Bankruptcy or Debt Settlement Program??? Please Help

[Anonymous]

DO NOT USE DEBT SETTLEMENT!!!!  My wife and I attempted this early 2005.  There were a multitude of problems with is, but the worst was that after the accounts had lapsed into default, there were so many late payment/over the limit fees that when they negotiated the settlement amount it was off a hugely inflated number and the amount saved was not substantial.  They also negotiated the larger accounts first and we did not have enough in the savings account that early in the program to pay the settlement.  We pulled out after 11 nmonths and ended up having to declare BK anyways.  Worse, our credit was good before the program and the DMP DESTROYED it worse than the BK could ever have.

[Anonymous]

In my opinion, stay away from debt settlement companies...they are far worse on your credit than a bankruptcy. As a mortgage lender I have reviewed thousands of credit reports and have seen the results of debt settlement and it is not pretty.

A Chapter 13 would be the best option in my opinion, because you actually make a good faith effort to pay your debts back. Also if it ever came into play, once you make 12 payments on time to your trustee and mortgage, you could get an FHA mortgage(by the way FHA mortgage has better rates than conventional mortgages right now and for people with scores less than 680 it is MUCH better as Fannie and Freddie introduced risk based premiums on Jan 1st).

Yes, while still IN the Chapter 13 you could refinance into an FHA loan if it made financial sense to do so (trustee would have to approve, but if it was for a BETTER payment and terms, I have yet to see them not approve it).

Chapter 7 would have to be discharged 2 years and you would have to re-establish during this time to qualify for a home loan. But this recovery is way faster than how long it will take if you do debt settlement. Also remember just because a BK is ON your credit report for 7 to 10 years does not mean it is hurting your score a lot for the whole time, the older it gets, the less impact it has...and when it comes to important purchases like a home or car, once you are out 2 years with good re-established you should be fine for those 2 things anyway.

The debt settlement companies just ruin your credit, because they encourage you to go 90-120 days down, because it makes their negotiating leverage greater. The key though is if you really want to do this, do it on your own. Get real late then call each one up and ask to settle. That is all they are doing for you. Once you pay them enough in payments they settle the first card, then they wait until you pay enough and settle the second and so on.

www.FHAinfoCenter.com

Message Edited by FHAInfoCenter on 02-28-2008 05:21 AM

Message Edited by FHAInfoCenter on 02-28-2008 05:22 AM

[mikki74]

I think you should file the BK.  That's if you want to pay $1075 to the debt settlement folks for years and still have bad credit.  You are only 25 so if you don't repeat the same pattern of credit card debt, filing Ch. 7 BK will allow you to start fresh by re-establishing your credit. 

[Anonymous]

LTrain NO NO NO on the bank Rupt NO NO NO  It not only can stay on your credit 10 years but some cases longer no MATTER what anyone says & NO on the DEBT council... They are a WAISTE of MONEY & TIME. Girlfriend nothing will clean up your credit or reports but PLAIN ole hard cash and YOU only if even its half the payment you owe every month the companies will work with YOU. Keep paying your little heart OUT a FAIR amount. Dont cheat YOURSELF by paying 5.00 a month on each unless thats true all you have. Unless dad or mom is PAYING for you to be a BRIDE hold off a few more years until you get control of this situation... PS your negative credit can will effect your new husbands . Its been proven on the SUZI show.

[Anonymous]

Hello,  I just wanted to share with you that I understand your situation with the credit card debt.  I have been there and still am.  I also went to a debt consolidation group.  Unfortunately, this did not stop some of my creditors.  I have had two to go to National Arbitration Forum, one threatened to go to court, but I was able to come up with a settlement before we did.    What I have found is that, I can negotiate with them as well or better than the debt consolidation/management groups who are supposed to be professional.   I actually had one creditor agree to drop $18K for a settlement of $6K.  Which is much better than the professionals were doing. 

Also, I was told by the Credit Reporting Agencies and my mortgage lender that bad credit items stay on your report for 10 years.  This is the same as Bankruptcy, but you have to pay.  NOW, my mortgage lender also respected the fact that I was trying to pay, to the bank this was better than Bankruptcy.  I was able to get a mortgage at 6.75%, with a credit score of 560 and $60K on credit card debt still outstanding.   The bank looked at my entire situation, not just my score, which will help me out in the long run, because my mortgage record will help offset my credit cards.

Basically, I am trying to say that you can try any of the routes, bankruptcy, debt consolidation, individual negotiation, the bad credit stays for at least 10 years anyway.   Don't be discouraged, you can get through this and come out on the other side in a better position. 

I am sorry about your tragedy.  People often don't understand what leads us to severe financial situations, desperate people make desperate decisions.  As long as your intentions are right, you will come out of this okay.   I tell myself this everyday!

[fishbjc]

I've been with A CCCS program for almost two years and have had one small issue of them paying $2 short to BofA causing 5 30 day lates.  Because of their relationship with BofA, the lates were all removed.

I pay $17 monthly for them to handle the payments.  This particular agency was recommended to me by BofA. 

I did NOT have to close all of my cards, just these two.  According to MyFico. you are NOT dinged for having CCCS on your reports!  BofA has left both credit lines reporting as *open*  so the original credit lines are stated.  I've paid extra payments each month so one of the BofA is almost paid off, just by adding $10/$20 each month.

IMHO, you're not ready to be married.  Get your debts taken care of.  Personally, I wouldn't marry anyone with a recent BK.  Money is one of the leading causes of discord in marriage.  Honestly, I don't think you can afford that condo payment on a 75k salary.   If you decide to look into CCCS, do not stop paying your monthly payments...those WILL show up as lates.  I used ClearPoint Financial and they've been awesome.  The initial fee was a *donation* of $30.00

Filing BK is going to affect you for a longgggg time.

