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Are Student Loan Settlement Companies a Viable Option?

Posted on in Bankruptcy

As the economy worsened and more people began looking for relief, debt settlement companies that claim to provide student loan settlement started to crop up across the country. Currently Americans owe more on student loans than they do on their credit cards. As a result, companies are expanding into so-called student loan settlement services.

Are these companies really a legitimate option to for erasing student debt?

Legal experts warn that student loan debt settlement companies are prone to unethical practices including deception, abuse and misinformation. In many cases, using one of these companies can put a consumer into an even worse financial situation than they started in.

When declaring bankruptcy, students loans are difficult—but not impossible to settle, according to the terms of the bankruptcy a person files for. In order to know for sure if a student debt can be forgiven, it is important to speak with an attorney who specializes in bankruptcy.

Often, people are tempted to choose a debt settlement company out of fear of filing for bankruptcy. The advertisements make using theses companies seem much easier and more beneficial for consumers. Any kind of debt settlement company—whether it claims to be able to forgive student debts or not—is more dangerous than the commercials lead you to believe.

These companies have come under fire lately, as investigators have uncovered the unethical practices that they use on distressed consumers who are looking for a fresh start for their financial situation. One reason is that these companies urge their customers to simply stop paying their bills in a way to strong arm creditors into taking a lower payment down the road. Many people have been sued by creditors as a result of stopping payments. Another reason is that the fees charged by debt settlement companies are so high that many people are unable to pay them upfront to get the service. Often those high fees go towards enrolling in the program, not towards paying down any existing debt which leaves a consumer even worse off than before.

While debt settlement companies may seem like an attractive alternative to filing bankruptcy, in order to ensure that you are working within the law with a trained, ethical professional it is important to meet with a bankruptcy attorney to fully explore your options. The experienced Chicago area bankruptcy lawyers at Newland & Newland will provide sound advice to help you resolve your financial issues safely and legally.

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