Debt settlement companies

[mfaina]

I am ready (unfortunately) to hire a debt settlement company to help me deal with my debts, can't pay them anymore. Beside the fact that they charge a pretty big amount up in front, have anybody here went through this process and would spare some time to give me some advices? I would appreciate any help possible.
Thanks!

[GWBcasualty]

I am ready (unfortunately) to hire a debt settlement company to help me deal with my debts, can't pay them anymore. Beside the fact that they charge a pretty big amount up in front, have anybody here went through this process and would spare some time to give me some advices? I would appreciate any help possible.
Thanks!

I have been researching all options for months and I have to say that if you really are in trouble there are only two options:

1) Do nothing (if you are judgment proof)

2) Prepare and start planning today to file BK in 3 to 10 months depending on how complicated your case is.

Last thing you need is to be charged for something you can do for free (settle with CC companies). Once you are past due, give them a few months and they will make you offers.
I guess that could be a third option, BUT you will have to pay TAXES on the amount of debt that they will forgive you.

[mfaina]

I don't think that I have what it takes to settle with CC and collections agencies in order to get a good deal, that is why I was thinking to pay. The procedure is that you put money into a saving account from where you pay them after the "broker" made the deal. Question is and I haven't got a clear answer - how this works when it will take some time to bring your saving account to the amount(s) they settled? I don't believe they (CC and collection guys) will wait until you finally save what you need. I know about taxes, I just want to get out from the mess that I am in. What will be advantage of filling Chapter 13 (I will not qualify for 7) vs. settlement? Thanks for your reply!!!

[GWBcasualty]

I don't think that I have what it takes to settle with CC and collections agencies in order to get a good deal, that is why I was thinking to pay. The procedure is that you put money into a saving account from where you pay them after the "broker" made the deal. Question is and I haven't got a clear answer - how this works when it will take some time to bring your saving account to the amount(s) they settled? I don't believe they (CC and collection guys) will wait until you finally save what you need. I know about taxes, I just want to get out from the mess that I am in. What will be advantage of filling Chapter 13 (I will not qualify for 7) vs. settlement? Thanks for your reply!!!

Benefits I can see are:
1) Including all debts
2) Paying monthly
3) Paying a fraction of the debt based on your disposable income
4) No taxes

But it depends on your personal situation.

[blindsided]

The FTC believes that most debt settlement firms are at best unhelpful, at worst outright fraud. Many times they take your money, then create defaults with your creditors by not paying, with the strategy being getting a better settlement deal -- and wrecking your credit further in the process. Almost anything they can do you can do yourself.

If you are capable of repaying your best option is an accredited credit counseling service, which will either help you develop a self-managed repayment plan or will manage it for you. Because they are funded by the credit industry they are at least legitimate but have an open interest in getting you to repay every dime. The advantage is that they can get you lower interest rates for the payoff period because you are in an approved paydown plan.

I would have been interested, on my parents' behalf, in the plan put forth last year to write off consumer debt settlements over five years, with tax advantages for creditors and debtors, but the government regulators decided it was a bad idea.

[heyu]

Just stop paying, your credit is going to be damaged anyway, avoid all the headaches, stop paying all of them, concentrate on your immediate needs and save as much as you can, get a magic jack phone, you can get a Number that's not even in your area code and it cost only $20. 00 for the service for the year, google Magicjack to find out more.
when couple months have passed they will meet you anyway you want or you can do a chap 7 and clean your self up with a fresh start.

[keepmine]

Another huge advantage of a chapter 13 vs settlement is, you are in control. Once the plan is confirmed by your trustee, the creditors must comply. Also, it's not unusual for a creditor to not file a timely proof of claim so, they get nothing.

[laurannm]

Not to mention that debt settlement very rarely works, and often times people who try the debt settlement approach end up filing for BK anyways. Except by then they have lost several thousand dollars to the debt settlement company. Keep in mind that your creditors do not have to work with the debt settlement company, nor do they always come to an agreement. On the other hand, when you file Ch 13, creditors have no choice...they have to go along with the court-approved plan or get nothing.

Do some searching on these boards and you;ll find several not-so-good outcomes with debt settlement companies.

[JRScott]

DMP plans do not work. They are largely scams. 80% of the people that enter them end up bankrupting anyway within 2 years.

The reason for this is that in a DMP there is no obligation for your creditors to actually work with you. There is no need to pay someone to settle debt anyway. After you are sufficiently late your creditors will send deals asking you to pay x amount and the debt be forgiven. While this can be a way out you have to realize any debt so forgiven is treated as income by the IRS and thus is taxable unlike debt forgiven in a bankruptcy.

