What are debt relief scams?

When you find yourself in over your head when it comes to debt, bankruptcy might be the best option. Filing for bankruptcy can provide relief from creditors while also affording you a clean financial slate to rebuild on.

However, misconceptions about the process lead many people to debt relief. While there are some legitimate companies that offer debt relief, there are also a number of debt relief scams that will leave you in worse financial shape than when you started. Here are a few signs of common debt relief scams so you can protect yourself and your finances.

Asking for payment upfront

Fraudulent debt relief companies often ask for payment upfront before they have performed any work on your case. In many cases, these companies will take your payment and fail to settle your debt in a reasonable manner. Some companies even receive payment and are never heard from again, which only increases your debt and stress surrounding your finances.

Asking you to stop working with creditors

When you file for bankruptcy, your legal team will be in contact with creditors to develop agreements about repayment or discharge of debts. Leaving creditors out of the loop often makes the situation worse, especially when legal action is pending or has already been taken against you. No legitimate company would ask you to ignore creditors, as it would be well aware of the consequences of those actions.

Guaranteeing they can get your debt eliminated and reduced

Elimination of debt is very difficult if you do not file for bankruptcy. And even if you do file, you must meet certain criteria to be eligible to have your debt discharged (otherwise you might need to file for chapter 13). Debt relief companies that claim they can get your debt forgiven are not providing the entire story. It should be particularly suspicious when companies claim to be able to take certain actions in a short amount of time.