Need advice from those who know (preferably firsthand) about Debt Management Plans!

[cghljh]

Long story short - debt is in husband's name and we want to try to pay it off (I have previously filed BK and we don't want to trash his credit unless absolutely necessary). Total debt approximately $39K; income level is about $60K (net).

Imminent problems are that we are behind on utilities and five of six credit cards as well as mortgage, need to do some necessary repairs to cars to ensure that we don't have to buy new ones anytime soon, and need to purchase new AC unit. Good thing is that we will be getting a rather large refund that will catch everything up, pay for the AC unit, and leave us a tiny bit leftover.

Our biggest problem is the card with around $27K on it. Before we got behind, we had been paying around $900 a month in minimums. Currently they (the credit card co.) will let us do a 12-month plan at 10 percent interest paying $800 a month. The account is closed with the option of *maybe* reopening it afterwards, I guess depending on how well you stick to the plan-? Does anyone know if they usually just roll the late payments and fees into the total owed or if we will owe these once again after our 12 months is up?

We are considering using a debt management plan through CCCS, which we know is the most reliable and reputable service to use in our area. They will take our balances/cards, contact the creditors, and renegotiate what they can, thus leaving us with a lower total payment but taking a fee from us every month of 7.5 percent (which won't exceed $50). They have also told us that while we are paying they will not report anything negative to the credit bureaus. Does anyone know what (if anything) the individual creditors will report?

The other big question that we haven't asked the big CC...if we are able to work extra some months and want to pay, say, $1000 extra on the card, will this be frowned upon?

Is there going to be a real big difference between the two? We are very committed to getting rid of this once and for all but realize that we are human and also have children and might run into difficulties along the way.

Any real-life stories of how others handled this type of situation are welcomed!

[lovemybugs10]

Isn't his credit already trashed because you are behind on everything? Working it out with them doesn't take it away.

Very rarely do these things work. So rarely that I didn't even try.

[cghljh]

Well, we don't really know what his score is right now. We were thinking that his credit report would bouce back more quickly with only five or six late payments versus 10 years of "bankruptcy" status, right? The real dilemma is whether or not the big creditor will report the reduced payments during the 12-month plan as "on time." If they won't do it for us but would do it through a DMP, then we'd choose the DMP...

[chicagoannie]

Years ago my ex and I worked with CCCS on a debt management/repayment plan and it did us ZERO good. After making almost a year's worth of payments to CCCS, 2 of our main creditors (Chiti and AmEx) still sued. All the accounts included in this "plan" still reported negatively to the credit bureaus. Two accounts were never even contacted by CCCS. We paid CCCS' fee and they did nothing for us. Nothing.

There is nothing CCCS can do that you cannot do yourselves. You need to ask yourselves if you have reached the point of no return with your bills. Getting rid of them "once and for all" is very unlikely in a debt management plan - it likely will prolong your financial agony and forestall the perhaps inevitable bankruptcy filing.

[lovemybugs10]

those late payments don't fall off your credit report for 7 years, I believe.

I'm settling with my creditors, and there are people who filed bk only a few months that have better credit than I.

The post above is right, there is nothing a management company can do that you can't.

[cghljh]

But my understanding is that after making on-time payments for a couple of years, those late payments will essentially be "invisible," right? At least speaking for my own report, there is a status now below each creditor that says "Included in bankruptcy", and underneath each creditor there is a two-year snapshot by month of the most recent activity. Isn't this the way all credit reports are structured? In other words, once my husband gets past those 24 months, his status on a particular creditor will show on-time payments. Whereas my status will say bankruptcy for 10 years, his shouldn't look out of the ordinary past that timeframe included in the snapshot.

Of course I know that his credit rating won't be as high b/c those past due payments will still be calculated by the credit agencies for 7 years...

Is my understanding completely wrong or at least partially right?

[lovemybugs10]

Partially right.


Have you looked into reviews for the local company you want to use?

I've really heard nothing but bad about companies like these. It almost never works.

[cghljh]

Yes, we know that the company is reputable (it's not-for-profit, which makes us feel better). However, we're nervous about losing control when we could probably manage it ourselves and are worried that once the plan starts we'll regret it and not be able to renegotiate with the creditors on our own. However, if they can negotiate better rates than we could get and can also get things removed like late payments, etc., then it would be worth it. It's just such a big decision...

[shark66]

Yes, we know that the company is reputable (it's not-for-profit, which makes us feel better). However, we're nervous about losing control when we could probably manage it ourselves and are worried that once the plan starts we'll regret it and not be able to renegotiate with the creditors on our own. However, if they can negotiate better rates than we could get and can also get things removed like late payments, etc., then it would be worth it. It's just such a big decision...

Make no mistake: they can't get anything that you yourself wouldn't be able to get from the creditors.

With your debt-to-income ratio you'll be filing for BK anyway. Maybe not now, maybe in two years. By that time you'll burn thousands with absolutely nothing to show for it.

Do yourself a favor: just find a competent attorney, and file ASAP.

My $0.02 only...

Good luck.

[lovemybugs10]

Have you tried negotiating yourself?

I completely agree with Shark66's post.

[daxtell]

although i am filing bankruptcy now. years ago when i was younger and had acquired too much debt i did go with my local consumer credit counseling company which was totally free. they charged me nothing and their plan actually worked and i had paid off everything in no time. but of course my debt load was much lower and they were pretty much the only management company around. today there are so many more management companies and i have heard horrible stories of how they make you lose so much more money when you could be using that for yourself.

if your gut feeling is that you can move out of this in a short period of time then do the work to list all your assets and liabilities and income and expenses. fill in all the worksheets. get a bottom line number yourself of where you stand. do not leave anything out. write every single expense you pay in a month. you will see how much money you have left over and keep for yourself and not pay a debt management company if you do not have too. if you come out in the red then you know you definately cannot afford a debit management company. because they may say they can work magic and reduce the interest etc, but its not guaranteed. if bankruptcy is the final answer then so be it.

[cghljh]

Thanks for your response. My husband and I are going to decide tonight which way to go. With the DMP I believe you can take a look at what they negotiate before committing to anything, so if that's the case we'll probably give them an opportunity to see what they can get. If it's not much better than what we could do ourselves, we'll save the $50 a month and do it ourselves.

The one question I do have is whether or not we'll be able to make extra payments if we are under a plan (whether it's through an organization or we just negotiate it ourselves)?

[lovemybugs10]

I honestly don't know the answer to that question.

I'm sorry you didn't get what you are looking for here. Truly, I am. Have you tried working out an agreement with the cc's yourself though?

[BKParalegal]

Paying $1000 a month against $40k in credit cards with them charging 10% (probably not that low but for example purposes) will take no less than 48 months. And you will have nothing but a low FICO score to show for it and maybe some pride for completing an arduous task. But pride doesn't take care of your children or put food on the table.

If you took the same money that you paid to the credit cards after filing BK, reaffirming your mortgage and getting a secured credit card to report positives. Then in those same 48 months you will have accrued $53,000 in principal and interest as well as have a FiCO score well north of 700.

I just don't see enough upside to going through CCCS, by the way the director of CCCS makes north of $120,000 a year last time I checked. Nice salary for a non-profit business. Which all a non-profit means is no money left at the end of the year, so someone has to get it.


Good luck

[shark66]

The one question I do have is whether or not we'll be able to make extra payments if we are under a plan (whether it's through an organization or we just negotiate it ourselves)?

I was thinking along the lines of you guys stopping payments on all unsecured debt, catching up with the mortgage and filing a Ch. 7...no plan, no repayments...

Good luck.