In California, the rate at which bankruptcy is rising is alarming. There may be many reasons responsible for leading you to file for bankruptcy, for instance, rising medical expenditure. Often when you are in such an insolvent state, you will tend to seek help from debt settlement schemes and companies who will settle your debts. Scammers take advantage of this situation. They will come with enticing promises and ways that seem efficient in settling your debts, which end up as debt settlement scams.

San Diego Bankruptcy Attorney is here to help you when you are facing enticing offers from such scammers purporting to relieve you from the burden of debt. We will begin by assessing your financial state to see what the best options are for you. Then, we can recommend the proper settlement measures to follow. We also have insight on the tactics used by debt settlement scams to help you avoid their scams. This article addresses all these issues and will make sure that you know about debt settlement scams in California.

Signs That Indicate You May be Heading Towards Bankruptcy

There are some factors that show you are heading towards bankruptcy. For instance;

  • You find difficulties saving;
  • You frequently receive calls, emails and text messages from debt collectors;
  • You use home equity loan to pay off your unsecured loans;
  • All of your credit cards have surpassed limits or if not, they are close to the limits;
  • You have found yourself taking loans with the highest interest rates ever;
  • You no longer qualify to take out loans;
  • Your monthly income is not enough to lower your debts;
  • You were involved in an accident or a chronic illness that have denied you the chance to renew your monthly income, as such, you are no longer able to service your debts;
  • You have been forced to put aside payment of essential bills in favor of payment of secured and unsecured loans you owe creditors.

If you find yourself at such a state, you should think of either filing for bankruptcy, or debt settlement programs.

Understanding Debt Settlement

Debt settlement plans assist consumers or creditors to settle their debts with amounts that are less than what they actually owe. The strategy, in most cases, happens to be the best solution for you to avoid bankruptcy. However, the settlement plan works well only if correct procedures are followed and you are in a good financial position. Debt settlement is not the only way to settle debts. Other means exist such as entering into a private arrangement with creditors and distributing the debt over a given period.

Situations, however, emerge when you face a lot of pressure from your creditors. You may have tried all you can but could not raise the amount. At this point, your creditors threaten to sue you and perhaps, have you declared bankrupt. You become stressed and frustrated. This is the point when you begin thinking of settlement strategies.

Debt Settlement Scam

There are legitimate companies who are willing and have histories of relieving people from debt. But most of them are just scams.

A scam is any fraudulent act performed by a dishonest person, company or groups with a view of obtaining money or valuables from another person. Often, scammers lure their ‘prey’ by the use of tricks where they may misrepresent themselves as individuals who can solve your problem. In a similar way, a debt settlement scam occurs when companies purport to pay your creditors on your behalf but only if you give them service fees in exchange. Later, they may not do as they promise or they may end up exploiting you for a long period to an extent that you will find yourself having paid more than you expected.

How Do Debt Settlement Scams Occur?

Debt settlement scammer’s in most cases target individuals who have significantly high credit card debt. To initiate their deal, they give you false promises that they are going to negotiate with your creditor in settling your debts. They may also promise you that they will have your payment obligation significantly reduced. They then charge you a high upfront fee but in the end, may fail to relief or settle the said debt. If they end up settling, they may not reduce the amount owed as they earlier promised.

During this time, the alleged ‘debt relief company’ advises you not to contact your creditor about any progress of the debt repayment. They, however, don’t let you know the dire consequences awaiting you. In addition to the upfront costs, they will demand that you pay them a monthly amount with a promise of reimbursing it to the creditors in a lump sum when you have saved the negotiated total amount owed. But finally, they do not fulfill any of the promise made. You will, therefore, be marked as a credit defaulter which negatively affects your credit rating. 

Common Types of Debt Relief Scams in California

While looking for a debt settlement service, you may come across some scams. Among the most common are;

  1. Upfront Fee Scam

Here, the scammer purporting to help you settle the debt demands that you pay a fee for the service they will render. Typically, the law requires that such agents are paid only after their service have been delivered. Demanding the service at the initial stage is in itself a scam.

  1. Debt Consolidation Scams

Typically, after borrowing from multiple creditors, you may see it prudent to consolidate your money until the amount you are required to pay is attained. Companies may call you promising to consolidate it for you and later on, pay them on your behalf. Upon entering into their trap, they will ask you for the processing fees also called consolidation or administration fees. Normally, genuine companies will consolidate it for you for free and collect interest. Demanding a consolidation fee is in itself a scam.

  1. Debt Elimination Scam

It is an established fact that no loan lending facility can eliminate your loan or the amount you owe to them. Such cases only happen where there is a special reason as to why your loan should be eliminated. For example, if you suffer permanent disability, insanity, death or the closure of the lending firm. You may also avoid repaying loan where there is identity theft or when falsification of loan documents occurred. Some companies may also be scamming you when they purport to get rid of your debt. They advise you that if you have a debt or loan from a certain institution, you can be exempted from repaying the debt. However, they promise to terminate your loan if you pay the fees. Students, especially those who apply for student loans mostly suffer this form of scam.

Signs of Debt Settlement Scams

There are signs which can help you to know if a debt settlement offer is a scam. They include;

  1. Charging you upfront

Debt settlement scams mostly require you to pay upfront fees.  In exchange, they give you many promises which they end up not fulfilling. For instance, they will promise you that they will offer a new and clean credit rating, remove your late repayment history, or in extreme cases, lies to you that they will negotiate with your lender to drop the debt altogether. 

