Debt Elimination: Too Good To Be True?

Consumers who find it difficult to continue making the minimum payments on their unsecured debt will often go in search of a solution. Consumer credit counseling, debt consolidation, debt settlement, and bankruptcy are some of the more traditional options available. You may be desperate for a solution, however, it is important that you avoid falling prey to a common debt elimination strategy that continues to be marketed.

Debt Elimination or Debt Termination

The scam is often marketed under the terms "debt elimination" or "debt termination". The website or marketing literature will typically start by reminding you of how you have been victimized by unpatriotic credit card companies that have been breaking laws since their inception. You will be encouraged to stand up for your rights and the rights of others.

Credit Card Lending Is Illegal

These "debt elimination" companies operate under the premise that credit card lending is illegal, and as a result, your original contract with the creditor is not enforceable. They will instruct you to stop paying your debts and inform you that you will not be held liable for any outstanding debt.

Some of their arguments and strategies include:

• Creditors do not have the authority to extend credit or lend money so your original contract with them is invalid.
• You can create your own arbitration company and certify an award that reduces or eliminates your debt
• Your debt is really an asset to the creditor and instead of being treated as a loan should be treated as a bank deposit account
• They will provide you with a certificate that you can present to your creditor that will wipe out the loan. Creditors will not attempt to take legal action against you because they do not want the rest of the general public to learn about this legal loophole.

Expensive Lesson

The prospect of wiping out of all your debt can be very enticing. It can also be a very expensive lesson to learn. Most of these companies will charge an upfront enrollment fee of $2,500 - $5,000 plus an additional 15% of the amount that is to be eliminated. If you were looking to wipe out $50,000 in credit card debt, you could wind up spending over $12,000 to learn that this is nothing but a scam.

Scam

While most people will realize that this is nothing but a scam, these companies can be very convincing to someone who is desperate for a solution. There are no legal loopholes that will allow you to break your original contract with your credit card company. There is nothing illegal about credit card companies extending credit to consumers.

Victims of Debt Elimination Scams

If you've fallen victim to a debt elimination scam, there are several things you should do:

1. Demand a refund. You probably will not have much success; however, it is certainly worth a try.
2. Call your BBB, Attorney General, and the FTC. Use this as leverage in demanding your refund.
3. Call your creditors and let them know what has happened and that you intend to figure out a way to properly deal with your debts.

Options

If you are currently struggling with making the minimum payments on your credit card debt, there are legal and effective ways to help reduce or eliminate that debt prior to exploring bankruptcy. Each situation is different; however, you should explore consumer credit counseling, debt consolidation, and debt settlement. Each method can be effective under the right circumstances.

About the Author:
Chris Rocks is the Founder and Executive Director of the Credit Advisory Alliance (CAA). CAA is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.

Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.

He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.