[catalina2225]

I lost $8,000 with a debt settlement company. I was with them 18 months and they did nothing. They took out money every month and the whole time they would be telling me they are working on a settlement. I ended up filing chapter 13 and wish I had done it sooner. What a relief it was to file and I'm paying a lot less now then to the debt settlement company and my debts will be gone. Don't do it. They sound like they can really help you but, they don't.

[HHM]

can't pay them anymore

LOL, That statement and debt settlment don't go together. If you can't pay your creditors, where exactly are you going to come up with the cash to settle?

In any event, everyone else has posted on the subject, so I won't rehash the points here. Debt settlement is actually for higher/high income individuals with significant non-exempt assets or who otherwise CANT file BK (usually because of a prior BK). For the average debtor (read that as 98% of debtors), BK is always the better option.

[mfaina]

Appreciate all your answers - it does help a lot!

[catleg]

If you are considering a 13 you have either income or assets to protect.

I would recommend just take whatever you're wasting on credit cards each month and just put that in your 401k instead, in the stable value option (forget the stock market).

Change your phone number, whatever it takes, no reason to talk to creditors at all. It is a complete waste of time.

When they see from their computers that you are universally in default you will get some settlement offers.

At some point if you lose your job or stop working for whatever reason you may be able to file for chapter 7. If it is an assets thing you still may be able to arrange your affairs to minimize payments to unsecured creditors in a ch13.

In other words take your time to study and don't rush into bankruptcy just because of the phone calls.

The main reason to rush into BK is to hold off foreclosure, or if you may be getting an inheritance in the future but not the immediate future.

[mfaina]

"As your attorney I advise you to start drinking heavily".
I will start my own" in basement" liquor making along with candle making so I will not loose the romantic touch! Thanks catleg!

[gogetter76]

WOW...OMG i have just gone through this........

There are too many acronyms out there......I believe a DMP is different than a DSP.

A DMP,( Debt management program) could be useful if you had a few credit cards and not too much on them. Consumer Credit Counseling Service (CCCS) is part of United Way here in Central FL. They require you to come in and talk to them and cut up all credit cards. They will add up your credit cards, come up with a slightly lower payment plan and negotiate with the credit card companies to lower finance charges and late fees. Some cc companies will and some won't.

A DSP (Debt Settlement Program) If you have more credit cards with higher balances. They offer to take your money and NEGOTIATE witht the credit card companies to SETTLE for 20-60% lower than what you owe.
The company i went with, made me pay a $100 fee up front and then make a $ payment.(different companies offer different things) For the 1st 6 months a large and i mean large part of your payment goes to the agency and a small part goes to your escrow(savings account). From month 13-18 more goes into the escrow and less to them. Month 19-whatever term you sign up for, goes into your escrow account.
Now i was told 2 different things. The agency does or doesn't wait until you have saved enough money to start the negotiation process. At no time will they ever send any payments to the credit card companies. IE you aren't making payments.
The only benefit was they would send cease and decist(sp?) letters to creditors not to contact you. Apparently, by law they can't. So this would in essence stop the creditors from calling you. It did for me anyways.
Then i find out, that in the end if all goes well and everyone settles, you then would get 1099's for the difference and have to claim them on your tax return.


Bankruptcy....By far seems like the best, mpre efficent and most hassle free way to go. My research i have found an attorney for $2000. I paid a retainer fee of 500 and will pay the rest off in 3-4-5 months. Now this is an important time. After retaining an attorney, they will not file until they have recieved the full amount. This also seems to help, as a time frame, to not use your credit cards. If you recently used cc's make small 'token' payments. Hopefully this will show the cc companies your wren't trying ot RACK up credit with no intention of paying them back.
After the time you have paid it off a, then you will go to a 341-creditor meeting. from there it may take a few months before eveything is all said and done.

Sorry this was so longwinded, i just have gone through this.

My opinion on debt settlement. 3 lawyers i talked to said it is a ripoff. Through reading on the internet, debt settlement companies are unregulated, but then i wonder why there are so many out there. Still do not know. when i had signed up i asked how many cases they had won and lost and could they direct me to any documentation to see. They always said no and could not provide ANY results. By this i was looking for something like a football teams won-loss record. Again, it could never be provided. i then was told in sarcastic tones to go look at the better business bureau and find something there about any complaints.

So in closing, go bankruptcy. It's shorter,less expensive and you have an attorney you can see and talk to more frequently.

DSP would have cost me 32000 ish and have to pay taxes and 5 years to what seems to be a 8-12 month period and $2-3000.

Less time and less money. Less heartache. The most heartache came from making my decision and if i was doing the right thing.

Good luck