Extension Report

Baldwin County Extension Office

302A Byrne Street

Bay Minette, AL  36507

Rick Zapata

Regional Extension Agent

Consumer Science & Personal Financial Management

July 14, 2009

Beware of Financial Scams

My parents told me that “Hard times bring out the best in people”, but hard times also bring out the crooks and scam artists. Every day on television and in print there are advertisements that promise to eliminate your debts, restore your credit rating or settle your debt for pennies on the dollar. Most of these agencies are designed to take your money for little or no service offered. Please remember this “If it sounds too good to be true, it probably is not true”.

We are now well into a prolonged recession. Thousands of men and women have been laid off in Southwest Alabama. These individuals had debts to pay on homes, vehicles, and consumer credit cards. When they can’t pay all their bills it just seems like there is no way out. These are the people that the con artists are targeting. They will promise the public that they can help them become debt free for a small fee. These companies usually leave the person with the same bills that they had, only now they have less money to pay bills. These companies are not in business to help you; they are in business to take your money. Let me tell you about some of them.

There are ads on television that promise to settle your tax debt for pennies on the dollar. There is a program with the Internal Revenue Service that is called “Offer in Compromise”. This program is set up to enable some taxpayers to settle their I.R.S. debt when they are unlikely to pay off their entire debt. It is based on your ability to pay, NOT THE AMOUNT THAT YOU OWE. You do not need to pay someone to process the Offer in Compromise for you. There is an I.R.S. office in Mobile where you can receive all the forms and there is someone there that can help you process the paperwork. These services are FREE; your taxes pay for the service. You can go on the internet to www.irs.gov  and download information and forms for free. The I.R.S. will take a financial information form and determine your ability to pay. If you are unable to pay the full amount, they may settle for less than the full amount. If you have lost your job and are unable to pay anything, the I.R.S. can suspend collection efforts all together until you are able to start back paying what you owe. The key here is to contact them ASAP and they can help you until you get back on your feet. The outcome of the offer in compromise will be the same whether you pay one of these companies to help you or you do it yourself. It is based on dollars and cents, not their negotiating skills.

There is another company advertising that they can wipe out all of your debt within a year or so and restore your credit rating. This is just too good to be true. These companies do not have the ability to handle the average family’s debts much less be able to restore their credit rating. Generally speaking, the credit bureau keeps records for seven years past the “last consumer action”. Once a legitimate negative report is placed on a person’s credit report, it usually will “Not” be removed until the seven years have passed. These companies are there to make money off of your problems and nothing else.

The first thing that you need to do if you get into a money tight is to call for help from an agency that is designed to help counsel people with financial problems. In Mobile (251-602-0011), Jackson (251-246-9898), and Montrose (251-990-8499) there is an agency that is designed for counseling. They are “Consumer Credit Counseling Service”. On the internet their address is www.cccsmobile.org . They offer Credit Counseling, Budget Counseling, and Housing Counseling. They are affiliated with the United Way and the Department of Housing and Urban Development. They are set up to help you when you get into financial trouble but anyone would benefit from their help. I would recommend that any couple planning to be married get financial counseling before they marry because financial problems can wreck a good marriage. Consumer Credit counselors will work with you one-on-one to help you with your financial problems and will help you set up a budget to pay bills and household expenses. This is a legitimate counseling service with trained, professional counselors.

Bankruptcy is often referred to as the “ten year mistake”. Filing bankruptcy will stay on your credit records for ten years and may hinder your efforts to land a really good job. More and more employers are checking credit backgrounds before hiring a person. The current bankruptcy rules require you to seek financial counseling before you file for bankruptcy and the rules state that if you have a large percentage of credit card debt you may not be eligible for bankruptcy relief. The Consumer Credit Counseling Service meets the requirement for pre-bankruptcy filing.

The current recession is causing thousands of job losses each month. If you have lost your job, you are not alone. The majority of creditors in our country are willing to work with you through an agency, but some of them will work with you directly to adjust the amount owed, suspend or lower interest rates, or allow you to skip a few payments. If you are allowed to skip payments, remember that they will add these payments onto the end of the loan and it will take you longer to pay off the debt. The Consumer Credit Counseling Service can act as a go-between with your creditors and they already have established a system with most of the major creditors in the nation. There is usually a nominal fee associated with this based on your ability to pay. The important thing is to get either financial or legal counseling or both to help you make the right decisions. There is help available for you.

The Alabama Cooperative Extension System publishes information on our web site at www.aces.edu that will also help you in these difficult times. There is a section called “Thriving in Challenging Times”. It is updated frequently with helpful articles for individuals and families to help them in the current recession. There is also a publication with the same title available on the same web site. Cooperative Extension also offers classes on budgeting, job search techniques, and other financial programs that are open to the public. These class schedules are published on our website at www.aces.edu/counties/Baldwin.

Email address: rrz0001@aces.edu

Phone: 937-7176 or 943-5611, 928-0860, ext. 2222

The Alabama Cooperative Extension System (Alabama A&M and Auburn Universities) in cooperation with the U.S. Department of Agriculture is an equal opportunity educator and employer.