Appears to Misinform Consumers to Sell Debt Settlement Services today distributed a press release title “Why Bankruptcy Should Always Be The Last Option For Debt Relief” that appears, in my opinion, to sell consumers into debt settlement services through blatant misinformation. Disgusting.

Obviously from the title the intent of the release is to try to encourage people away from bankruptcy. But here is what the release says:

Bankruptcy should always be considered a last resort for securing debt relief, though it can also sometimes be the only solution especially when a creditor files a lawsuit or debt is too outstanding to settle. Through Chapter 7 bankruptcy, debt is completely wiped out, while with Chapter 13, debtors are still required to put their income toward debt repayment. After an individual files a bankruptcy claim, creditors can no longer foreclose on his or her home or garnish wages to collect payment.

Bankruptcy has the potential to offer debtors a clean slate, with one exception. A bankruptcy filing will remain on an individuals credit history for ten years, and can affect future employment and the ability to get credit to buy a car, house etc., even decades later. Though for some bankruptcy is the best option to rebuild finances, it should not be considered before other debt relief options because of the serious enduring effects on one’s credit. All debt options take time and commitment. But the most important thing to keep in mind when getting out of debt is minimizing the impact on one’s long-term credit as much as possible. – Source

But here are the real facts readers need to know.

  • Bankruptcy should never be considered last as a way to deal with debt. Bankruptcy is a legal process that can eliminate unmanageable debt for most within months. Bankruptcy will also make collection calls stop, block lawsuits, and kill any wage garnishments. Debt settlement can’t offer any of those benefits.
  • The effects of bankruptcy will remain on the consumer credit report for ten years if a consumer discharges their debt in a few months with a Chapter 7 bankruptcy. Immediately after the bankruptcy discharge the consumer can begin to rebuild their credit report following this easy process.
  • A Chapter 13 bankruptcy, which has payments the consumer can afford and provides consumers with legal protection will only appear on the consumer credit report for seven years.
  • The negative effects of debt settlement and the delinquent debt from debt settlement will remain on the consumer credit report for seven years.
  • Bankruptcy makes it more likely that people with financial problems will be able to get security clearances and jobs since people in long-term debt settlement programs show a history of bad debts and delinquent accounts that have not been addressed.
  • If as the press release says, “But the most important thing to keep in mind when getting out of debt is minimizing the impact on one’s long-term credit as much as possible.” then debt settlement should be the last option to consider, not bankruptcy.
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3 thoughts on “ Appears to Misinform Consumers to Sell Debt Settlement Services”

  1. Hey Steve, another great article as always but one thing I do tell my clients is that even though Bankruptcy is an option but should not be something you should do if you have the means to pay back your debts. The biggest problem I have when talking with my clients about debt settlement is in a lot of cases they have already talked to other companies.

    Unfortunately these companies make debt settlement sound like a magical fix to all their problems. They are so focused on trying to sign people up so they can make money and with no regard to the damage they could cause.
    Before anyone makes any decision they should have a clear understanding of their options as well as the positive and negative effects they can expect to have.

    When speaking about Bankruptcy I inform them that it should not be the first option because it could possible have a long lasting effect depending on what is shown on the means test but if you are in a position that will not allow you to resolve the debt through one of the other options or own your own, then Bankruptcy may be what you need.

    The bottom line is just to make sure you consider all your options before you make a snap decision. Once you have decided on the best option you then have to find a reputable company or law firm to go with.

    It is imperative that you take the responsibility to check out every company or law firm before you do anything. Make sure you feel comfortable with them and all of your questions have been answered. Thanks again Steve and look forward to reading more of your articles.

  2. Debt consolidation would be safer than debt settlement. But you can’t lower the principle. Bankruptcy wipes out the principle. But some older folks can just lay low and the collectors will realize that they can’t get social security, or a homesteaded house up to a certain value. Debt settlement should only be used if you have the means, in property or cash, to get it paid quickly. The negotiation should be quick. But Allegro going bankrupt makes settlement pretty scary.

  3. Steve,

    There never seems to be a shortage of people willing to mislead for profit.
    I agree that bankruptcy should be avoided if there is a logical reason, supported by the financial ability, to do so.

    That said, bankruptcy for many is and should be the option of first resort.

    One of the flimsiest reasons to avoid bankruptcy is the concern over ones credit, and yet consumers and hypsters alike focus on it. One to their detriment, the other to their gain.

    The ability to obtain fair credit terms for things like a home, dependable transportation, and education will be available after a chapter 7 in a range of usually between 1-3 years.

    That is faster than would be likely through credit counseling, and faster than through debt settlement plans sponsored and serviced by the vast majority of companies offering it.

    Unfortunately, the press release you are focused on in the article is just one of far too many sources that propagate lies and misleading information for gain.



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