Attorneys Posing as Debt Relief Companies

People who are looking for credit card debt relief are advised to pay special attention to how debt relief services can be marketed in a misleading manner by bankruptcy attorneys. Part of the confusion comes from the fact that bankruptcy law firms are required to be called debt relief services according to the bankruptcy reform laws that passed in 2005. Consumers who are not aware of this may be signing up for the services of a bankruptcy attorney instead of credit card debt relief through a consumer credit counseling agency.

How to Spot the Differences

When a bankruptcy lawyer claims that he or she can help consumers consolidate their bills, they may be referring to Chapter 13 bankruptcy rather a traditional debt consolidation plan offered through a credit counseling agency. In a Chapter 13 bankruptcy, the client pays a set fee to a court trustee each month. The trustee is charged with oversight of the money and for distributing it to the client's creditors. This is also referred to as a reorganization plan or a wage earners plan and it must be completed within three to five years. Consumers need to make sure there is no mention of any type of bankruptcy when they sign up for services if they are looking to avoid it.

If a consumer is told that a company can stop the garnishment of their wages, this is a sure sign that he or she is dealing with a bankruptcy attorney and not a debt consolidation companies. When a consumer files for bankruptcy, creditors are required to cease all collection activity at once, including wage garnishment. This is not true of a debt settlement or consolidation plan; because creditor participation is voluntary and collection activities may continue for those creditors that choose not to participate.

Consumers who are told that they can have their debts entirely wiped out are dealing with a bankruptcy attorney and not a credit counseling agency. Bankruptcy is the only way to completely eliminate debt, but that comes at the cost of having a negative credit history for up to 10 years and possibly losing some assets. A debt settlement or consolidation plan can help consumers to reduce their debt, but neither plan can completely eliminate it.

Although bankruptcy is a viable option for people in serious debt, those who are wishing to avoid it can do so by being aware of the tactics of bankruptcy attorneys.