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Man sentenced for his role in debt relief scam

Some Massachusetts residents who have struggled with financial difficulties may have tried to avail themselves of the services of a private agency that offers assistance with settling one's debts outside of the bankruptcy process. While this option may be attractive to many and even best for some people, debtors in Massachusetts need to be cautious, since not all of these self-styled "debt relief" agencies are legitimate.

For example, a man in another state recently received an aggregate 70-month sentence in federal prison stemming from separate cases in which he and an accomplice created several debt relief agencies and marketed themselves as being able to settle the debts of people in financial need.

However, once debtors contacted these agencies, the man would only pretend to work toward settling his customers' debts. He would then inform his customer that he had reached a negotiated settlement with a creditor and tell the customer to wire settlement funds to him. Once the man had the money in hand, he would not pay the creditors as he had promised, but instead would take the debtor's money for himself. This left the debtor with an unpaid bill, an angry creditor and even fewer resources than before.

Granted, most debt relief agencies are legitimate organizations, and many of them play a vital role in the bankruptcy system by offering mandatory credit counseling classes that debtors must take before they can file for bankruptcy protection. However, consumers struggling with debt must be cautious and should not hesitate to walk away from a debt relief agency that seems just too good to be true.

Moreover, people should remember that although using a debt relief agency can produce good results if creditors are willing to negotiate, only a Chapter 7 or Chapter 13 bankruptcy carries with it an enforceable court order that prevents a creditor from collecting and effectively forces a creditor to the negotiation table.

Source: Houston Chronicle, "Fake debt relief business got Houston man $68K and prison," Robert Stanton, Aug. 2, 2013