Debt Relief
Debt Relief Scam
Debt relief scam summary:
Debt relief scams prey on regular people who owe debt.
Signs of a scam include unsolicited advertisements and overpromises.
Legitimate debt relief programs deliver results before charging fees.
Debt Relief Scam Definition and Meaning
A debt relief scam is a type of scam that promises to reduce or eliminate your debt. Scammers typically reach out over email or text, making false guarantees too good to be true.
This scam is so common that the Federal Trade Commission (FTC) explicitly calls it out and lists some of the worst offenders on its website.
Key aspect:
Signs of a debt relief scam include an unsolicited text or mail that offers to eliminate debt, or a very bold promise about getting your debts significantly reduced or forgiven.
Real-Life Examples of Debt Relief Scams
Government, student, and credit card debt relief scams are just a few types of debt relief scams. The FTC lists real-life examples of each on its website.
Government: In 2024, the FTC charged Prosperity Benefit Services with stealing $20.3 million from consumers seeking debt relief by pretending to be affiliated with the Department of Education.
Student: In February 2018, the FTC charged Brandon Frere and his companies, including Ameritech Financial, with stealing millions of dollars from thousands of people. His companies falsely promised monthly payments would go towards paying off student loans.
Credit card: In 2022, the FTC charged Sean Austin, John Steven Huffman, John Preston Thompson, and their affiliated companies with stealing tens of millions of dollars from people. The scammers falsely promised to eliminate or reduce credit card debt.
Debt Relief Scam: A Comprehensive Breakdown
Debt relief scams pose as legitimate organizations that help you pay down debt. Quick and easy relief from debt is rare, but that’s what debt relief scams typically promise.
Keep an eye out for red flags to avoid being scammed:
Sign of Debt Relief Scam | Description |
Unsolicited contact | Company reaches out first via call, email, or mail, often using high-pressure tactics. |
Upfront fees | Demands payment before providing any services (this is illegal). |
Unrealistic promises | Guarantees significant debt reduction or elimination. |
Pressure to act quickly | Urges immediate decisions without allowing time for research or consideration. |
Creditors aren’t obligated to negotiate. A debt settlement company can’t promise in advance that they will, or that there will be any specific amount of debt forgiveness.
Watch out for mentions of new government debt relief programs that promise relief from credit card debt. Chances are, it’s a scam. When checking out these so-called national relief programs, stick to government (.gov) websites. Generally, the debt relief offered by the government falls into these categories:
IRS offer-in-compromise or other programs to help you get caught up on tax debt
Debt forgiveness for qualified federal student loan borrowers
Bankruptcy
Legitimate debt settlement programs typically wait for you to contact them, reduce your debt before charging fees, and make no debt reduction guarantees. Debt settlement programs must deliver results before charging fees.
At Freedom Debt Relief, we never charge fees until:
Expert negotiators work to reach an agreement with your creditor
You review and approve the details of the agreement agreement
At least one payment has been made toward satisfying the agreement
All of this starts with a free professional debt assessment with a licensed debt consultant.
If a debt relief scammer calls you, hang up. Do not engage. You can report the scam to the FTC through its website (reportfraud.ftc.gov) for free. The FTC will advise you on how to protect yourself, and it will share your report with law enforcement to help with investigations.
Debt Relief Scam FAQs
Is it worth paying an upfront fee for debt settlement?
No. Not only is it not worth it, it’s against the law. If you're asked for a debt settlement fee before services are rendered, that's a sign of a possible scam. Reputable debt relief companies only charge a fee when they reach a debt settlement agreement, you approve it, and at least one payment is made to the creditor. For perspective, typical debt settlement fees are 15% to 25% of the amount of debt they settle on your behalf.
Is there a government debt relief program?
The most common form of government debt relief is bankruptcy. But bankruptcy doesn’t always relieve debt.
If the court thinks you can afford a monthly payment, you may be put into Chapter 13 bankruptcy. You’ll make payments on your enrolled debts for three to five years and if any balances remain at the end of your program, they’ll be forgiven. About half of Chapter 13 enrollees do not end up having any debts forgiven.
If the court decides you don’t have enough disposable income for a payment, you’ll be enrolled in Chapter 7 bankruptcy, where all of your enrolled debts are forgiven within a few months. In Chapter 7, if you have assets, you might have to sell them.
For both kinds of bankruptcy, participation is mandatory. That means if a debt qualifies and you want to enroll it, the creditor can’t refuse to participate. Some kinds of debts don’t qualify, like federal student loans in most circumstances.
The other kind of government debt relief is for federal student loans. You can apply for a deferment or a forbearance. In a forbearance, interest will continue to accrue and if you don’t make any payments, you'll owe more at the end of the forbearance than you did before. In a deferment, some types of loans continue to accrue interest, but some don’t.
Is Freedom Debt Relief a scam?
No. Freedom Debt Relief is a legitimate company that has helped tens of thousands of clients since we started in 2002. We are a founding member of the American Fair Credit Council (AFCC) and a platinum member of the International Association of Professional Debt Arbitrators. Every day, our dedicated employees carry out our mission to help people solve their debt problems — even if the solution they choose isn’t Freedom Debt Relief. Learn more about our commitment to integrity and our accreditations.
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