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DEBT SETTLEMENTS – HOW THEY DON’T WORK

September 5, 2017

That’s right they don’t work!

We met with two entirely separate clients yesterday who had been talking with two separate debt settlement companies, and this is what happened:

In the first instance the client had signed on with the debt settlement company. The client was paying the company a monthly sum if money to help them to settle their debts. They were advised that the company wou…ld be with them every step of the way.

The client was being sued by one of their creditors and was advised by the company “not to bother defending the action” – because “they had no defines”. Instead they were instructed not to show up in court thereby ensuring that the creditor would get a default judgement.

The creditor did get the default judgement and enforced it by way of registering a lien on the client’s property. Had the client attended court their defines may have been that they acknowledged owing the debt but they may have negotiated a repayment term through the court’s mediation process.

With the filing of a bankruptcy the creditor with the lien will be reduced, once again, to an ordinary unsecured creditor and the lien removed from the property. As it happens the client has no equity in the property anyway. However, without the intervention of a trustee through a bankruptcy or a consumer proposal the judgement creditor would just sit on title accruing interest and waiting for the mortgage to be paid down and the house to be sold or refinanced in order to get paid.

In the second instance the client was about to start paying a “debt settlement company” on a promise that they would be able to reduce debts to smaller amounts following an extended period of default.

DON’T BE FOOLED! The only people who gain from such client naivety are the debt settlement companies who retain your payments as “fees” when there programmes fail.