A reader sent in a copy of a mailer they got from American Debt Mediators. They said ADM is allegedly charging the first three months in fees. If true it looks like American Debt Mediators is using an attempted catalog by mail loophole to avoid the Telemarketing Sales Rules.
The letter appears to be an offer for debt settlement services from ADM at 15950 North Dallas Parkway, Suite 400, Dallas, Texas 75248. That address happens to be a rented virtual office space. – Source
Now there is nothing wrong with virtual office spaces but I would think people would want to know where the people are physically located who would be handling their debt. A virtual office space is not an indication of stability.
ADM describes their services by saying “We help our clients restructure and resolve their unsecured debt such as credit cards, medical bills, student loans, lines of credit and personal loans, typically for less than is owed, so that our clients can save for what’s really important – like saving for retirement, college education or even a new home.” – Source
But if getting people to saving for retirement and other important expenses then why isn’t ADM heavily promoting bankruptcy as a way to discharge debt as fast as possible and get to saving pronto?
In fact they issue a rather common refrain talking people away from bankruptcy. “However, since the passage of the new bankruptcy laws – eliminating your debt may not be as easy as it once was and it typically stays on your credit report for 10 years. Many people do not want the stigma associated with bankruptcy and don’t want to have to live under court supervision.” – Source
But a chapter 13 bankruptcy stays on your credit for seven years, just as a defaulted debt in a debt settlement program will. About 70% of people who file bankruptcy do so as a chapter 7 and their debt is totally discharged in about 90 days and they can get back to saving immediately.
What their solutions page seems to skip saying is that in a debt settlement “Debt Negotiation” approach creditors can sue you, your wages can be garnished, your balances will increase and it will appear as a negative item on your credit report.
Their FAQ page has more less than accurate information on it as well.
“What’s so bad about filing bankruptcy?
Bankruptcy may seem quick and simple, however many people file for bankruptcy each year failing to realize they are forced to deal with the harsh effects that will plague them for the rest of their lives. One must first be aware that bankruptcy does not go away after 7-10 years, as some bankruptcy attorneys may claim. The reality is many credit applications ask if you have ever filed bankruptcy, and to answer falsely may be considered a federal offense. Also, costly court and lawyer fees accompany the process of filing for bankruptcy. And with changes in bankruptcy laws, many consumers will not be able to eliminate their debt simply by filing for Chapter 7.
Consumers may now be required to file Chapter 13, which requires you to pay back a portion of your debt under the supervision of the court. This process may last for years. Bankruptcy should be considered one of the last remaining options in solving financial problems but you should always consult with an attorney regarding such matters.
[And what harsh effects would those be? I filed bankruptcy and have great credit, got new jobs, got the lowest possible mortgage rate, etc. I think people need to read Everything You Always Wanted and Needed to Know About Bankruptcy to learn a different side of this issue. They give the impression many consumers will not be able to file for a chapter 7 bankruptcy but court data shows about 70% do.]
How does the IRS treat debt that is forgiven?
Financial institutions are generally required to provide a Form 1099-C in the event that a forgiven debt amount exceeds $600.00. Please understand that if you receive a Form 1099-C showing income in the form of canceled debt, this does not necessarily mean that you owe taxes on the forgiven portion of the debt. In most cases, clients can legally and ethically exclude forgiven debt from their income through the “insolvency exclusion” provided by the IRS code. This exclusion means that your liabilities exceed the fair market value of your assets, or in other words, you “owe” more than you “own”. We recommend that you consult your tax advisor regarding your particular circumstance. They will also be able to assist you on filling out Form 982 that excludes you from the particular debt.” – Source
[Seems to completely skip past the fact debt forgiven in bankruptcy has no tax liability at all.]
The ADM Letter
The letter appears to say there is no fee for the service because “upon activation” we will begin a plan to negotiate with creditors.
The offer says there is a limited time to join in an open enrollment period that will expire.
The paragraph about notification of the credit bureaus could give people the wrong impression the program will have a positive impact on the credit bureau report. But they fail to say what percentage of people sold into the program actually pay off all their debts in the program.
American Debt Mediators
According to the State of Texas, American Debt Mediators has been registered to do business for less than a year. The company was registered on October 31, 2012. Chris Elliott is listed as a manager of the LLC. – Source
And according to the State of Texas, Elliott is the only listed officer.
But on the ADM website they list an alternative address:
6200 Tennyson Parkway,
Plano, TX 75024 – Source
That address was actually the mailing address of Credit Answers, Auto Assure, DMI, Debt Mediation Initiative, etc. – Source
You will notice the 2010 DMI letter that also had a catalog looks very similar. See Credit Answers Hides Behind DMI Mailer to Consumers.
The BBB gave Credit Answers and F Rating.
Auto Assure has a C- rating from the BBB.
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