After A Scam Is Discovered Comes The Debt!
Many Victims Then Have To Face The Truth About New Debt!
As a financial fraud victim, you have to face many hard truths after your scam!
One of them is debt!
You became involved in a scam …
- You did not want to be scammed, but it happened – you were lured in, groomed, and manipulated expertly.
- You did what the scammer asked – in most cases, this meant that you sent them money.
- In many cases you did not have the money you sent to the scammer – you borrowed it:
- You got advances or cash from your credit cards
- You took out new loans
- You re-mortgaged your home
- You borrowed it from friends and family
- You leveraged other assets to get money
- Now you have to deal with this reality – you owe money, potentially a large amount!
Now That The Scam Is Over
You now have to deal with your real financial situation at the same time as you are going through grief and the trauma that was left behind.
We know that the financial aftermath from your scam can be as devastating as the emotional side – both contribute to your trauma and will make it hard to recover. A successful recovery program must guide you through both sides. SCARS understands this!
There are ONLY Three Options for you at this point:
- Ignore it – stay in denial and pretend it will all just go away
- Procrastinate – you know you have to deal with it, but just not today
- Confront it – take control of the situation and work through each point of pain until they are all under control and you have a clear financial path forward
Obviously, Each Victim’s Situation Is Different
Each scam victim did different things to satisfy their scammer. From credit card debt, to loanshark loans, to home mortgages. Regardless of the details, they cannot be ignored forever. Besides, trying to live in denial will always make things worse – potentially much worse – much depends on the country where you live and the kinds of debts.
SCARS supports scam victims worldwide. Because of this, not all information applies in every country. Make sure that you understand what is appropriate, possible, and safe for your country.
You Are Going To Face It!
Dealing with your debt will come after you have the rest of the scam under control, but it will not wait for long. Payments will have to be made, legal decisions need to be considered.
In our experience, that average victim will delay from one month to a year before really taking firm control of their finances and debt. We can’t tell you what is right for you, because we are not financial professions, and because each person’s situation is somewhat different. But it is important to talk with professionals that can help you sort through this.
The SCARS FOUR STEPS
As a victim, there will be FOUR major steps to your financial control and recovery:
Control The Damage
Confront The Debt
In each one, you are going to be facing many difficult processes and emotional challenges, but it becomes easier the more you plan. Having a step-by-step plan helps reduce stress and further trauma. The single biggest value in all this is a sense of regained control and certainty – when you have a plan, you have a sense of what the future will bring, even if it is not great – at least you know and can deal with facts. Uncertainty can make it much harder to both recover control and work through your emotional pain.
STEP 1: Regain Control
The first step in regaining control is to know what your real dept is – how much, what is due and when. This is basic debt management & planning.
Start by listing every debt that you have, along with expenses and obligations on a piece of paper (or spreadsheet). You have to learn what is really out there. Include everything, even how much you plan to spend of food, utilities, and more – all of it must be accounted for – or you will set yourself up for surprises.
Catalog Your Debts
First, create a list of all your debts. You should have done this already in STEP 1 above – this can include money owed on:
- credit cards
- student loans
- auto loans
- medical bills
- personal loans
- all other financings
- Other obligations that must be paid on a monthly or regular basis
The list of your debts should include:
- the name of the lender
- type of loan or obligation (category)
- total amount owed
- interest rate
- minimum payment due each month
You can also include the contact info of each lender, and any other pertinent details (i.e., terms, fees).
Make sure your info is up-to-date and accurate.
STEP 2: Control The Damage
After you really learn what you have to face, begin the painful process to talking with every person or business or government that you owe money to. Yes, you have to do this.
This will serve many purposes, from buying you time to sort through it, to stopping or delaying debt collection activities. You will ned time to recover emotionally too, and adding the financial issues will be hard. Do what you can to give yourself space and time to recover, but don’t hide from it – what you hide from will come back to haunt you.
Make sure you prioritize your debts carefully – talk to all of them, but give the most attention to those that are going to be the worst for you.
Make a list of your creditor and go through them one by one and inform them that you are the victim of financial fraud (they don’t need the details) – but they will require the police report number – make sure you have it.
