Debt Consolidation

[nicole38]

I was just wondering has anybody considered a debt management plan to pay back creditors as opposed to filing bankruptcy.

[lrprn]

I was just wondering has anybody considered a debt management plan to pay back creditors as opposed to filing bankruptcy.

We tried it before we filed. First of all, some of our creditors refused to the join the DMP so those we still had to pay ourselves at the full rate. After we started working with CCCS, our credit card APRs started jumping to 30%, including the cc's who agreed to work with us! We paid CCCS $800/month for seven months. At the end of seven months after paying $5,600 into the plan, we owed $900 more than when we started. It was a total waste of our time and money. We filed Ch 13 bankruptcy a few months later - that was what we should have done to begin with.

DMPs only help a small portion of people with not much unsecured debt owed compared to their income. If you have a high secured to non-secured debt ratio, your credit cards APRs are jumping, and when you compare your income to your expenses you are seriously negative every month, a DMP is most likely a waste of your time - you are too far in the hole.

Don't let the stigma of bankruptcy stop you from making a fresh start. Most of that stigma comes from cc marketing trying to keep you paying them beyond all reason. Make 3-4 appointments for free consultations with bankruptcy lawyers in your area. Discuss your situation and find out where you stand. Don't throw good money after bad in a DMP if there's no hope of it getting you out of the hole in a few years. My $0.02. Good luck to you whatever you decide!

[HHM]

Do a search in this forum for debt management to get a sense of the experiences members have had with DMP's. Everyone's experience pretty much mirrors that of lrprn's.

Their a couple of problems with DMP's. (1) by the time most people figure out they need to do something about their spiralling financial crisis, it is too late for DMP to help. (2) and honestly, if you couldn't afford to pay your creditors on your own, you probably cannot afford a DMP. DMP's really don't save you that much money over paying directly.

[JasonK94Z]

We thought about using a CCCS too. But I started to look into it along with looking into BK. In the end, I chose to do a BK. We are in the process now of getting ready to file.

http://www.moranlaw.net/consider.htm

Read the link above. There is a lot of info on this site that will help you decide what is better for you.

[BKTango]

Been there, done that.

First try - We had pretty much the same experience as lrprn, but with a different DMP company.

Second try - We then jumped on the debt settlement bandwagon with another company, which is a totally different thing than a debt managment program....and that was WAY worse. (you save up money to settle your debt for a supposed fraction of the cost, instead of making monthly installments to the DMP for your creditors)

Thrid try - We went to CCCS. They are non-profit and DOJ approved. But...the proposed payment was $300 a month more than what we started out originally paying when we were still paying the creditors, before the first DMP. (If you can't afford the payments to begin with, you can't afford a higher one...that's simple math.)

Well over a year later, we were farther in debt due to late fees, interest, and etc. than when we started. Plus we had the lovely side effect of non-stop calls, and lawsuits. Not threats...actual "you've been served" lawsuits. We found a bk attorney, filed ch7 and walked away. Even if we had to file a ch13 I would have jumped on it. We figured if we had to keep making payments somehow, we might as well make them to the court and not have to deal with the harrassment and lawsuits. But we qualified for a 7, so that was like a gift from above. Looking back, our only regret is not knowing enough about bankruptcy and know that we could file and things would be okay. It's really a shame how much money we lost and spent with these companies...not too mention the time. During that whole process we only paid off one creditor and settled with another. If we had only known, we would have just filed and been done with it from the start.

[whatamess]

UGH! Here is my experience. My CC bills were about $750-$800 minimums, and my husband was working tons of over time and we even starting doing newspaper routes to pay them. I called 'X' consolidation company after our interest rates topped at 32 and 23 %. They wanted upwards of $800-$1,000 a month, and said they could not go lower. The CC companys that did wish to work with them wouldnt budge on interest rates below 22%. I think one was offering 16% but I cant remember now.

They were willing to sign us up despite that we were shorts on the paperwork $400 a month. We decided NO, to working three jobs, living with a relative and having almost no food money for the next four-five years. We went over every option on how many jobs we would need, and it was just not possible. Thats when we starting researching BR.

I have had two family members involved in these programs, and they ended up refinancing to pay them off early because the balances were not dropping much at all. My sister had late charges piling up because one company didnt pay her bills on time despite the huge auto withdraw they did every month from her bank. They they are not for profit but demand a 'monthly donation'.
Several places have closed up in recent years due to dishonesty and not paying bills on time.
Be careful!!
WAM

[JollyGG]

We looked into a DMP but they flat out told us to file chapter 7 bankruptcy and they couldn't help us.

My brother actually was very successful a couple of years ago with a DMP. He was living in a crappy apartment and working two part time jobs after dropping out of college. He was living on basically his credit cards and robbing peter to pay paul. He went to a DMP and they cut his budget to the bone and told him to increase his income. So he joined the Navy. He didn't have to pay rent or for groceries. He sent most of his paycheck off to the DMP and they paid his credit cards. The only reason the DMP worked for him was because it motivated him to get him butt in gear and straighten out his life. Unfortunatelly most of us here have families, ect. and don't have the ability to dramatically change our life in order to pay off our credit cards. Additionally while he was in the program he also had problems with creditors not willing to work with the DMP, the DMP paying bills late, ect. ect.

[familyof7]

We contacted cccs and we were so far in debt with low income they could not help us and said either make more money or talk to a bankruptcy attorney.

[Cassiopeia]

We contacted cccs and we were so far in debt with low income they could not help us and said either make more money or talk to a bankruptcy attorney.

That's basically what happened to me as well. When they figured out the payts (with reduced interest rates etc.) it was STILL more than what I brought home in a paycheck. They recommended refinancing my house (I currently have an HELOC) or bankruptcy. But they wanted me to avoid bankruptcy if at all possible, and referred me to a mortgage company. They worked out something for me, but my credit score was SO low and plummeting day by day, that they had to rescind the offer.

Then I knew bankruptcy was my ONLY choice.....but still kept putting it off for months. Finally filed in June and I couldn't be happier. Like so many of us, my biggest regret is that I didn't do it sooner. By the time I filed I was such a nervous wreck over my financial state (nearly ALL accounts in collections...harrassing phone calls daily), living from paycheck to paycheck, couldn't even afford basic necessities.....I'm surprised I didn't develop ulcers.

I am SO much happier now!

[finallyfree!]

My husband and I called a CC consolidation co. and THEY actually told us that the best situation was to file BK. Another one that I had consulted with sent me a workup in the mail, and would have had me paying almost my entire paycheck to the CC's! Where is the supposed reduction in payments!!!!!! THERE WAS NONE. I think they are a ripoff for the most point. Basically, I think you have to call them when you BEGIN to have problems. Not when you are really desperate. Just my opinion.

[finallyfree!]

I agree with Cassiopeia above. Living paycheck to paycheck, not being able to do anything! It is getting better now that I am discharged. The harassing phone calls stopped when I filed with the lawyer. Thank God.

[Boscoe]

The only question on this that I have is: How many people are out there, struggling mightily to make ends meet, living paycheck to paycheck without medical insurance or any frills whatsoever, who will NEVER pay off their credit card, medical, etc. bills?

Those are the ones that are suffering, and many are doing so needlessly, just because of the stigma of filing bk. I think many of us felt the same way, but NOT.......ANY.........MORE.