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Credit Solution Scams Can Lead to Personal Bankruptcy

Posted by: on 05/27/2011
 

Of the thousands of Canadians having real trouble keeping up with their bills, only a few consider personal bankruptcy as their first option for getting out of debt and back on sound financial footing.  Consumers desperate for help will listen eagerly to any solution that will spare them from their fear of personal bankruptcy.

Some solutions that sound too good to be true often are, and by any measure could be called credit solution scams.  Perhaps the worst are the unsolicited offers of debt consolidation loans at low rates.  You get an email or a letter congratulating you on being pre-approved for a sizable loan to help you deal with your credit card debt.  All you have to do is send in a hefty processing fee. 

Check the Internet complaint forums and you will find there are still Canadians out there who fall for these frauds.  We think there is a bigger problem with the way credit solutions work, even though you could not go so far as to call the credit solution scams.

A scam is a deliberate attempt to deceive.  The deception in most credit solutions lies not in what the provider says or includes in their documentation, but in the way they operate.

From time to time, we see people in our offices that are ready for personal bankruptcy after falling prey to some credit solution scams.  Yet when we question them, we find in most cases they simply failed to consider the full implications of the program.

For example, consumers who enroll in a credit solution and later end up being sued in court by one of their creditors should not be surprised.  With the vast majority of credit solutions, somewhere buried within the paperwork you read and sign, there is a warning that your creditors can continue to harass you and even sue you. 

The problem is consumers fail to heed that warning.  Some are so desperate for help they overlook the warning, feeling it is no more that a legal disclosure requirement of a potential event that rarely happens.

In fact, the way these credit solutions work creates failure conditions.  When you sign up, you stop paying your creditors and rely on the credit solution provider to communicate with your creditors.  Here are some questions you need to think about before enrolling in a credit solution scheme:

  1. Will they send letters only to your creditors, or will they use phone calls?
  2. How often will they contact your creditors? 
  3. What happens if one of your creditors does not agree to honor the settlement solution?
  4. When will your solution provider start making payments to your creditors?