November 23rd, 2009 | 
Author: As most people know times are hard and my husband like many others has lost his job. We are really considering going through a company called Credit solutions or maybe another dept consolidator. To me it seems really good but I know that sometimes you can get "screwed". I would like to know how bad this will really hurt my credit and if any of this is all worth doing? So can someone please help us out with any information or your own personal expediences about this?
This company is a debt settlement firm, not a debt consolidator.
What you need to know about debt settlement firms:
Your credit card companies are not going to offer you settlements like 50%, for example, if you are current (not behind) on your payments. If credit card companies offered settlements to people who are current on their payments, then everyone would be calling them up and asking for 50% settlements. Basically, the only way you can get into a position to negotiate settlements is to deliberately let your accounts go into default. This is exactly what debt settlement firms do….They take a monthly amount from you and use that to build a “settlement” account, which will go towards paying the “settlement” at a later date. Whatever monthly payments you make will go directly to the debt settlement firm for their fees and your settlement account. All of your accounts will go unpaid for several months and will default. This is not an accident. It’s a deliberate default as an incentive for the credit card companies to accept settlements.
If you are current on your accounts, this process will ruin your credit rating as your accounts will all go into default. Your creditors are under no obligation whatsoever to accept settlements from any debt settlement firm you hire. Their response might be to serve you papers and take you to court.
As your accounts all go into default…you will get increasingly aggressive collection calls from debt collectors. It is "typical" that creditors offer settlements for defaulted credit card debt….They often do this in lieu of loosing everything if you file for BK. HOWEVER, you can never predict how any one creditor will respond to defaulted debt. They might decide to take you to court and get a judgment against you. If they win, your wages may be garnished. Debt settlement firms have no power whatsoever to stop creditors from taking this action and they have no power to force creditors to accept settlements.
****If you have already defaulted on your cards….make your own settlement offers…you can do this on your own and it puts you in control. If you do…get all settlement terms IN WRITING PRIOR to paying them.
Posted in debt consolidator
Debt consolidators are a huge scam, I know because I used to work at one of these places. You have to sign a power of attorney, and the people that work there have no qualifications. I saw so many people have their accounts sent to collections or law firms, and they didn’t see it coming because after you sign the power of attorney, your creditors can only contact the debt consolidation company. You can do the same thing that these companies do yourself. All they do is put a certain amount of your money in an account until there is enough to pay off one of your accounts.
They don’t really consolidate your debt. The "consolidation" is the fact that instead of paying on many accounts, you make one monthly payment to them and they hold it for you and decide which accounts to pay off. They will also make settlement agreements with your creditors which will hurt your credit.
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Emily is dead on. These places can be a total scam. If you are looking for a non-profit company to help you figure your your finances, go to: http://www.debtadvice.org
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I also agree with Emily, if you must do this use Consumer Credit Counseling Services they are the oldest and largest non-profit credit counseling service in the nation and have offices in most every major city.
I used them several years ago and they lowered both my monthly payments and interest rate and I was debt free in 36-months.
You can reach them at 1-800-388-2227 or http://www.nfcc.org.
Good luck.
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Finance Manager for over 9-years / 2008 edition Consumer Action Handbook.
This company is a debt settlement firm, not a debt consolidator.
What you need to know about debt settlement firms:
Your credit card companies are not going to offer you settlements like 50%, for example, if you are current (not behind) on your payments. If credit card companies offered settlements to people who are current on their payments, then everyone would be calling them up and asking for 50% settlements. Basically, the only way you can get into a position to negotiate settlements is to deliberately let your accounts go into default. This is exactly what debt settlement firms do….They take a monthly amount from you and use that to build a “settlement” account, which will go towards paying the “settlement” at a later date. Whatever monthly payments you make will go directly to the debt settlement firm for their fees and your settlement account. All of your accounts will go unpaid for several months and will default. This is not an accident. It’s a deliberate default as an incentive for the credit card companies to accept settlements.
If you are current on your accounts, this process will ruin your credit rating as your accounts will all go into default. Your creditors are under no obligation whatsoever to accept settlements from any debt settlement firm you hire. Their response might be to serve you papers and take you to court.
As your accounts all go into default…you will get increasingly aggressive collection calls from debt collectors. It is "typical" that creditors offer settlements for defaulted credit card debt….They often do this in lieu of loosing everything if you file for BK. HOWEVER, you can never predict how any one creditor will respond to defaulted debt. They might decide to take you to court and get a judgment against you. If they win, your wages may be garnished. Debt settlement firms have no power whatsoever to stop creditors from taking this action and they have no power to force creditors to accept settlements.
****If you have already defaulted on your cards….make your own settlement offers…you can do this on your own and it puts you in control. If you do…get all settlement terms IN WRITING PRIOR to paying them.
References :
You ma get some articles and tips regarding debt consolidation and case study from
http://debtcons.freehostia.com
References :
http://imortgage.freehostia.com
With the state of the economy right now, it is difficult to get a home loan. Buying a house to spread out you credit card debt will just cost you more in the long run. You will have an easier time getting the home loan and getting it at a better interest rate if you just pay off the debt first.
Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. There is a better way.
A. Have a garage sale and sell anything that you no longer need or want.
B.Get a temporary part time job, if you have one, get another. The holidays are coming and there will be plenty of temporary jobs available. It is better to have a no fun year or two than a no fun decade.
Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make.
2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.
3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:
To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment
Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment
Debt #1: paid off
Debt #2: paid off
Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.
That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.
4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.
5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.
5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.
5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.
You can do it and it isn’t as hard as you think. Just follow the plan.
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