Consumers need to stay aware of the debts they are responsible for because when a creditor is owed money, the creditor may try to get the money from anyone, even the people who did not incur the debts.
For example, when a person dies, the debt goes with the person. Relatives of deceased are not responsible to pay for the debts of loved ones. Yet, creditors may have collection companies call the relatives to persuade them to pay for the debts of others. Survivors of the deceased may not know the law on who owes what, and end up paying for another person’s debts just so the collection company would go away. Sometimes the collection company does not care how much it gets – it just wants to collect something because with the debtor being dead, it will not likely collect anything. Sometimes a consumer may ask a debt settlement company to help negotiate a settlement with a creditor.
The Federal Trade Commission (“FTC”) adopted rules to help people get relief from collection companies and the debts they owe. On September 27, 2010, the FTC adopted rules designed to stop abusive and deceptive practices by debt settlement firms and ensure consumers do not pay fees without getting relief.
The rules cover telemarketers of for-profit debt relief services, including debt settlement, credit counseling, and debt negotiation providers. The rules do not cover non-profit providers, except they cover businesses that falsely claim to be non-profits.
For-profit debt settlement firms are required to let consumers know:
(1) the time it will take to decrease the debt,
(2) when a firm will negotiate a settlement with creditors, and
(3) how much money consumers must set aside before a settlement offer will be made.
Debt settlement firms need to let consumers know about the negative results of not making payments to creditors. For example, they may be subject to collections lawsuits, poor credit worthiness, and increased debt. Unlike bankruptcy, with no help from an automatic stay, the debt settlement firms cannot stop collections activities from creditors.
The debt settlement firms cannot charge advance fees beginning October 27, 2010. Unlike bankruptcy where attorneys’ fees are evaluated by the court before payment, debt settlement firms do not have any court monitoring except for the FTC rules.
Contact a New York bankruptcy attorney to learn more on the administration of a bankruptcy estate.
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