Five Lakes Law Group Lawsuit: Bankruptcy Cases and FTC Ban

Five Lakes Law Group, a Southfield, Michigan debt settlement firm, has been named as a defendant in at least two federal bankruptcy adversary proceedings alleging that fees it collected from clients were fraudulent transfers, and it continues to draw consumer complaints over front-loaded fees, extended program timelines, and settlements clients say were made without their authorization. Both lawsuits have closed, one by settlement and one by dismissal with prejudice, without any public finding of wrongdoing against the firm.¹²

The Bankruptcy Court Cases

Both suits were brought under Section 548 of the Bankruptcy Code, which lets a trustee or debtor claw back money the debtor paid out while insolvent if the debtor did not receive reasonably equivalent value in return. It is a common theory in the debt settlement industry: when a client files for bankruptcy, the fees they paid to a settlement firm become a target for recovery.

Williamson v. Five Lakes Law Group (Kansas, 2023)

Darcy D. Williamson filed the first known adversary proceeding against Five Lakes Law Group, LLC in the Kansas Bankruptcy Court in October 2023, seeking to recover money paid to the firm as a fraudulent transfer. The firm did not initially respond, and a default judgment was entered against it in February 2024. Five Lakes later moved to reopen the case and set aside the default, and the parties settled. The bankruptcy court approved the settlement in January 2025, and a satisfaction of judgment was filed on February 25, 2025. The settlement amount was not disclosed on the public docket.¹

Hanna et al. v. Five Lakes Law Group (Ohio, 2025)

Three plaintiffs — Dennis M. Hanna, Tobey A. Hanna, and Virgil E. Brown, Jr. — filed a second Section 548 adversary proceeding against Five Lakes Law Group, PLLC in the United States Bankruptcy Court for the Northern District of Ohio on April 2, 2025. Five Lakes answered in May 2025. In June, plaintiff Brown moved for authority to compromise his claim. The parties filed a joint motion to dismiss on September 16, 2025, and Judge Jessica E. Price Smith granted dismissal with prejudice on October 1, 2025. The case closed on October 14, 2025. A dismissal with prejudice bars refiling and generally signals a private resolution; the terms were not made public.²

Consumer Complaints Behind the Scrutiny

Complaints filed with the Better Business Bureau describe several recurring problems that clients say they experienced with the firm:

Fees taken from client custodial accounts before settlements were finalized. One complainant reported that $6,768.90 had been collected in fees while only $3,084.00 had been paid to creditors.
Programs initially quoted at 48 months that later stretched to 60 months or longer, which clients characterized as bait-and-switch aimed at collecting more fees.
Debts settled without the client’s written authorization.
Refusals to refund fees on cancellation, on the ground that the fees had already been “earned.”³

Clients also report a program fee of 27 percent of the total debt enrolled, plus about $10 per month in account maintenance charges. The 27 percent figure sits above the 15 to 25 percent range typical for the industry.⁴ On a $50,000 enrolled balance, that works out to $13,500 in fees.

The FTC Advance Fee Ban

Several BBB complainants have argued that the firm’s timing of fee deductions violates federal rules. Under the FTC’s Telemarketing Sales Rule, as amended in 2010, a for-profit debt relief provider cannot collect any fee until it has renegotiated, settled, or reduced at least one of the consumer’s debts, secured a written agreement between the consumer and the creditor, and confirmed that the consumer has made at least one payment under that agreement. Front-loading fees, or charging based on debts not yet negotiated, is prohibited.⁵⁶

Law firms do not get a blanket pass. Attorneys offering debt relief remain subject to the advance fee ban unless they limit marketing to intrastate calls or meet face-to-face with every client before enrollment.⁵ Five Lakes enrolls clients across state lines through its website and phone consultations, so those narrow exceptions appear unlikely to apply.

What the Firm Has Said in Response

In its BBB responses, Five Lakes has consistently pointed to Section 8 of its retainer agreement, which the firm says sets out the fee structure, the timing of fee collection, and program expectations that clients agree to at enrollment. The firm has also said that some monthly charges clients complain about are paid to third-party account administrators rather than to the firm. On the advance-fee question, the firm’s position is that fees are earned once a resolution offer is reached and the client makes a first payment on that offer.³ Five Lakes has not publicly addressed whether that practice meets the specific conditions the TSR sets out.

How the Program Works

The disputes make more sense against the outline of the program itself. Five Lakes enrolls clients who generally carry at least $10,000 in unsecured debt, such as credit card balances, medical bills, or personal loans. After a consultation, the firm builds a settlement plan and instructs the client to stop paying creditors directly and instead deposit money into a custodial account. Once the account has enough to fund a credible offer, the firm negotiates lump-sum settlements. The advertised program length runs 24 to 48 months, with claimed monthly-payment reductions of 40 percent or more. If a creditor sues during the program, the firm says it provides pro se document drafting and attorney assistance at no additional cost.⁴⁷

Stopping payments is not cosmetic. Credit scores drop for years, late fees and interest accrue on the unpaid accounts, and creditors can and do sue.⁴ Those are the conditions under which the fee, timeline, and authorization disputes documented in BBB complaints and the two bankruptcy adversary proceedings arose.

1
PACER Monitor. Williamson v. Five Lakes Law Group, LLC
2
PACER Monitor. Hanna et al v. Five Lakes Law Group, PLLC
3
BBB. Five Lakes Law Group PLLC BBB Complaints
4
Finder. Five Lakes Law Group Review
5
FTC. Debt Relief Services and the Telemarketing Sales Rule
6
Federal Register. Telemarketing Sales Rule, 75 FR 48458
7
Five Lakes Law Group. Five Lakes Law Group Official Website