New Debt Settlement Rules Protect Consumers
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New Debt Settlement Rules Add Protections for Consumers

Since the economy began its downward spiral in 2007, the debt settlement has become one of the fastest growing industries, offering unsustainable promises are charging high up-front fees to those who could least afford to pay them.

Now, thanks to intervention from the Federal Trade Commission, a new set of regulations are providing some reasonable expectations for consumers looking for a way to get back on top of their finances.

One alternative to debt settlement that millions of people have used for debt relief is bankruptcy. If you have questions about how bankruptcy could work in your situation, connect with an attorney today to learn more. Simply fill out the form below to arrange a free, no-obligation consultation and see if bankruptcy is right for you.

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Overview of the New Debt Settlement Rules

The new rules, which were phased into effect in the fall of 2010, protect consumers against aggressive marketing tactics by debt settlement firms. These include:

  • Advance fee ban: debt relief companies cannot charge any fees before actually helping the consumer. Only once debts are successfully settled may firms charge for their services.
  • Disclosures: debt relief companies must make specific disclosures to consumers: how long it will take for consumers to see results; total cost, including fees; negative consequences that could result from debt settlement; and key information about dedicated accounts that may be used to pay creditors.
  • Misrepresentations: debt relief companies cannot make false claims about their specific service or the anticipated outcome of debt settlement.
  • Inbound calls: general telemarketing rules will now apply to calls made by consumers in response to debt settlement firms' marketing efforts, including disclosures.

While these rules may seem like reasonable expectations for consumers engaging in debt settlement, these rules are being enacted to avoid a situations in debt settlement industry where consumers' money was being taken while making untrue guarantees, but rarely following through on those promises.

Industry analysts predict many companies could end up shutting their doors rather than comply with the new set of federal standards.

While this may seem like a bad deal for individuals in debt, consumers will now have better information to use in making decisions in this important part of their life.

It may also lead more Americans to file for Chapter 7 or Chapter 13 bankruptcy, which is a legal debt relief option governed by bankruptcy laws and the U.S. bankruptcy court system.

Debt Settlement or Bankruptcy? Ask an Attorney Today

With the new debt settlement laws in place, you could now be better protected in your quest to eliminate the burdens of debt. But which option is right for you? The answer depends on a number of factors in your unique situation.

By connecting with a local bankruptcy attorney, you can compare these options and see if bankruptcy is right for you. Connect with a lawyer near you is easy—simply fill out the case review form below to arrange a free, no-obligation bankruptcy consultation today.

Free Case Evaluation

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