Ask a Lawyer and Get Answers to Your Legal Questions
Thank you for using our forum. My name is ***** ***** I hope to assist you today.
Unfortunately this kind of scam is very common (see: https://www.consumer.ftc.gov/articles/0225-credit-repair-scams), and while there are many variations on the scam, the basic idea is that the consumer is led to believe that their debts are being dealt with (often sending money to the debt consolidation company) while the fact of the matter is that the loans are going into defaualt and the creditors may sue the borrower.
As between you and your 4 creditors, you still owe the money as agreed - and unless you reach a payment agreement (such as the $25/month one you referenced above) you will need to pay the debt in full in order to clear this debt from your credit history. (Some creditors will remove the negative entries for non-payment from your credit history due to the consumer being scammed in this nature, but they have no obligation to do so). I would recommend that you get any payment agreement in writing.
The advice you received from the local attorney (file bankruptcy) is probably the most accurate way to deal with all of the loans you took out together (so it isn't bad advice as far as that goes, but it probably doesn't help as far as reaching your goal of purchasing a home in the next 12 months - although long term a bankruptcy is not as bad as most people think for their credit when compared with unpaid debts).
Without filing bankruptcy, or without reaching a settlement agreement, your creditors can continue to report your loans as being in default (so there will be "non-payments" listed on your credit report, and they have the option of suing you for breach of contract.
With regard to the credit reporting company (the fraudulent ones that tried to scam you into believing they were dealing with your debt). You can do 2 things:
You are welcome, and I do wish you the best with this matter.
Thank you for using our forum, and please do not forget to rate my service (the series of 5 stars next to the chat window) so that I can receive credit for assisting you.
If you would like to direct future questions to me specifically, you can do so by starting your new question with "For William B. Esq." and a moderator will notify me.
Thank you again, and again I wish you the best.