Our office is regularly consulted by individuals who are either participating in programs with debt consolidation companies or who are contemplating entering into such programs. Typically, these companies advertise that they are “non-profit” or “not for profit” and upon enrolling a debtor, the companies claim that they will dramatically reduce or eliminate the credit card debt owed.
The sales pitches that these companies make vary significantly. However, in most circumstances, the core concept is that the company asks an individual to start making payments to the debt consolidation company, rather than to the credit card companies. The monthly payment amount is oftentimes hundreds of dollars per month. Furthermore, in most circumstances, many of the initial payments end up in the pockets of the debt consolidation company, and are not paid to the creditors. After several months of payments are made, the debt management companies claim that they will then negotiate to settle the debts with the credit card companies for a reduced amount and begin applying some portion of the remaining payments to those debts.
Be warned that our Schuylkill County bankruptcy attorneys have encountered many individuals who have participated in these programs, some of whom have paid out tens of thousands of dollars to such companies, and yet received little or no debt reduction in return. In several cases, these companies disappeared, literally overnight, taking large quantities of money. In other circumstances, these companies have asked debtors to sign various kinds of Powers of Attorney granting them rights to deal directly with the creditors. In several circumstances, when debtors were sued by the credit card companies, we have also learned of situations where the debt collection companies have prepared legal documents and had the debtor file them in the local courts, such as in the Schuylkill County Court of Common Pleas, in Pottsville. Residents from various communities in Schuylkill County, including Pottsville, Pine Grove, Orwigsburg, Schuylkill Haven and numerous other local communities have been targeted.
Before signing with a debt consolidation company, we strongly advise that you talk to our experienced Pennsylvania bankruptcy and litigation attorneys about other means of controlling or eliminating out-of-control credit card debt.