Feb/10
9
High credit card debt. Is the credit settlement companies the way to go? or is settling with the actual co?
5 Comments · Posted by sanbank in Credit
DF asked:
Is the credit settlement companies the way to go? or is settling with the actual company?
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Is the credit settlement companies the way to go? or is settling with the actual company?
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Credit Card Debt · Credit Settlement · Settlement Companies
5 comments
<< Any reccomendations on paying off a credit card debt of $20K.Does debt settlement really work?
CatDad · February 12, 2010 at 3:07 pm
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STAY AWAY from any “debt consolidation” program that involves debt settlement. Debt settlement is a risky tactic where 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.
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You can attempt to settle on your own, but they will only settle if you are either drastically past due…either near or at default/charge-off status. In today’s economy there are some that might give you a 90% settlement even if you are current…but in general they will only settle if you are drastically past due.
Plan B: Another option is entering a Debt Management Plan (DMP) with a non-profit credit counselor like CCCS (Consumer Credit Counseling Services). They can negotiate lower payments and interest rates. They do not negotiate settlements.
They will require you to stop using all credit and to cut up your cards. Your credit report will be updated to “enrolled in debt management.” This does not damage your credit, but it may make it impossible to obtain new credit while you are enrolled in their program….so don’t use this service if you anticipate applying for a new apartment, car loan or mortgage anytime soon, as you would probably be denied while you’re enrolled in the CCCS debt management program…. Otherwise, it can be a very good way to deal with your debt.
Plan C: Chapter 7 bankruptcy
bdancer222 · February 14, 2010 at 3:32 pm
credit card debt settlement
Debt settlement companies will take your money and trash your credit. Most credit card companies refuse to play with these debt settlement companies and immediately sue you.
If your credit card accounts are current, you probably won’t have a lot of luck negotiating settlement on your own, unless you have some permanent change of finances, like medical disability. Even if you do get them to settle for less than the full balance, the account will show on your credit report as a charge off/settled — a negative. You will also receive a 1099 for the forgiven portion which will have to be included on your income taxes.
However, if you have already defaulted on these accounts and they have been sent to collections, you can probably settle for half or less — lump sum gets the best deals, payment plans have to be very short. Get the settlement agreement in writing and don’t give the collector direct access to your bank account.
If these are current accounts, you might consider credit counseling. Check for a local NFCC member: . These are legit, non-profit companies that offer debt management programs for a nominal fee. They don’t negotiate settlement. They negotiate lower interest and payments so you can pay off the debt.
While in the program, it is noted on your credit file. However, upon completion of the program, the notation is removed and you will have decent credit.
Bozo C · February 15, 2010 at 7:40 pm
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Never get involved with that bunch!
Bedford S · February 16, 2010 at 9:10 pm
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From my standpoint I am not in favor of settling at all, I believe in paying 100% of my debt. That being said, if you want to settle do it yourself. Most companies are a scam. On Y/A one person was being sued because debt settlement company fell through the cracks.
Kevin F · February 19, 2010 at 8:59 am
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Professionals can settle the debt for 1/2 or less of what you owe. They will settle the debt wherever they find it–whether it is at the company or collection agency. Let them do it for you and save yourself some headaches. Good luck.