Bankruptcy

Avoiding Bankruptcy Service Scams

Bankruptcy service scams are among the worst of all scams we report on because they target people who are by the nature of the service required, already in an incredibly difficult financial position, emotionally exhausted and desperate for a way out.

Like blood to a shark, scammers can target this desperation and use it to reel in victims. Heavy emotions can easily make people susceptible to scammer’s lies and so when the promise of a quick solution is offered, desperation can cloud a victim’s judgement making them less likely to look in depth at what’s being proposed.

When a cold caller offers to get rid of all their debt for only $1450 up front – and they may owe $50k or $100k, the temptation is easy to understand. Yes they may need to borrow even more money to pay the scammer, but the possibility of freedom from debt can make it seem like a good investment.

And of course as the FTC reports – by then it’s too late. The scammer doesn’t provide the service advertised and the victim is left even closer to bankruptcy and traumatized by the crime.

The FTC have brought scores of law enforcement actions against these scam companies and partnered with state law enforcement to bring them down but the issue continues and we receive a number of reports every month from consumers who are still facing robocalls, hard selling tactics and false claims.

If you plan to file for bankruptcy protection, you must get credit counseling from a government-approved organization within 180 days before you file. You also have to complete a debtor education course before your debts can be discharged.

Pre-bankruptcy credit counseling and pre-discharge debtor education may not be provided at the same time. Credit counseling must take place before you file for bankruptcy; debtor education must take place after you file.

So how can you protect yourself when looking for credit relief services?

• Only use legitimate and trusted companies, such as those we list above – or if you’re formally filing for bankruptcy you must use a government approved service.
• Do not deal with companies who call you – be the one to reach out to the company.
• Check a company’s credentials at the BBB and with your local Chamber of Commerce if they are in-state.
• Read online reviews – is there a pattern of complaints with the company concerned?

And most importantly, if they ask for any money up front while making big promises to solve all your debt worries – walk away.