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Debtors in Miami are urged to be cautious before accepting fee-based debt settlement company help. So warns the National Association of Consumer Bankruptcy Attorneys. Instead of debt relief, many consumers learn that their financial woes have become worse.

Particularly damaging is the common advice that you stop paying your bills, which usually results in additional high fees, troubling fines and other financial penalties that push you only deeper in debt than before. The bankruptcy attorney group advises that “debt settlement schemes are a trap for most consumers . . .”

The association recommends that you avoid those firms that promise significant discounts to pay off debts. This includes companies that charge monthly or recurring fees and/or require upfront payment of part of the amount they say they’ll save you.

The American Fair Credit Council, which represents debt settlement firms, reminds consumers that companies offering debt resolution services must act in light of Federal Trade Commission rules and regulations. These rules include that these companies must not charge or accept fees of any kind until you are presented with a settlement offer and you have agreed to accept the proposal. You must also have made at least one payment on the agreed settlement before the firm can collect fees.

The recession and housing crash has heightened scrutiny by regulators, particularly for those companies promising to modify mortgage loans. The Federal Trade Commission has already filed three lawsuits against alleged scams in Florida, California and Ohio. The bankruptcy attorney group warns all consumers to be wary of promises of mortgage or loan modification and, also, debt settlement of any kind.

Do you believe the bankruptcy attorney association is to be commended for issuing public warning of debt settlement firms that may be unscrupulous? Have you ever experienced one of these empty debt settlement promises?

Source: American Banker, “Bankruptcy Attorneys Warn Consumers on Debt Settlement,” Brian Browdie, Oct. 18, 2012