Alabama Bankruptcy Blog

I have seen and heard lots of advertising by companies saying they can settle my debts for very little and help me avoid filing bankruptcy. Does this work?

Unfortunately, debt settlement falls under the “if it sounds too good to be true, it is” category.  While I am sure there may be a few success stories from people using these companies, I have yet to personally hear of one.  Instead I have heard many complaints from clients who have wasted thousands of dollars on these “settlement” plans before having to turn to bankruptcy because of lawsuits and garnishments.  The Wall Street Journal has a good article on this subject – Debt-Relief Firms Attract Complaints.

 

The problem is most people cannot afford to pay enough monthly to settle each credit card debt before at least one of the credit card companies file suit, obtains a judgment, and attempts garnishment.  Also, if you can afford to save enough to do this, you could settle your credit card debt on your own without paying the high fees these debt settlement companies charge.

 

Speaking of the fees, remember that even though these companies may call themselves “non-profit” and a few may technically qualify under the tax laws (this is apparently being questioned by the IRS), it does not mean they are a charity.  These companies are clearly making lots of money.  Why else would they be multiplying like rabbits and how else could they be buying all of that advertising?

 

Many people think they are saving their credit by using these debt settlement companies.  If your credit score has not already been significantly lowered before you use one of these companies, it will be by time you finish (which I have yet to see) or drop out.  Settling for less than the amount owed is a negative on your credit report in itself.  Add to that charge offs and judgments from the card companies that are not settled early and your credit score will show tremendous damage.  A bankruptcy’s effect on your credit would be very similar and allow a quicker recovery.

 

A bankruptcy may or may not be the answer for you, but do not buy the hype of these debt settlement companies and fall for their anti-bankruptcy propaganda.  Do your research on these companies by checking with the Better Business Bureau and educate yourself about bankruptcy by getting your free (for Alabama residents) copy of my The Alabama Bankruptcy Book.

 

Richard L. Collins - Attorney at Law practicing extensively in Bankruptcy Law in Alabama - 422 Third Ave SE, Cullman Alabama

Credit Card Company Dirty Tricks

    I have had numerous clients recently whose financial lives have been thrown into chaos because of "dirty tricks" by credit card companies.  These bad acts by the card companies include lowering the credit limit of the card to right at or below the current balance of the card and/or significantly increasing the interest rate (sometimes more than doubling it) and thereby the minimum payment on the card.  What is shocking is that this is often done without prior notice to the cardholder and without the cardholder being in default.

    Often when one credit card company does lowers the credit limit or raises the interest rate, it causes a domino effect and the rest of the cardholders credit cards follow suit.  I have had cardholders who have never missed a payment be forced into bankruptcy because they can no longer afford their monthly payment due to the interest rate increase or dealing with being over the limit on their credit cards.  Smart Money has a recent article on this problem -- How to Blow Your Credit Limit -- Without Spending.

    Unfortunately this nasty practice by the credit card companies is not currently illegal.  If this has happened to you, please email me your story and I will forward it to our state Senators and Congressmen.  Remember, many of these credit card companies that are squeezing their customers are the same companies that begged for and received the "bailout" money from the government that we the people will be paying back through our tax dollars.  What a way to say thanks, huh?

    If you can no longer pay your credit card debt, order my book and/or contact an experienced bankruptcy lawyer immediately.

Richard L. Collins - Attorney at Law practicing extensively in Bankruptcy Law in Alabama - 422 Third Ave SE, Cullman Alabama

New Book: The Alabama Bankruptcy Book

I have redone my book.  It is now The Alabama Bankruptcy Book.  It still has the Bankruptcy Myths from the prior book, but now has about 20 more pages with Answers to Common Bankruptcy Questions.  The best part is that is FREE to Alabama residents with no strings attached.  Now you can get the info you need to see if bankruptcy will work for you without having to see a lawyer first.  If you would like a copy of the book, click on the Contact Me link on the top left side of this page.  No one will call or bother you.

This book will dispel many myths and answer many questions regarding bankruptcy such as:

• The effects of the Bankruptcy Reform Act (HINT -- Bankruptcy still works)
• What happens to your stuff
• How to save your house or car from foreclosure or repossession?
• How to stop lawsuits, garnishments, and collection calls and letters?
• How you can still file and keep your property under the “new” laws?
• How you can still get credit after you have filed bankruptcy?
• How to wipe out credit card debt, medical bills and other debt?

 Don't believe the myths.  Educate yourself and don't let debt keep you down.