Debt relief agency

How it works

Bankruptcy assistance is defined broadly. It includes providing information, advice and document preparation, and the statute's text also lists legal representation and appearing in a case for someone else. 1

An assisted person is someone whose debts are mainly consumer debts and whose nonexempt property is worth less than a dollar limit set in the Bankruptcy Code. 1

Some helpers are left out of the definition: nonprofit organizations that are tax exempt under section 501(c)(3) of the Internal Revenue Code, a creditor helping a person restructure a debt owed to that creditor, banks and credit unions, and authors, publishers and sellers of copyrighted works. 1

The label carries duties. The agency must give written notices soon after it first offers its services, sign a written contract within 5 business days of first providing them, and include a statement such as "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code." in covered advertisements. 2 3

In everyday use, "debt relief" often means debt settlement companies, which is a different thing. The FTC's warning signs of a debt settlement scam include collecting fees before settling any debt and guaranteeing to settle all debts. 4