[fishbjc]

Keep in mind that a CCCS and DMP are two different balls of wax. 

[Anonymous]

Dear $70,000 in debt,

I'm not an attorney, but I would advise to file bankruptcy instead of using "Consumer Credit Counseling" or any other debt management program.

I chose to go with consumer credit in 1995, and I thought I was doing a great thing by repaying all my credit card debt.  (or so I thought)  The counselors work with your creditors to take away the interest and late payments so that you can afford to pay them a small, monthly fee.  What the debt management service does not tell you is that the entire time you are repaying the debt, that all of those creditors are putting a bad mark on your credit history.  They have the right to report negatively for the entire term of your repayment program.   I did not realize this!  So the whole time you are re-paying (3 years) on all of these accounts they are still open and showing up as late because you are not making the required payments that include the interest.  I think the creditor calls it a charge-off.  And then this information will stay on your credit for another 7-10 years after you have paid everything off.  So your credit reports will reflect negative information for at least 10-13 years.  Not only did my credit rating suffer from the Consumer Credit Counseling repayment program, but I went through a divorce that left mwe with no choice but to file bankruptcy.  So my credit scores were terrible.  My advice would be to file for bankruptcy and that way you only have the one public record on your report and you can start to rebuild.  I would suggest that you go to Stephen Snyder's website callled, "Life After Bankruptcy. " He offers a free seminar on the "do's" and "don'ts" when it comes to your bankruptcy and credit.  His seminar, book, and e-newsletters are wonderful resources, and give you the confidence that you can rebuild your credit after bankruptcy with a lot of hard work and sacrifice.  Overwhelming amounts of debt can get you down and depressed, and the good news is that you aren't alone.  So go to Mr. Snyder's website and learn from his past mistakes so you don't make the same ones.  Trust me, you will benefit from his learnings.  The first thing to do is change your mindset so you don't get into the same traps.  If you cannot pay cash for something, then sacrifice eating out for awhile and put that money into a savings account, and then when you have enough money go purchase the item.  Not only will you appreciate it more because of the sacrifice, but the item is yours free and clear-No outstanding credit card debt hanging over your head or outrageous interest fees.  Build your savings account up every payday.  By doing this, you will have "liquid" assets.  Once you get your savings account up to $3000 you can ask a lender for a loan of $1000, etc.  You are not a risk if the money is already in your savings account.  There is one thing that I've found to be true...People that don't need credit, can get approved at a drop of a hat, and the people that desperately need credit/loans cannot obtain it.  So take control of your credit and take control of your life.  I wish my parents would have told me just how important credit scores are in life.  It would've saved me a lot of heartache and a lot of money!  I wish you much luck and success.  Tracy  

[Anonymous]

Of course i am not a lawyer and can't offer legal advise.

My story $50K in debt to credit cards.  No house,  Car payed for.  Simillar gross to yours, but my liabilities were much less.  I went with DMP and in 3 years, it was all done. (sort of).  I paid $800 a month, closed all my cards and went 120+ past due.  The smaller debts were paid off first.  Eventually, litigation happened and so did pay check garnishment.  At that point, I took a 401K loan and started handling the collections on my own.  All said and done, I paid out around $42K.  Negative: Now, the sort-of part-- the amount BofA "wrote-off" ended-up being "income" on my 2006 return.  That cost me another $1900.  The positive part of this program was "peace of mind."  The DMP people dealt with the creditors and I was instructed not to talk with them on the phone, nor answer any mail.  Any nasty mail was just forewarded to the DMP.  The other positive was I was able to keep my truck.  There is a vehicle allowance in Ch7, and my truck was worth more than that.  Negative: With the 120+ past due and the civil judgements, I'm not much better than the 10 year bankrupcy issue.

If I had to do it again, I'd go DMP.  However, no matter what you do, the important part is to change your behaviors.  And, my suggestion for you would be go bankrupt and get on with your life.

Your mortgage seems horribly high with all the other stuff you have going on. 

Bank of America : $34,000  I see this as a problem.  They don't play nice.

[Anonymous]

I was in your position a few years ago, over $85k between cars and consumer loans.  At this time I have a little over 30K left to go and I've only been at this for three years.  I bought a book on CD called The Total Money Makeover by Dave Ramsey.  It made a lot of sense to me.  It's a get out of debt and get rich the long, slow, painful way type of message but it works.  By the end of this year all I will owe on is my house.  I intend to have it payed off no later than 2015.  Can you imagine being able to invest everything you're currently paying creditors so you end up rich by retirement instead of them having all your money?  I couldn't imagine it three years ago but I can today. 

It's a long slow process but if you follow it you will see results.  Dave Ramsey also has a radio show where callers call in when they've hit the two major debt free stages, no consumer debt other than their house, and no debt period.  A few months ago a man and his wife called in to say they didn't owe a person on the planet a dime and that he had no way of putting that feeling into words.  Thousands of people have done it and you can too.  You just have to be prepared to make the sacrifices along the way.  For what it's worth, your credit scores will follow, but when they're better you won't even care because you don't want any debt.  When my wife and I started this plan three years ago we had scores of 655 and 670.  Currently we have scores of 780 and 795.  I check ours three times a year to make certain there's no activity.

If you decide to go this route be prepared to make a budget every month and stick to it, but know it gets easier as time goes by and your level of peace and satisfaction with life increase greatly along the way.

Message Edited by DebtFreeIn2015 on 02-28-2008 07:45 AM