According to a new study from the National Consumer Law Center, some unscrupulous debt relief companies are taking advantage of college students. These students are burdened with student loan debt that they are finding difficult to repay. Some of these companies seem to be offering a debt repayment program, but in reality are just enrolling students in federal government programs that are free. These companies are charging the students fees that can be as high as $1,600 to enroll and $50 per month. The problem is so bad that 23 senators have urged an investigation of these companies by the Federal Trade Commission, the Department of Education and the Consumer Financial Protection Bureau.
But it isn't only students who may become victims of fraudulent debt settlement companies. While it is not generally possible to include student loans in a bankruptcy, many consumers with other types of debt often seek to resolve debt problems without resorting to bankruptcy. Although their intentions are good, the results may not be.
It isn't surprising that when consumers find themselves in circumstances of overwhelming debt, they may become desperate. Constant calls and letters from creditors and debt collectors can cause emotional distress. Harassed consumers may become eager to find a solution to their debt problems. For this reason, they could fall prey to scams and companies that promise much but deliver little in the way of real debt relief.
Although debt negotiation and settlement is often possible, many people do not understand all of the tax implications. For some consumers, filing for bankruptcy may be the most advantageous solution. A bankruptcy filing can stop the harassment from debt collectors and can provide true debt relief.
Consumers must be wary about disreputable companies that promise to settle debts or offer debt repayment plans. For that reason, consumers who find themselves struggling with debt may want to consult a debt settlement and bankruptcy attorney who can review their situations and advise them on the best course of action for their individual needs.
Source: Bloomberg Businessweek, "Student Debt Relief Firms Should Be Probed, 23 U.S. Senators Say," John Lauerman, July 11, 2013