Debt settlement companies

[DYLAN150]

I just ran some numbers pass this one located in California. I have about 90K in credit card debt. I did consider chapter 13 but would be in a 100% payback plan so I am still thinking about it as an option. Anyhow this debt settlement compamy wants three payments of $1,133 to get started.
They say they handle all the creditors phone calls???? (don't know about that) Oh, they also take VISA. They basically do the same thing as everyone else, settle one account at a time as the payments add up. They don't mention anything about paying taxes on settlements. I no I could do this myself. Of course they say they have a better relationship and creditability with all the banks so they can get a better settlement. Sure would like to hear from anyone who has done this. Thanks.

[HHM]

Settlement is all about timing. How long would you be in the program?

My rule of thumb, if you cannot come up with the settlement funds in 12 months or less, you are not a good debt settlement candidate.

As your intuition is telling you; they cannot legally stop creditor calls; and most importantly, they cannot stop lawsuits. Thus, how long it will take you too settle, is the biggest factor. Most people who need 12 or more months to raise settlement funds, can't make it.

And yes, there are the possible tax implications of forgiven debt. Nothing can be done about that.

[DYLAN150]

Yes, that is a really good point. If i Paid them $1400 per month for 12 months that would come to $16800 bucks. Deduct their fee and it would only leave about $11,000 to settle with. On credit card balances of about $90,000 that would be about a 12 percent settlement. They said some plans are for up to 60 months. What credit card company would wait for 60 months to receive settlement. If I didn't pay my credit card bills I could possiblity save about 18-20k in one year and hopefully do it myself but would still have to pay taxes on it and then handle the daily calls and maybe even a lawsuit or two. I also worry that if this company disappears then I am out all of my money.

[Depressed]

I wouldn't pay anyone to do it. From what I hear they only get you down to about 50-60%, plus their fee. I had Chase offering 30% and BofA offering 25% on my own after one phonecall after not paying them for 5-6 months. I'd probably still be considering it if one certain BofA manager said my kids didn't need to eat and that I should immediately send them $500. - I had just told him I only had $300 till payday a week off and needed to feed a family of 5.

You'll be given a 1099 as well for any difference.

[ryan]

From what I've learned the settlement company's motivation is to settle you early, and therefore for a much higher amount than you night be able to get on your own.

Why should they fight to get you settled at a lower % that would likely take much longer to accomplish? Plus there's all the other negatives already mentioned here.

[dirtpoor]

I speak from experience. Don't waste your money. We tried debt settlement and was 9 months into the plan and then I got sued by Discover. When I told the settlement company about it they said they were not allowed to talk to them. They kept asking me how much money can you come up with? I told them if I had lump sums of money I wouldn't be needing their services. Huge waste of money. We ended up filing Chapter 13 anyway. After that, I found out in Missouri it is illegal for a debt setllement company to collect fees upfront. This company was in Florida. I contacted that BBB, Florida State attorney general and any other official office I could find trying to get my money back. It wasn't until I contacted the attorney general of Missouri that one day I got a letter in the mail with an apology and a check for my full amount that I paid. I was just lucky from what I was told. I'd stay as far away from debt settlement companies as I could. There may be some good ones out there but this experience left a bad impression and just postponed the inevitable.

[HHM]

Even if you do it yourself, you still need to plan for an average settlement in the range of 40-50%.

Also, if it takes too long to settle, one of your creditors will invariably force your hand by filing a lawsuit. Settling with the law firm can be very difficult. Thus, if you have already settled a few cards, and a creditor sues you, you may be forced into BK anyway after wasting thousands of dollars settling other accounts.

I view debt settlement as the LAST RESORT as it is expensive, time consuming, a fraught with uncertainty. A 100% chapter 13 may still be a better option if you don't have the resources to settle in 12 months or less. Reason being, chapter 13 brings certainty and control back to your financial life, don't undervalue that.

[DYLAN150]

Thank you for the replies: I a considering the options I have.
a. chapter 13 2100 a month for the next 60 months.
b. debt settlement with unknown results.
c. do nothing

BTW, one attorney told me that the credit card companies must not even sue me when they find out I don't have anything for them to get.
Income can't be garnished, all of my furniture is exempted, little equity in my home falls under the homestead act here which covers up to 125K.
Car is a lease. No RV's, boats, bank accounts, stocks, bonds, motorcyles, etc. My kids are in there 40's now and they can have them if they want them.

[kornellred]

What makes you think that your Chapter 13 payments would be that high? If you can afford that much, you can afford to keep paying the minimum payments on the credit you do have (unless you have already screwed yourself on the credit thing).

If your children are in their 40's, that means that you are in your early 60's (at least). Your best bet, at your age, is to just stop paying anyone anything. Just stop. If one of your creditors brings legal action and gets a money judgment, let them garnish your wages. It will be a lot less than your minimum payments, a Chapter 13 plan, or a debt settlement boondoggle.

[DYLAN150]

One attorney told me it would run right around $2100 per month. Yes, in my 60's is correct and no, a credit card company (unsecured creditor) can not garnished my income. ( social secuirty, other disability etc).

[kornellred]

Well Dylan 150 - you seem to be on the horns of a dilemma, or there is something you are not revealing. I am in my 60's, in my second bankruptcy (a Chapter 13 - first one was a Chapter 7 in 1994), I was making $70K per year when I filed in early 2008, with $80K in unsecured debt. My monthly payments to the standing trustee are $311 per month. 24 down and 36 more to go. That gives the creditors somewhat less than 21% payback after the trustee takes 9.2% in administrative fees. My attorney was paid up front.

There are only two ways to avoid wage garnishment: One is to live in a state where it is not permissible, or Two - your income is exempt from garnishment. I am not aware of any exempt income stream that can leave a person with $2100 per month in disposable income. If you know of one, by all means let everyone know!

[DYLAN150]

Two - your income is exempt from garnishment. Bingo, all three incomes that I receive can not be garnished by unsecured creditors. When I went to a chapter 13 attorney he figured this amount for me.

[flyinbroke]

Well Dylan 150 - you seem to be on the horns of a dilemma, or there is something you are not revealing. I am in my 60's, in my second bankruptcy (a Chapter 13 - first one was a Chapter 7 in 1994), I was making $70K per year when I filed in early 2008, with $80K in unsecured debt. My monthly payments to the standing trustee are $311 per month. 24 down and 36 more to go. That gives the creditors somewhat less than 21% payback after the trustee takes 9.2% in administrative fees. My attorney was paid up front.

There are only two ways to avoid wage garnishment: One is to live in a state where it is not permissible, or Two - your income is exempt from garnishment. I am not aware of any exempt income stream that can leave a person with $2100 per month in disposable income. If you know of one, by all means let everyone know!

That apparently is me. But I have retirement/VA disability and a job. I make 67K a year, but somehow got a 2400 a month payback in a 13. naturally I am looking at other attorneys...

[kornellred]

I must be living in a dream world, then. My Chapter 13 plan payment was determined in accordance with established protocols. I would have been paying about $400 more per month into the plan had my 401K loan repayments not been considered as legitimate expenses. So I am paying that amount back to myself instead of to the trustee. Of course, that is just fortunate happenstance - I was not aware of this exemption to disposable income beforehand.

Even so, Dylan150 relates that the $90K unsecured debt would, according to an attorney, be paid back at 100 percent in a Chapter 13, amounting to $2100 per month in Plan payments. As W.C. Fields long ago remarked in a movie; There's an Ethiopian in the fuel supply.

[DYLAN150]

Yes, I am trying to figure my monthly budget every way from Sunday but it still comes up about the same. I am single and low House payment, etc.