Debt-settlement companies are frequently scams that can send people into New York bankruptcy. They’ve appeared on this blog before (here and here), but now it appears they’re moving from credit card and mortgage relief into a new territory: student loans. On Friday, July 18, Marketplace, a publication run by American Public Media, published an article on student loan consolidation companies. Marketplace reported that the attorney general of Illinois, Lisa Madigan, sued two such firms for allegedly charging customers upfront fees to assist them with their student loans, even thought that assistance was never provided. Apparently people who want relief from their student loans turn to companies promising them consolidation with reduced monthly payments and lower interest rates, but in fact they get nothing. The industry has sprung up only in the last few years.
Here are a few ways to identify these kinds of scams and some alternatives to try instead:
(1) One trick the student-loan consolidation company will do is try to enroll people in programs that sound like they’re run by the federal government but in fact are not. For instance, one of the defendants in the Illinois lawsuits, First American Tax Defense, signed debtors up to its “Obama Forgiveness Program,” which is fictitious.
(2) Another tactic is charging debtors as much as $1,600 to provide services they could have obtained for free on the Internet, like consolidating government student loans.
(3) Debt-settlement scammers will use the usual tricks of the trade: high-pressure sales tactics like claiming immediate action is necessary because interest rates will skyrocket, or charging debtors fees before any settlement is reached.
(4) Sometimes they may claim to work for the U.S. Department of Education when they do not, or they might say they have special access to government programs.
It’s possible that these companies are expanding because of growing awareness of legitimate government programs that reduce student loan debt burdens. Debtors with government student loans can switch to longer or graduated repayment plans, consolidate their loans for free, or use an income-sensitive repayment plan that caps monthly payments, such as “Pay-As-You-Earn” (PAYE) that’s touted by the Obama administration.
The Marketplace article can be found here.
Although the government is making efforts to reduce the burden of its own student loans, debts originated by private creditors without any subsidies are still as much of a burden as ever. Filing New York bankruptcy can help free up income dedicated to other debts to cover student loan payments.
For answers to more questions about debt-settlement scams bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