  1. Employ aggressive tactics

Scammers will try any means possible to persuade you into buying their faked services instantly or shortly after meeting you. They even threaten that if you don’t act immediately, you will lose the chance. Normally, debt settlement option is an idea that needs to be given time before deciding. Thus asking you to decide instantly is a clear indicator that you are dealing with a suspicious agency. Legit settlement companies will always give you information about the service they offer, the fee associated with the service, the means of settlement and any other vital information about them. They then give you ample time to assess their offer if it suits you. Scammers never allow you that chance! 

  1. Ask for your personal data

Personal information is your security and should never be given to any other person. If you come across any debt relieving company that asks you details relating to your bank account, social security as well as their login credentials, you should avoid them. The truth behind asking your details is that they will later use the information to steal your identity, open your bank or credit account and finally interfere with your finances.

  1. Come from nowhere

Debt relief scammers in most cases don’t know you and are therefore,  not able to physically locate, call or text you. As a result, they tend to use other means that are susceptible to accessibility like emails or social media. Through these means, they advertise their tantalizing offers to scrap your debts. Although, legitimate companies also use such means to sell their services, they do so in less aggressive methods compared to scammers. Also, legit companies do more follow-ups only if you request them or when you show a stronger interest in their services - A trend that is totally different from what the scammers do.

Common Mistakes that are Likely to Land You in Debt Settlement Scam

It is true that California and other states are faced with frequent scams related to debt settlement plans. If you are careful enough, you may avoid these problems. Among the mistakes people often commit include:

Failing to read the contract’s details carefully

While looking for debt relief service, scammers present an overview of attractive offers which will tempt you into having a deal with them. outwardly, the settlement firm may  appears to be your appropriate debt reliever, but may inwardly present dreadful detail about the service they offer. If you fail to read the details well, you might fall a victim of debt settlement scam.

Not researching well on the debt settlement company or the firm

Before entering into a deal with a debt settlement company, it is prudent to research well on the company. There are specific sites which can do extensive searches on various debt relief companies for you. Alternatively, you can do it yourself. researching well will help you know more about the firm and how legit it is in meeting its promises. Your attorney can be of help to you at this point by reviewing the history of complaints on the company if any.

Fearing to question any charges you feel are illegal

In 2010, debt settlement related scams had escalated in most states of America including California. As a result, TFT stepped in and strongly banned debt settlement companies from charging its customers before they offer the promised service. The move resulted in many of the firms leaving the market.

However, some other companies remained and continued exploiting people. Most often, they would purport that they have realized a loophole in the state that allows them to still operate by charging upfront fees. You should be bold enough to ask these individuals the question concerning the fee they charge. You can even challenge them by citing recommendation the law suggested. Once you fear to ask them and you believe in what they say, then you may end up scammed. 

Not declining their offer to meet you face to face

Face to face meeting with some affiliates from companies alleging to be able to settle your debts can be dangerous. For example, if a sales agent from that firm calls you, then takes you through their programs for almost an hour, and later requests for a face to face meeting, you should not just accept. There is suspicion in such a move. Pitching you in their program for a long time may be a way to get your details, and the meeting can lure to you sign the deal. Also, the face to face contact may be an excellent avenue that will enable them to a request or persuade you to pay the upfront fee. So if you agree that they meet with you, yo could end up being a victim.

Failing to conduct Google searches

Google gives vast information about a debt settlement company. Many people tend to use the platform to share their experiences and the information they have about such companies. If you have found a company, you can try searching for some details about it. For example, you can type in the name of that company with the word “scam.” If he company has a history of issues, you will definitely know right away. Therefore, if you fail to contact searches, you may end up entering into a deal that you will regret.

Not researching the company’s option before hiring

Before you hire the services of any debt relieving company, it is prudent to research well on the various services they offer, such as debt consolidation, bankruptcy credit debt settlement, credit counseling among others. Researching well on those option enables you to know clearly about the company and how safe it is to work with them. For instance, you will be able to know if it actually fulfills the options it cites. Failure to do so may result in problems.

Not asking or getting the second opinion from a trusted source

Being encapsulated in debts is very embarrassing. You may not want your friends, family members and the loved ones to know of your challenging financial state. Instead, you aptly try to fix the issue immediately and in secret. In fact, you may never ask for advice from anybody. Scammers will take advantage of your secrecy and woo you into their scam. It is also true that once scammed, most people will not be ready to let anyone know of their state. Such moves are responsible for the success of illegal debt relieving companies. Maybe, if you had shared the idea with a friend, he or she would have been willing to advise you on the best option.  

How Can an Attorney Help you to Avoid Debt Settlement Scams?

You may find yourself in a situation where you don’t know whether negotiating your debt settlement is an important step or not. In such a state, hiring a skilled attorney will be of great help. The attorney can do any of the following:

  • Take you through your options and advice where possible

He or she will assess your credit situation and then advise you on whether you should really look for negotiations or take the bankruptcy state option. Debt Settlement Companies will never offer you such an alternative. Instead, they will just convince you into hiring their services regardless of whether you really deserve them or not. 

  • Defend you if the creditor decides to sue you

At times, creditors may decide to sue you and demand that you collect the debt for them. Also, creditors while demanding their pay, may violate some rules. Your attorney can defend you against the presented lawsuits, as well as pointing out mistakes committed by creditors.

Find an Experienced Bankruptcy Attorney Near Me

Debt settlement scams come in various ways which in most cases may prove difficult for you to understand. San Diego Bankruptcy Attorney understands such scams. By hiring our services, you get expert’s advice on the best option between filing for bankruptcy, and taking debt settlement options. If you also face lawsuits, we’ll be ready to take up your case and walk with you until the end. If you need our services, contact our experienced San Diego Bankruptcy Lawyer at 619-488-6168. We are waiting for your call!