Many scams prey on consumers hoping to become debt free

As the new year begins, many people in Georgia and across the country will have resolved to gain stable financial footing in 2013. Unfortunately, the economic downturn has given rise to a number of scams that promise to help those struggling financially. While people may see hope in the assurance that they will be debt free in a short amount of time, many companies offering such claims do little, if anything, to improve the struggling party’s financial situation.

Consequently, for those facing mounting debts, it is wise to be aware of the different types of scams preying on vulnerable people. In addition, Americans who are unable to pay their bills should know that other options exist – such as filing for bankruptcy – that will allow them to have a fresh start.

Common scams claiming to help consumers become debt free

The most common scam currently facing those in debt are debt settlement companies. The National Association of Consumer Bankruptcy Attorneys has identified such companies as the “number one threat facing deeply indebted Americans.” Debt settlement companies are particularly hazardous due to the guidance they provide to those who seek their help.

In many cases, these companies will instruct consumers to stop making any payments toward the debts they hope to reduce. Instead, debt settlement companies will collect the money the consumer would have paid toward the bills and put it into a separate account. Typically, they will claim that those funds will be used to pay the amount due when the negotiations are complete. When a consumer defaults on the debt, though, he or she will incur penalty fees and higher interest rates.

Consequently, if the settlement company is unable to negotiate a lower balance, the consumer is left with a much higher debt than when he or she initially went to the debt settlement company for help. As the FTC estimates that fewer than 10 percent of those who use debt settlement companies receive the desired results, this means most are left in worse financial positions than when they originally sought help.

Another common scam in the U.S. involves companies that place so-called robocalls, claiming that they can reduce the consumer’s interest rates on their credit cards. Americans are facing higher credit card debt these days, according to TransUnion. The credit-reporting agency has reported that during the third quarter of 2012, Americans had, on average, debts that were 4.9 percent higher than during the same period the year prior. On average, credit card users owed almost $5,000 during the third quarter of 2012.

When consumers respond to the robocalls and speak with an individual, they are told their credit card interest rate can be significantly reduced, provided they pay the company a fee. The fees vary from a few hundred dollars up to thousands of dollars. After the company receives the fee, it rarely takes any significant action to reduce the consumer’s interest rate.

Filing for bankruptcy is often the best way to eliminate debt

Rather than falling prey to these scams targeting Americans in debt, filing for bankruptcy can provide many people with relief. Consulting with an experienced Georgia bankruptcy attorney will ensure the appropriate path is chosen to resolve your financial difficulties in 2013.