Suspension of Large Debt Settlement Company Shows Flaw in the Plan

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Ever heard of Allegro Law debt settlement company?  You won’t anymore because an Alabama Court shut it down.

Allegro Who?

Allegro Law LLC offered debt settlement services across the United States.  It promised its clients to reduce their credit card debts between 40%-50% in a very risky practice.  Basically, clients were told to stop paying their credit cards to have them classified into a bad debt column which could be settled for less than the amount owed.  Meanwhile clients paid Allegro a set monthly amount meant to be held in escrow while Allegro promised to negotiate the debts down.  Allegro would then use the money in escrow to pay the settlement, usually at a fraction of the original debt amount.  There were two catches to the scheme.

Read the Fine Print.

First, the clients had to stop paying their credit cards which put them into default with penalties and high interest.  Therefore if Allegro failed to negotiate the loan or the client could not make the monthly payments then they were left with credit card debt and interest significantly higher than when they started.

Second, Allegro wanted their fees paid first before any money went into escrow.  For example, if Allegro charged $4,000.00 for their fees and the client made a monthly payment of $400.00 per month, then the client would not have any savings in escrow for 10 months.  So the client could not get a single “settlement” during those 10 months.

It Gets Worse.

Besides the unspoken negatives pointed above, the outcome for the client could get worse.  While Allegro was collecting their fees, the client would still receive harassing collection calls despite instructions to contact Allegro.  If you thought a creditor was persistent when the debt was $2,000.00, imagine how rough it got when the debt skyrocketed to $5,000.00 without a single payment over 10 months.

Next, there was nothing to stop a credit card company from suing a client in court.  Imagine walking into Court to find out that your $3,000.00 credit card debt had become a judgment for $10,000.00 after attorney fees and a wage garnishment was about to take effect.

At Least the Bleeding Stopped.

In 2009, Allegro was ordered to suspend business while a lawsuit filed by the Alabama Attorney General ran its course.  After which, Allegro’s main attorney agreed to have his law license suspended for unethical practices.  The final straw was drawn when the Alabama Court shut down the business and put its $12 million of assets into receivership. (presumably to be returned to its clients.)

The problem was that clients believed that they were represented by a lawyer when in fact Allegro’s owners were not licensed to practice in another state besides Alabama. (Thus no legal representation)  Furthermore, Allegro was not a licensed to operate as a debt payment service company.  In addition their clients were not given any actual help due to the failure to explain the fine print or failure to stop lawsuits.

If you were thinking about debt settlement, then make sure you check up on your prospective client.  Check the fine print on when they will do any work for you.  Make sure they are licensed and allowed to practice in your state.  Or just consult a good bankruptcy attorney for a possible Chapter 7 Bankruptcy that may wipe out all credit card debts in 90 days.

Eddy Hsu is an attorney experienced in the areas of Bankruptcy and Family Law.  He is admitted to practice in California and the Northern District of California Bankruptcy Court. He may be reached at 415-230-5388, or directly by clicking here. The above article is informational only and not legal advice for your specific situation.  Always consult directly with an attorney to obtain legal advice.