Ask them about:
- In what ways can you delay payments
- Can you change payment amounts or extend the loan repayment
- Do they have programs for partial or complete debt forgiveness
- Can they help you in debt planning and creditor management
- Did you have any type of insurance on their debt
STEP 3: Confront The Debt
This is where you have to face the music – as the saying goes. You have to face your reality and make choices about the direction you take.
3.a – Debt Management
After you have done the above and you have the answers to those questions, you are ready to lay out a realistic debt management plan.
There are two basic ways to work a debt management plan:
- Do it yourself – you plan and then work the plan
- You hire a service provider (third-party) to do it for you
You can do all the work yourself and maintain personal control over it all. This has many advantages, but may also be difficult if you are still dealing with the emotional grief and trauma of the scam. It may make more sense to work with a debt relief or management provided to help keep it all strain, and potentially even handle the payments for you – this makes it much easier for you to avoid the additional trauma of having to speak with debt collectors – they do it all for you.
In the sections below we will explore Do It Yourself Debt Management.
You may wish to start by talking to a credit counseling service. Here is what you can expect when talking to one – click here.
3.b – Debt Elimination (Bankruptcy)
Depending on the types of debts and what you learned in STEP 2 – you may be able to obtain forgiveness or write-off of some or your debts, but probably not all. You may have to consider bankruptcy.
We cannot advise you about this choice or the details that will be specific to you. For this, you will need to find a licensed bankruptcy attorney or solicitor to explore these options.
Here is a directory service to help you locate them: Best Bankruptcy Lawyers Near Me – Attorney Ratings | FindLaw
However, before you go there, make sure you have fully explored all of your other financial options first. Once you jump into bankruptcy all other options become unavailable.
STEP 4: Debt Management
If you are going to try to manage your own debt, you will need a plan.
4.a – What is a Debt Management Plan?
A debt management plan (or DMP) is a way to get yourself out of debt and rebuild your credit and control your life, all while making monthly payments that fit your budget. They can be extremely beneficial for someone who is in over their head with debt and needs help getting a handle on it.
While participating in a debt management plan, you’ll also learn how to manage your money better so that you can avoid falling into debt again in the future.
How It Works
A debt management plan is a system that allows you to pay one monthly payment that covers all of your included debt. Essentially, once your creditors agree to the plan, you make a single payment each month to the facilitator of your debt management plan. It is not a loan, however, and your monthly payment is divided and dispersed to your creditors every month.
When you request a debt management plan and your creditors agree to it, they will often lower your interest rate and waive any late fees that you currently have. They will also agree to a set monthly payment that has your account paid in full in no more than five years. If you cannot do this in 5 years, then bankruptcy may be the right option.
While you’re in a debt management plan, your credit accounts will be closed and you will not be able to use those accounts for any new charges. You will also not be strongly discouraged from opening any new lines of credit, as creditors offer you perks (reduced interest, waived fees) with the idea that you’ll focus on paying off your debt and not creating new debts.
Yes, there can be a cost, but it is not much and it will vary depending on the amount of debt you’re repaying and the state/country where you live, and the specific service provider. If you work with a nonprofit credit counseling agency, there will likely be two fees: an ongoing monthly fee and a one-time set-up fee. Monthly fees may be a percentage of your monthly DMP payment, or a flat fee (again depending on where you have residence).
With many of the better providers, the average monthly fee is around US$24, with a maximum of $50 (depending on regulation, country, and type of entity.) The average set-up fee is $33, with a maximum of $75. Fee waivers and fee reductions are available for consumers with hardships – just ask your credit counselor if you qualify.
How You Sign Up For One
Your best, and easiest possible approach may be to work with an accredited nonprofit credit counseling agency. They’re not all the same though. Do your homework and search their Better Business Bureau or other national rantings to find a reputable company.
Contact the one you’re most interested in working with and schedule an appointment for a complimentary counseling session. This will allow you the opportunity to discuss your financial situation with a credit counselor, review your options, and see if a debt management plan is right for you.
Remember, they are not YOUR financial planners – they have a mission that may be different than yours – we encourage you to talk with a real financial professional about all your possible options.
If you’re not opposed to putting in some long hours on the phone, you can set up your own debt management plan. If you’re having trouble keeping up with your payments, creditors may be willing to work with you. But there’s no guarantee that you’ll receive the same interest rate reductions and other benefits if you go it alone. It is a question of trust and how much effort your creditors have to put in to work with your directly.
