Has anyone out there been successful with those debt settlement programs?
I have quite a bit of credit card debt, but I do not know which companies can be trusted. The credit card companies will not work with you these days if you are current. But it is a real strain when income is limited.
Debt settlement is the process in which you stop paying your creditors for some time and save that money so that you can then negotiate with them to settle the debt for a lesser amount. So it is better to seek help from any reputed debt settlement company. Such companies can handle it properly as they are experts in that field. I took help of freedom debt relief to settle my debts. I have joined their debt settlement program one year back and almost debt free now.
January 19th, 2010 at 7:04 pmI highly suggest doing it yourself… It look a lot better on your credit file if your credit recovery is self managed… It’s not a lot of work, only 2 hours or so of research is needed – And I’d be happy to help with what I can.
A great place to start is:
http://credit.about.com/cs/qt.htm
If you have any questions send me a reply.
Good Luck,
January 19th, 2010 at 7:04 pmT
I haven’t used them personally, but I’ve heard decent things. A friend of mine used The Debt Settlement Program. I mean, if your credit is already in shambles, then you really can’t lose because they got her a great settlement. I’d be weary of which companies you use, but my girl really seemed to have a good experience with this company. I think she went with them because they had a good record and didn’t charge any ridiculous fees.
January 19th, 2010 at 7:04 pmIf you are current you DO NOT want to work with Debt Settlement Companies. Because what they do is have you stop paying your credit card companies. Also, credit card companies are not required to "settle" a debt, in fact a lot once they find out you are with a Settlement company they go right to filing suit.
If you are having problem you want to work with a Debt MANAGEMENT program. Here you don’t stop paying your credit cards. What happens is you make one payment to the DMP and they disperse the money each month to the credit card companies. This reduces your debt and will get your cards paid off. There are several out there and the best thing to do is look at the National Foundation of Credit Counselors as they give a lot of good information as well as can help you find a DMP in your area.
January 19th, 2010 at 7:04 pmIf your current than Debt Settlement is not the way to go. For that to work you’d have to stop paying your bills and then a settlement plan would be set up. That would have a negative effect on your score.
Debt Management would probably be something that would be better for you as they could set up a plan for you to get that credit worked down.
There are companies that do both. I know one, Debt 1 Solutions, that is good and advertises on my blog. They do both programs and you could get a free consultation for them and they’d explain just what Debt Management can do for you, also explain to you what Settlement could do. It can’t hurt to listen. (877) 577-DEBT.
They also have never had a complaint with the Better Business Bureau, I checked them out before I approved their advertising.
January 19th, 2010 at 7:04 pmStay away from any "debt consolidation" company that promises to cut your debt and payments in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.
Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.
See this as an example of what can go wrong with debt settlement:
January 19th, 2010 at 7:04 pmhttp://www.ripoffreport.com/Credit-Debt-Services/Clear-Debt-Pro-Inc/clear-debt-pro-inc-debt-cr-fe942.htm
Debt settlement and consolidation will hurt your credit almost as badly as declaring bankruptcy. None of these firms will work with you if you are current either. You need to suck it up and pay down your debt. There is no easy out.
Debt settlement companies charge hundreds of dollars as an initial "admin fee" to set up your account, plus a monthly service fee. The fees vary depending on the company and the amount of your debts.
Such companies take your money every month, but don’t make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there’s enough in your account to pay a creditor in full.
That can take *years* depending on the amount of debt you have with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don’t make payments to your creditors. You’ll end up in the same spot without paying someone to help you get there!)
Settlement companies don’t ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will continue to grow! So if you’re sued and a judgement is brought against you, you’ll owe more money than before!
And shoddy companies, which there are alot of, don’t tell you *any* of this up front. I call it "getting permission by ommission" because they simply don’t tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, eventually you’ll figure it out. (Or when the crap hits the fan. Whichever comes first.)
Let me give you an example of how debt settlement works.
Let’s say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you pay $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you’re saving $5,000 and you’ll be debt-free in 5 years, right?)
The admin fee will cost you $750. Your first 3 monthly payments go towards that and nothing gets put into your trust account until your 4th month.
The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account.
Most debt settlement companies claim to be able to negotiate your debt for about 50% of what you owe. So let’s use the lowest credit card debt as an example.
If you owe $4,000 and your creditor agrees to accept $2,000 as payment in full, it will take 10 months at $200 per month to have enough in your trust account to pay off just that one credit card.
But remember, your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.
So what’s the problem? It’s simple. Your creditor won’t agree to accept half of your actual debt unless, or until, it can be paid in full. Otherwise, you’re expected to make your normal monthly payments.
Since you don’t have $2,000 in your trust account, and you won’t have it until more than a year after you stopped paying your creditor directly, they’ll probably take you to court and request that your wages be garnished long before you have that $2,000 built up.
And what about your other creditors? Well, they’ll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* months to pay off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.
On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not.
The facts are, you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And, of course, you’ll save thousands of dollars in fees to a settlement company.
Before signing up for any service, please be sure you check out the company thoroughly. And don’t let the words "non-profit" fool you either. Alot of debt settlement companies claim to be non-profit.
Going back to the example above, if you pay them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they’ll make $5,000 from you. I’d call that a profit, especially since they might not have actually helped you in any way.
January 19th, 2010 at 7:04 pmThe first thing to do is stop using your credit cards. Use cash for all your purchases. Do a lot of research.
Go to the National Foundation for Credit Counseling here: http://www.nfcc.org/
They can help you find a qualified debt management counselor (not a rip off site) that will help you decide if bankruptcy is right for you. The debt management counselor can also set up a 5-year program to get out of debt, if you qualify.
Avoid the Debt Management scams that will want you to default on your credit cards. CCCS is a nation wide network of councilors who can give you advice on how to get out of debt. Be careful here though, they will want you to cut up all your cards and pay all your debt in 5 years (this is by law – they have no choice if you go into a Debt Management with them); but they are reputable.
I have personally talked to a CCCS councilor – and although I have chosen my own path, much of the information that they gave me (for free) has been useful in my charting a path to a debt-free future.
January 19th, 2010 at 7:04 pm