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FAQ'S

Saturday, November 29th, 2008

by Theodore Sliwinski, Esq.

Avoid debt counseling, credit repair, and bankruptcy-related scams.

1. I don’t want to pay for an expensive lawyer to handle my bankruptcy. Can I simply use a debt counseling agency to get me out of debt?

Sometimes when people are in massive debt and they fear they can’t afford a bankruptcy attorney, they are often ripped off by the false promises of unscrupulous people who are eagerl to take their last remaining dollars. These shady characters appear in a number of types of businesses, but they all offer the lure of a cheap, easy way to make financial problems simply disappear. Unfortunately, these rip off artists leave the person poorer and, in many cases, much worse off than before. Below is an overview of the type of scams that are out there lurking.

Congress has made filing for bankruptcy so complex and the legal knowledge to prepare a case is so important that these typing services just can’t do the job. Typing services (also called bankruptcy petition preparers) have never provided any good service to distressed debtors. However, under the old bankruptcy law if you had a simple case the mistakes they made probably wouldn’t cause your case to be rejected by the bankruptcy court. That is very different now. Bankruptcy law is now an entirely different world! Congress has made filing bankruptcy extremely complex, and the legal knowledge to prepare a case is so important that typing services just can’t do the job. They can’t advise the debtor of ways to eliminate liens or to pursue more complicated procedures. Moreover, they can’t go to court or defend the debtor if a creditor attempts to oppose the bankruptcy or take advantage of the debtor. Finally, they can’t give legal advice that could save the debtor hundreds or thousands of dollars.

A bankruptcy case that is filed with only the help of non-attorneys often fails to accomplish even its basic purpose. Thus, the debtor is often left in worse shape than before he filed. In fact in many cases that are prepared by typing services and filed under the new law have been rejected by bankruptcy courts. When debtors whose cases are rejected then try to file a second, corrected case, the new law takes away many rights they would have had in the first case. Therefore, it is very important to get the advice of an experienced bankruptcy attorney for your first case so that you will have all the rights and legal protections possible in that case. Some bankruptcy lawyers rates may be high. However, shop around. There are plenty of bankruptcy lawyers who can you offer affordable fees and  a reasonable payment plan.

2. Can I use a credit repair company to get me out of debt?

No, you should also be very leery of using any type credit repair service. Credit repair or credit counseling are not associated with the established non-profit credit counselors in the local community. These outfits promise to make credit problems simply go away and to obtain new credit for those who have bad credit records. However, they fully know there are no magic tricks. At best they may obtain you an expensive secured credit card. A secured credit card can only be used as long as the card user keeps enough money in a special account to cover the amount charged on the card. In most cases, customers do not even receive this questionable benefit, and the operator’s simply fail to deliver on their promises after taking the customer’s money.

3. What other rip-off artists in the “get out debt world” should I be aware of?

There are limitless companies who offer false promises to help debtors wipe out their credit card debt for almost nothing. Don’t believe these empty promises! If something sounds too good to be true, then it probably is. After taking the consumer’s money, some outfits offer only a referral to a bankruptcy attorney, who may not be very knowledgeable. Others, who claim that they can help consumers with bad credit to find housing, give lists of apartments taken directly from newspaper advertisements. Finally, some offer a debt-consolidation loan, which often means a home-equity loan or a refinancing of the debtor’s first mortgage. These loans can be a big mistake. These type of loans turn unsecured credit card debts that can be wiped out in bankruptcy into mortgages that can’t be discharged; or trading debts with little or no interest for debts with high interest rates. The brokers or lenders who push these loans on debtors with poor credit histories usually charge very high fees.

In summary, the best way to solve your credit card problems is through a consult with an experienced bankruptcy lawyer. New Jersey-ites who have massive debt are particularly inclined to being scammed. These people are desperate and they become much more gullible because of their financial predicament. There are no shortage of companies and scam artists who try to pounce on the opportunity to take advantage of these desperate people. I have even heard of scam artists calling people who are facing a sheriff sale of their home, and advising them that they just won the lottery. The scam artist will then advise the desperate debtor that they have to pay a certain sum of money to pick up their winnings. My clients have personally verified that these type of scams exist. Many poor souls fall for this scam. This is an extreme example as to how people who are desperate and in massive debt are preyed upon by the multitude of so called debt counselors, credit repair businesses, or other bankruptcy related scams. I have heard of many poor souls who have used paralegal services and they lose their home because their case is botched up. Bankruptcy laws are “alive and kicking” and they should be used to improve your life if you have to. Always consult an experienced bankruptcy lawyer. Don’t be foolish and try to use a cheaper substitute for a qualified professional.