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Debt relief and mortgage scams to watch out for

Bankruptcy has provided many Long Island residents with much-needed debt relief over the years. It's possible in some situations to pursue non-bankruptcy remedies that also help overcome financial challenges.

Mortgage modifications are one major form of debt relief that avoids filing for bankruptcy. Unfortunately, there are some companies that seek to prey on vulnerable Long Island residents' fears of losing their homes and scam them out of what little money they may have left. Let's look at a few signs that should tip off our readers to a potential mortgage modification scam.

Charging significant fees (e.g., thousands of dollars) up-front is a common sign of fraud. Also, promises that sound too good to be true probably are -- solutions need to take individual circumstances into account, and it's not possible to save a home in every situation. And you should not let anyone rush you into signing paperwork before you've had a chance to fully read and ask questions.

Scammers may advise you to stop paying on your mortgage, perhaps so that they can ostensibly take over your payments. They may even try to get you to transfer the title to your house over to them. Remember, you are legally on the hook for paying your mortgage -- even if you've given up ownership of the home.

Some scam artists may even tell you that filing for bankruptcy will let you keep your home. The subject of bankruptcy and foreclosure is actually a complicated one, and depends in many factors, including the type of bankruptcy filing (Chapter 7 or Chapter 13, for example). We'll talk more about this in the following weeks, but in general, someone who promises you that bankruptcy will prevent foreclosure -- especially without having taken the time to analyze your financial situation -- is likely promising something they cannot deliver.

Source: Findlaw.com, "Mortgage Modification Scam Warning Signs," accessed on Jan. 9, 2016

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