Table of Contents

Debt Settlement

Avoiding Debt Settlement Scams in Florida

Florida residents have been the target of many debt settlement scams in recent years, especially in the form of people pretending to be lawyers offering debt settlement services. A common tactic for debt settlement fraud in Florida is to ask for payment in advance, which is against Florida law. According to FS Section 817.802(1), debt management agencies cannot charge more than $50 for the initial consultation. Other fees must not be more than $120 per year, $35 per month or 7.5 percent of the monthly bills paid, whichever is greater. Never pay for debt settlement in advance.

The Florida Attorney General’soffice warns consumers to avoid agencies that do not follow fair business practices and follow regulations, including charging more than $40 month, claiming to represent your credit card company, not providing you with monthly accounting showing payments made to your creditors and claiming its system will let you avoid bankruptcy. Other signs of a scam can include not requiring you to sign a contract and not having a refund or cancellation policy.

How Florida Debt Settlement Agencies Work

“Most debt negotiation companies charge consumers substantial fees for their services, including a fee to establish the account with the debt negotiator, a monthly service fee, and a final fee of a percentage of the money you've supposedly saved,”€ according to the Florida Attorney General office. “€œThere also is no guarantee that a creditor will accept only partial payment of a legitimate debt. If you stop making payments on a credit card, late fees and interest usually are added to the debt each month.”

Several Florida laws make debt settlement a feasible solution for many residents of the Sunshine State. If you file your taxes as head of household, you qualify for the Florida Head of Household Exemption that can protect your assets during the debt settlement process. One of the most significant is the homestead exemption, which prohibits creditors from placing liens on your property, except if the loan was for the purchase or renovation of the property. However, to use this exemption, you must file an affidavit detailing the exemption as stated by Florida Statute 222.01. Additionally, Florida law protects the income of the head of household for six months from when deposited.

Credit Counseling

What Florida Residents Should Do

In recent years, the Attorney General’s office has focused on eliminating fraud in Florida, including increasing the office’s ability to prosecute agencies in violation of the law and providing additional protection to consumers. As a result, a more effective debt consolidation industry has flourished to enable Florida residents to get back on their feet. According to the Florida Attorney General's office, €œA reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If a firm doesn't do that, consider it a red flag and go elsewhere for help, €according to the Florida Attorney General’s office

Review credit counseling services available.

Florida is part of the U.S. Trustee Program and the Department of Justice maintains a list of approved credit counseling agencies. You can also use the database maintained by the National Foundation for Credit Counseling or check with your local cooperative extension service for credit counseling services. Many Florida residents use the nonprofit Consumer Credit Counseling Services, which has a number of locations throughout the state. If you are a part-time resident of Florida and spend part of the year in another state, consider finding a credit counselor that also offers phone and internet consultation so you can continue your sessions throughout the year.

Get fee information up front before signing up for services.

The Florida Attorney General’s office says residents should consider it a red flag if the agency is charging more than $50 for the counseling session or more than $40 in monthly fees. Since agencies can charge an extra fee for completion certificates under the U.S. Trustee program, be sure to specifically ask about certificate fees. If you cannot afford to pay, the credit counseling service must provide you with counseling free of charge, typically for families whose income level is less than 150 percent of the poverty level.

Attend credit counseling sessions.

These can be either online, in person or over the phone. When it comes to credit counseling connected to a bankruptcy, according to the United States Department of Justice U.S. Trustee program, you must have completed debtor education and credit counsel sessions at different times. You may attend counseling with your spouse, but make sure that agency addresses each of your debt needs as an individual as well as a couple. When you complete the course, the agency will give you a certificate.

Implement your plan.

The credit and debt reduction strategies developed for you during the sessions are designed to help you meet your financial goals. Implement these and schedule follow up credit counseling services as needed.