injury, the consolidation company cries “Contract!” and demands its own pound of flesh.

People always ask, “Can they do that?!” My answer is, “I don’t know, but they do.”

As mama always said, “If something seems too good to be true, it probably is.” Before you sign up with one of these companies, call around. Do some research online. Read the fine print. There are some legitimate companies out there, but most of them do not advertise at 1,000 decibels in the middle of the night.