Can a BBB Rating Burn Consumers Who Want to Avoid Bankruptcy?

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) June 10, 2010 -- The organization assigns a “D” or “F” rating even to debt settlement companies that have received little or NO customer complaints. But why is this happening? The answer boils down to greed by banks and the domino-effect of the banking industry-induced mortgage lending crisis.

The mortgage lending crisis, which is also blamed to irresponsible government oversight on lenders and mortgage brokers, caused many new homeowners, who didn’t qualify for a mortgage loan to lose their properties. The resulting record property foreclosures and short sales drove our nation into a recession.

The recession in turn fueled massive unemployment. It also caused banks to lose billions due to loan defaults and credit card payment delinquencies. Essentially, the recession made Americans drown in debt like never before. Even a debtor, who is determined to avoid bankruptcy may see Chapter 7 or Chapter 13 bankruptcy as the only debt relief option.

In the past 12 months as of April 2010, consumer and business bankruptcy filings hit a record number. The 1.5 MILLION filings represent the largest number of filings since 2005 prior to inception of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), a new bankruptcy law aimed to created more stringent bankruptcy filing requirements.

Prior to the onset of the financial crisis, for many years banks and credit card companies pushed for bankruptcy law reform. A main concern was that consumer credit counseling debt management plans, which are chiefly funded by banks to help a consumer avoid bankruptcy, have been a major failure in helping lower the high rate of bankruptcy filings. Despite new bankruptcy law reform, the problem has become more extreme with the economical crisis, which has lampooned the rate of bankruptcies to a record high.

To avoid bankruptcy, more savvy insolvent debtors are increasingly turning to debt settlement companies to get more adequate debt relief. Debt settlement is very appealing to consumers in being a much stronger bankruptcy alternative than consumer credit counseling. On the average, the procedure eliminates 50 percent of a consumer debt. In contrast, consumer credit counseling debt management plans cause consumers to repay 1 ½ to two times their total debts.

According to TASC (The Association of Settlement Companies), debt settlement companies also succedd with a higher consumer completion rate - 45-50 percent compared to consumer credit counseling debt management plans, which have a dismal 21percent completion rate and Chapter 13 debt reorganization bankruptcy plans, which have a 33 percent completion rate.

Because of the heightened consumer demand for debt settlements, the debt settlement industry has undergone rapid growth. Today, there are over 2,000 debt settlement companies compared to several hundred just a few years ago.

Regrettably, a number of the new players are inexperienced companies. Unscrupulous mortgage brokers from the dying mortgage industry have also migrated into the industry. As they say, you can’t take the stripes off a zebra. However, the industry, which settles billions of dollars of debts for consumers each year, has done a lot more good than bad in helping people.

In closing, if you are a debt settlement candidate, relying solely on the information of a Better Business Bureau’s Business Reliability Report may be injurious to your financial health. Although the debt settlement industry is sometimes misunderstood and scarcely regulated, short of bankruptcy, it can be the best resource for you if you seek aggressive debt relief.

In finding the right debt settlement company, making an unbiased informed decision will require you to act on your own due diligence and research. Finally, you must also understand and compare the pros and cons of each debt elimination option you are considering.
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