The Consumer Financial Protection Bureau recently brought a case against Freedom Debt Relief alleging that Freedom Debt Relief wasn’t telling its customers everything about how settlement works, and that it wasn’t handling their debts like it advertised.
As a bankruptcy practitioner, I meet with lots of people who have tried debt consolidation using debt settlement companies first.
Often times they tell me that the settlement company had terrible customer service, and that the client couldn’t tell what was happening.
The complaint filed against Freedom Debt Relief mentions exactly these problems.
A few things that the complaint says about Freedom:
Freedom misled customers
Freedom misled consumers about whether ALL of the creditors will be willing to negotiate, or only SOME of them will be willing to negotiate.
In my experience, people who try debt settlement companies have a little initial success in settling a few debts, but the other creditors continue to collect and maybe even get judgments.
The debt settlement company can’t keep the other debt collectors at bay. Debt settlement companies do not stop debt collection law firms from getting judgments while they are working to settle the other debts.
Bankruptcy, however, has the automatic stay immediately stops any creditor from trying to get a judgment, and voids or discharges most pre-existing judgments.
Freedom deceived customers
Freedom deceived customers about the scope of their services.
Apparently, Freedom was telling clients that they will deal with all of the debts, but in reality knew that there were certain creditors that would never work with them.
In bankruptcy, creditors don’t have a choice of whether to accept the outcome or not.
They can try and fight or contest a bankruptcy, but only if they have proof that the client has been dishonest or fraudulent.
Freedom wasn’t totally honest
Freedom wasn’t totally honest about how their fees worked.
In debt settlement, the company takes as a fee a portion of any money that they get the creditors to forgive.
The complaint alleges that Freedom was taking fees for other reasons also, such as when the collector voluntarily gives up on collecting the debt.
Walker & Walker Law Offices does bankruptcy in Minnesota on an affordable flat fee.
We tell you exactly how much it costs when we first meet, and we see the case through to a successful discharge without nickel and diming our clients.
Freedom didn’t tell customers about the right to a refund
Freedom didn’t tell customers about the right to a refund.
Debt settlement works by having the client pay some money every month to the settlement company.
The settlement company sets that money aside and then tries to settle the debts one at a time by offering a lump sum to the creditors.
If the customer wants to stop, then the settlement company is supposed to give back whatever hasn’t been spent yet.
If they are setting aside money every month, then some of that money should still be there right?
Apparently Freedom wasn’t refunding this money.
I work with lots of people who tried debt settlement and found that it took too long and costed too much.
Chapter 7 Bankruptcy or Chapter 13 Bankruptcy doesn’t require your creditors to agree on how much money they get, and can be done in a matter of months instead of years.
If you don’t know whether bankruptcy or debt settlement is better for your situation, why not read our article about the dangers of debt settlement, or even better, make a free appointment to sit down and talk to a lawyer about your debt options.
Call us today at 612-824-4357 and tell us how we can help you.