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    Loan Modification and Debt Consolidation Scams

    It’s Buyer Beware When it Comes to Debt Consolidation

    Beware of companies that offer debt consolidation and loan modification services in Florida. Many of these companies are not licensed or regulated by the state of Florida. Many of them are not even located in Florida.

    If you have received an offer from a company to reduce your debt through loan modification or debt consolidation, call us at The Law Offices of John E. Mufson in Delray Beach. Attorney John Mufson offers a free initial consultation to determine if the plan would work for you.

    What Is Wrong With Debt Consolidation?

    Debt consolidation refers to combining your debts into one manageable payment that is less than the total amount you owe. However, debt consolidation isn’t for everyone. Here are some of the things debt consolidation firms don’t tell you:

    • You will need to come up with a large up-front payment to make debt consolidation work. Unless you have a relative who can loan you the money, you may not be able to pay for debt consolidation. Don’t let anyone talk you into dipping into your 401(k) account. Your retirement nest egg would be protected if you file bankruptcy.
    • If you are asked to make monthly payments, be aware that the debt consolidation company in many instances will take its fee first, before it pays any of your creditors. After a year of making payments, you could end up with more debt than when you started. Some debt consolidation firms are scams and close shortly after taking your money and don’t pay any of your debts.

    For many people, bankruptcy is a more effective solution to debt problems.

    What’s Wrong With Loan Modification?

    Currently, fewer than 10 percent of home mortgage modification requests are approved. In addition, applying for a loan modification can take a long time. While one branch of the bank is working on your loan modification, another department can be foreclosing on your property. Often the modification offered by the lender only gives only a small reduction in the borrower’s interest rate and does not lower the principal balance of the often inflated mortgage.

    Only bankruptcy includes an automatic stay to protect you from foreclosure.

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