Friday, March 23, 2012

Watch out for credit counseling and repair companies!

I am a bankruptcy attorney in Phoenix ($995/Chapter 7) and, many of our bankruptcy clients come to us after having a bad experience with a credit counseling company.  Some of them are so bad the IRS has prepared a watchdog document about them. The FTC has compiled a list of signs that a credit counseling company is a scam. Congress passed a law providing protection for people from being victimized by these organizations, called the Credit Repair Organizations Act.

Very few of these companies are legitimate. Some are paid by creditors to provide this service, so they don't have your best interests in mind, but instead their interest is in getting you to pay the maximum possible amount to your creditors!

One red flag is if they require money upfront. The Credit Repair Organizations Act prohibits these companies from charging until after you have completed their services.

Another red flag is if the company doesn't offer you free advice and counseling, but instead forces you into a debt repayment plan immediately.

Any company that promises to get rid of all or most of the negative information in your credit report is not being honest. Credit rebuilding takes a long time.

Some credit counseling companies form as nonprofit 501(c)(3) organizations in order to avoid being accountable to credit counseling laws. The public is fooled into thinking since they are formed as nonprofits they must be more reputable! Ameridebt, organized as a nonprofit, was shut down by the FTC when it was discovered it had charged consumers over $170 million in hidden fees.

Watch out for companies that instruct you not to contact the three major credit reporting agencies, avoid telling you what your legal rights are, suggest that you apply for an EIN (Employer Identification Number) to use instead of your Social Security number, or tell you dispute everything regardless of what it is on your credit report.

Always check and see if the organization is listed with the Better Business Bureau and has a good rating. See how long it has been in business or whether it has suddenly appeared. If you have been victimized by a credit counseling company, contact your state Attorney General.

The vast majority of people who attempt credit counseling end up filing bankruptcy anyways. In order to file bankruptcy, you are required to take a credit counseling course anyways (which can be taken online in a few minutes). Unlike credit counseling services, you can rest assured that the bankruptcy process is completely governed by federal law (and in some states, some state law as well).

The Alexander Bankruptcy Law Firm provides low low cost Chapter 7 and 13 personal bankruptcies. $995 Chapter 7 or $2500 Chapter 13 bankruptcies plus court filing fee. Free consultation with a compassionate attorney who will handle your case personally. Call 24/7, available to meet with you around your schedule. 602-910-6812. Conveniently located in Central Phoenix along the Camelback corridor.

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