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Got student loan debt? Be on the lookout for debt-relief scams

The worlds of finance, lending and debt management are so complex that most Americans cannot reasonably understand them. Unfortunately, this means that the line between legitimate companies and scammers is not necessarily easy to see. This is especially true when it comes to for-profit companies offering to consolidate, reduce or eliminate your debts and charging you up front.

The latest scam in this arena takes advantage of Americans who may already be experiencing financial troubles and considering bankruptcy. These “companies” promise to help settle student loan debt. To that end, they charge unsuspecting consumers for help with services that are either completely fictitious or which are already freely provided by the government.

For the record, federal student loans cannot generally be discharged in bankruptcy. This is likely one reason why student loan debt settlement scams seem so attractive. You should not believe any company that tells you it can eliminate or reduce your student loan debt.

A recent article in Forbes warns of three scams/scammers to avoid:

  • A Chicago-based company called First American Tax Defense, LLC – currently being sued by the Illinois Attorney General
  • A Frisco, Texas-based company called Broadsword Student Advantage, LLC – currently being sued by the Illinois Attorney General
  • The “Obama Forgiveness Program” or anything with a similar name – no such program exists

Federal student loans are generally not discharged in bankruptcy, but filing for bankruptcy protection might still be the smart financial move to make if your other debts have become overwhelming. If you need help determining if bankruptcy is right for you, please contact an experienced attorney.

Source: Forbes, "Debt Demons Discover Student Debt," John Wasik, July 16, 2014

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