If you do not watch carefully, there are pitfalls that even the most adept lawyer might fall in. That’s why your best bet is to work with a qualified bankruptcy attorney. A knowledgeable bankruptcy lawyer can point out the warning signs on the road to debt relief; whether it be bankruptcy or bankruptcy alternatives.
W is for Warning
If you are contemplating filing a bankruptcy or looking at alternatives to bankruptcy, here are a few things to run away from:
Mortgage Rescue Scams:
These thieves tell distressed homeowners that if they sell the home to the thief and pay rent each month, when the homeowner finally gets back on their feet, they have the option to re-buy their house back. Problem is, the homeowner is charged exorbitant fees and a huge interest rate. They rarely work because the homeowner becomes worse off.
These things are so bad, the government is chasing after these goons for fraud.
Debt CON-solidation Loans:
You have to read the fine print. These loans promise outrageously low interest rates, but in the really, really small type you’ll find penalties and fees that will put you in deeper financial distress. Oh, and there may be a pretty hefty “set-up” fee.
These are programs where you pay an amount per month to a company who says they will talk to your creditors to lower interest rates, monthly minimums or discuss settlement. Problem is, they won’t do this for over a year from the beginning of the program. The money you pay the company for the first year is their “fee”. Meanwhile, your creditors want to know why they haven’t been paid. They might have even sued you and began garnishing your wages. Once the company begins accumulating a pile of your money, they will begin discussing settlement options with your creditors, but that doesn’t mean the creditor has to accept it.
My big problem with these companies is that you are paying them a good amount of money to ruin your credit and do nothing for a year. You can negotiate settlements on your own without having to pay a monthly fee.
Check Cashing/PayDay Loans:
This one should be obvious. There is no way you are going to get out of debt by paying a credit card debt at 23% with a check cashing loan of over 400%. These rates may be even higher if you go with a company not regulated by the state (ie: Sovereign Indian Tribes). Just don’t do it.
Do It Yourself Bankruptcy Forms/Bankruptcy Petition Preparers:
If you buy the bankruptcy petition forms online or from something like U.S. Legal Forms, you have gotten ripped off. Every bankruptcy court website will supply them for free. But you shouldn’t even contemplate filling out the forms yourself without getting the advice of counsel.
Bankruptcy Petition Preparers are not attorneys. They pretend to be experts, but they are not. They are not allowed to give you legal advice only prepare your petition (I’m still puzzled how this can be done without providing legal advice). They may charge a lower fee than an attorney, but they will not represent you at the Meeting of Creditors, don’t know the law and will not back you up if items on wrong on the petition. Don’t fall for this scam.
Bankruptcy Law Firm Mills:
This is probably the least poor decision of those already referenced, but by going with a mill firm, you take the risk that your case will be treated like all other cases, when in actuality, every case is unique. Wished you could have saved that house if you would have only done one little thing different?
These are the most significant warnings a qualified bankruptcy attorney can give you.
Other Lawyers talking about the Letter W include: