Debt Settlements and Bankruptcy Debt Settlement can sometimes be a good method to resolve your debts and avoid Bankruptcy. Debt Settlement is typically where one can Settle her credit cards by making a one-time payment to a Creditor. The Creditor upon accepting the Settlement will report the debt as “ paid” or a “0” balance on the Debtors credit report. We also provide Debt Settlement programs at Weller Legal Group. There has been an explosion in the number of Debt Settlement companies in the past three to five years. Although a number of these companies are honest, many of these companies either misrepresent how their Debt Settlement product really works or are out-right scams. The way most of these Debt Settlement companies operate is they arrange for you to pay them a monthly fee which is usually paid over three years. Once you begin the Debt Settlement program, you stop paying your credit cards. When the Debt Settlement company receives enough money to Settle the Debt (meaning usually about 50% of the balance on any one credit card), then the Debt Settlement company contacts the Creditor to attempt a Debt Settlement. In theory that is how Debt Settlement companies operate but usually the Debt Settlement clients do not achieve a good result. Although there appears to be no independent research regarding dropout rates in Debt Settlement programs, many consumer advocates can attest to poor performance of these programs. One of the largest Debt Settlement companies in the United States, the National Consumer Council, was shut down by the Federal Trade Commission (FTC) in 2004. The FTC found that only 1.4% of the Debt Settlement clients actually completed the program, 42.9% of the Debt Settlement clients dropped out, and the average Debt Settlement client paid $1780.00 (seventeen hundred and eighty dollars) in fees. Deanne Loonin, a Staff Attorney with the National Consumer Law Center (NCLC) says that Debt Settlement clients usually pay dearly for the services, oftentimes with bad results. There are many things the Debt Settlement companies will not tell you. First, that the Debt Settlement program may not be for you. Most Debt Settlement personnel are basically telemarketers working in a large phone bank. The Debt Settlement operators are usually working on commission, and are pressured either through their employer and/or financially to retain as many Debt Settlement customers as possible. If you are considering Debt Settlement, know that Debt Settlement is a good option for one class of Debtors: Debtors who are heading towards Bankruptcy but do not qualify for a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy.  The second thing Debt Settlement companies do not tell you is that you could get sued. Typically a Debt Settlement company waits two to three years to Settle your Debts , if they do at all. Leslie Linfield, the Executive Director of the Institute for Financial Literacy, states that many Creditors, when they know you are working with a Debt Settlement company, will actually accelerate the Debt and then bring a Law Suit. Once a Creditor sues you, the Debt Settlement company will drop you as a client because they can no longer represent you. If you get sued, it is very unlikely the Creditor will agree to Settle your Debt. The third thing Debt Settlement companies may not tell you is that their whole operation may be illegal. Twelve states prohibit for-profit Debt Settlement entities: Arizona, Georgia, Hawaii, Louisiana, Maine, Mississippi, New Jersey, New York, New Mexico, North Dakota, West Virginia, and Wyoming. The fourth thing Debt Settlement companies will not tell you is exactly how their fees work. Most Debt Settlement companies will charge you hundreds of dollars for an initial administrative fee plus a monthly service fee. Some Debt Settlement companies instead of a monthly service fee will charge you a percentage of savings, usually 25%.  The final thing Debt Settlement companies will not tell you is that the Debt Settlement may be a taxable event. The forgiveness of the Debt is looked upon as income by the Internal Revenue Service (IRS). For example, if a taxpayer has $10,000 in debt and $3,000 in assets, he cannot exclude more than $7,000 in Debt from his income tax. There are exceptions to this rule is the taxpayer is Insolvent or Bankrupt, and can petition the IRS to waive the tax liability by filing Form 982. You can go to the Better Business Bureau website (http://www.bbb.org) to find reports on hundreds of Debt Settlement companies. Among the Debt Settlement companies to beware of are the National Consumer Debt Council, Financial Rescue Services, Debt Legal Services, and American Debt Relief. There is correct way to Settle a person’s Debts and it is not as described above. Even a well-intentioned Debt Settlement company will not produce a good result if they attempt to Settle your Debts over a three year period. At Weller Legal Group we have negotiated thousand of Debt Settlements. If you are interested in this option, please contact our Office. We can explain our whole range of options, from Debt Settlement to Credit Repair to Bankruptcy or Credit Counseling. We provide all of these services. Our affiliate company, Julian Credit Management (www.JulianCredit.com) is a Credit Counseling Organization and offers: Debt Consolidation Credit Counseling Credit Repair Mortgages Loans Settlements Refinancing Not all Bankruptcy Lawyers or Bankruptcy Attorneys are created equal. We are the only Bankruptcy Law Firm in the State of Florida providing Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Credit Counseling, Settlements, Credit Repair and Mortgage Refinancing.   Bankruptcy Attorney Consultation Questionnaire - Microsoft Word Format (Click below to open file, then save to your computer hard drive, and complete) Bankruptcy Attorneys Questionnaire Bankruptcy Attorney Consultation Questionnaire - Adobe pdf Format (Click below to open file, print and then complete) Bankruptcy Attorneys Questionnaire Jay Matthew Weller, Attorney at Law  Bankruptcy Attorneys Tampa Bay Florida and Debt Consolidation Legal Services Florida Law Firm with Offices in Tampa  Clearwater (Headquarters)  Lakeland  Port Richey Phone: 1-800-407-3328 (DEBT) www.jayweller.com Follow Bankruptcy Law and Weller Legal Group on the Internet!		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