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My Debt Settlement Company Went Out of Business

New regulatory action by the Federal Trade Commission and the Debt Settlement Consumer Protection Act will probably put a vast majority of debt settlement companies out of business. My bet is that those companies that close doors will soon file bankruptcy to terminate any claims a past client might have for refunds.

Hopefully many of those companies were using the services of Global Client Solutions, NoteWorld, or some other third party escrow agent so client trust fund accounts are safe, and not liquidated as happen in the Allegro Law situation.

Since so many debt settlement companies front loaded fees, and it is estimated that 65% of consumers bail from debt settlement programs before a single debt has been settled, most of the money paid so far by consumers will probably be lost to those fees.

It appears most debt settlement companies were taking fees paid at them time they received them as ordinary income and not savings them for the time the debt settlement work was actually performed. This means consumer funds paid in fees yesterday were probably spent yesterday.

So when debt settlement companies fail what is a consumer to do?

  1. For those consumers that have a reasonable amount of money saved in their escrow accounts it might be prudent for them to talk to a remaining debt settlement company and see if they would be willing to represent them. The downside of this approach is the consumer will wind up paying a double fee. They will have paid the failed debt settlement company upfront and then will pay the second company that takes over their account a performance fee when the debts are settled. If this might be your situation I suggest you might want to talk to Damon Day and develop a game plan on how to best address the debt and see if pursuing debt settlement still makes sense.
  2. A consumer could always contact their creditors directly and settle the debts without paying any additional fee. But people will need some education about how to best do this.
  3. And some people might just decide they have lost enough money and in the face of collection calls and possible lawsuits they may decide pursuing bankruptcy makes more sense. If you fall into this category you might want to click here to find a local bankruptcy attorney, make an appointment, and go talk it over with them to decide if bankruptcy is right for them.

Will new debt settlement company regulation create a hardship for many of the people enrolled right now, yes. But this legislation will also serve to prevent people from falling into the trap of deceptive companies in the future. In the end, the people saved moving forward will outweigh the people hurt right now.

It is all unfortunate but as I’ve said before, if the deception had not occurred by bad companies that allowed consumers to be abused, there would be no need for this regulation of the debt settlement industry now. This is not a problem of regulation but of the greed and abuse by some that led to regulation.


READ  What to Do When Your Debt Settlement Company Goes Out of Business



About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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