Making the decision to create a debt management plan can be a responsible way out of debt, but it is not right for everyone. If you’re considering one, talk to a credit counselor about your options.
SCARS cannot recommend any specific credit counseling company. However, in the United States, we recommend that you consider NCFF Members in good standing with solid Better Business Bureau ratings (A+).
4.b – Will A Debt Management Plan Work For You?
Here are some things to consider when deciding whether or not to use a debt management plan:
You Must Have A Source Of Income
No repayment option will work for you if you don’t have some form of income. When a nonprofit credit counseling agency administers a DMP, they are obligated to ensure that the plan is affordable and works as part of a balanced budget.
If you barely have the income needed to manage your basic essentials (food, shelter, etc.), then debt repayment should not be your top priority and a DMP is unlikely to be a good idea until you can increase your income. This is where bankruptcy comes into this again.
However, if you have a steady income, but are just struggling to make your debt payments balance against the rest of your budget, then a DMP may be a great choice for you.
A DMP is likely to reduce most or all of your high-interest credit card rates, allowing more of your monthly payments to go towards the principal. This will allow you to pay down your debts quicker. In fact, most DMPs are repaid within 3-5 years.
Missed payments don’t disqualify you from a potential DMP. In fact, there are usually no credit requirements for a DMP, so unlike many consolidation loans, if your credit has suffered from missed payments you can still qualify for a DMP. Creditors will also often bring your account current after you have made a certain number of consecutive payments through your DMP.
Luxuries & New Debt
You probably will not be able to do that.
Accounts included on a DMP are usually closed or frozen by the creditor. Because the age of your accounts is a factor in most credit scoring models (and older accounts are better for your score), this means that your credit score may fall immediately after starting a DMP. If you need your credit in premium shape for a major purchase (home, car, etc.), then you may want to wait before starting a DMP or look into another option, like a low-interest consolidation loan. We do not suggest this for scam victims – we suggest that you forget normal life as it was for a while, and stay laser-focused on financial survival.
Your Credit Score / Credit Quality
If your score is already low because of missed payments, then a DMP may be a good option. The truth, however, is that any option (besides potentially debt settlement) can be a good way to help rebuild your credit, providing that you:
- Make payments consistently each month, as agreed upon, and
- Pay off your debts in full.
The DMP’s single, consolidated payment and reduced interest costs can certainly help you rebuild your credit over time, but that only works if you’re able keep making your payments straight through to the end.
Help Staying Accountable
Scam victims frequently avoid dealing with challenges. The DMP actually is a good way to reduce your stress because it reduces the number of people you have to deal with. It simplifies your life by giving you a financial advocate that you can really work with – assuming that you qualify.
One unique benefit of using a DMP through a nonprofit credit counseling agency is that it comes with continual support and assistance from a team of trained financial educators and counselors. If you’re self-directed and only need the boost of a lower interest rate and consolidated payment, then a low-interest consolidation loan may be what you need. But if you feel you might need a little extra support to give yourself time to heal and to set and stick to your new goals, then a DMP may be the way to go.
Ultimately, anyone with more credit card debt than they can comfortably handle can potentially benefit from a DMP. It is simply a matter of deciding whether or not the benefits of a DMP meet your unique needs.
4.c – Creating Your Own Debt Management Plan
There are plenty of organizations that can help, but if you want to do it yourself and you like handling things on your own?
You may be able to do it – but you may also be foolish to try. We cannot tell you the answer here. But you must be realistic.
Doing It Yourself
You should consider doing it yourself ONLY if:
- You are able to handle the additional emotional load of managing your finances and dealing with creditors – this is not easy! But can help you maintain control. Or,
- You live in a country where debt management services are not available.
Those are the only two reasons to do it yourself. Do not let pride or shame enter into this. If you are in trouble over your debt, do what is best for you.
By being organized, diligent, and having determination and commitment, you can become debt-managed by yourself through your own debt management plan.
4.d – Step by Step
The following is a step-by-step approach to creating a debt repayment program and implementing it on your own.
4.d.1 – Create Your Plan
When it comes to figuring out the best tactic, two popular debt repayment me