Former Personal Consolidation Loan Clients Face Bankruptcy
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UPDATED: Aug 23, 2012
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Former clients of an Indiana-based debt consolidation company are contemplating filing for bankruptcy after they allege the personal consolidation loan company stole their money.
The company in question is called Debt Doctors. Debt Doctors promised to consolidate clients’ debt, but asked for an upfront fee for their service. After receiving money from debt-laden customers, Debt Doctor’s owner passed away and the consolidation company closed their doors.
Debt consolidation companies usually correct debt problems through two approaches: first, they originate personal consolidation loans, which lumps all of a borrower’s debts into a single monthly payment, and second, they contact credit agencies to correct credit scores.
However, these Indiana residents never saw their debt “doctored,” nor have they been reimbursed for their upfront fees. This has left several ex-clients contemplating filing for bankruptcy.
“We don’t want to do something like that, but if it comes down to it, that’s were going to do,” Margie Engle of Lafayette told the Journal and Courier Online.
Engle was one of 46 of Debt Doctors’ customers who submitted a complaint to Indiana’s Department of Financial Institutions. Despite the fact that the state has already said they are not pressing charges against Debt Doctors, Indiana’s Department of Financial Institutions has said it will review and possibly change some its policies to avoid any other personal consolidation loan companies from repeating this situation.
Marvin Hill, another Debt Doctors’ client, said this whole situation has left him financially crippled.
“I’ll probably end up having to file bankruptcy,” he said. “It’s a mess. I hope justice gets served after they figure this out. I know there are others out there besides me… I was trying to do the right thing.”
But all hope is not yet lost.
Debt Doctors was backed by a $50,000 surety bond, which wronged clients may receive compensation from.
However, that restitution may take months to be distributed, as the process requires both the state of Indiana and a third-party bond company to carefully review each case.
“Obviously we’re going to try to expedite the process,” said Mark Tarpey, the consumer credit division supervisor for the Department of Financial Institutions. “It can get to be a little tricky. Since we haven’t been through this, we’re not really sure [when the process will conclude]. We’re going to do our best. The end of the year seems like a realistic goal.”
It’s due to situations like these that personal consolidation loan experts and financial counselors urge consumers never to pay an upfront fee for credit-fixing services.
Instead, borrowers should either find a more reputable debt consolidation service, or approach a traditional lender and attempt to originate a personal consolidation loan themselves.