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Bankruptcy or Debt Settlement Program??? Please Help

angel3391
New Visitor

Re: Bankruptcy or Debt Settlement Program??? Please Help

in feb 2006 I went to a debt settlement company.  $12000.00  in debt  gave them $225.00 per month until dec.2,2008. a total. for a total of 4950.00 of which $98.10 per month was to go to pay my debts.  needless to say they did not pay any of my bills, they are now in charge backs on my credit report. trie to get my money escrow back as they did not honor their contract with me. they refused and said I am not entitled to have any thing back.  please be careful  who you pay your money too. they are scams.  I think I should have gone bankruptsy..   pat
Message 31 of 60
denalixl22
New Visitor

Re: Bankruptcy or Debt Settlement Program??? Please Help

I've just completed 39 months with a dmc...My experience was wonderful.  They did not "settle" my accounts.  They negotiated on my behalf to eliminate late charges, and lowered my interest to, in most cases, 1%.  In just 39 months I have resolved over $100k in credit card debt.  My credit scores ave gone from <400 to just under 700.  It was my conviction that I incurred the debt of my own free will I shouldn't "absolve" myself of it and help drive up borrowing/default rates.  This plan worked marvelously and they also offer credit management training so that you can avoid it in the future.  If you're interested you can find them at www.takechargeamerica.org.  Good luck!
Message 32 of 60
curiosity
New Visitor

Re: Bankruptcy or Debt Settlement Program??? Please Help

Hi to everyone,
 
There is certainly a lot of great advice in this forum and I am hoping some of you will be able to help answer a few questions.  I am trying to help out a friend who finds himself with cc debt totaling about 18K as a result of a recent move and underemployment for several years.  What has thrown him over the edge is child support payments that increased by over 1K per month suddenly.  He spoke with an attorney about Chapter 7 and 13 bankruptcy and also debt consolidation programs.  My question is whether he would be better off to simply contact his creditors (a couple major credit card companies and some consumer, i.e. Penny's, companies) and see if they would settle with him directly in return for an immediate pay off of his debt.  What would be the best approach when contacting the various companies?  Would it be to his advantage to simply tell them that if he cannot reach a settlement with them then he will file bankruptcy and they will most likely get nothing at all?  What has worked for some of you in the past?
 
Thanks in advance for your help.
Message 33 of 60
hisser64
New Visitor

Re: Bankruptcy or Debt Settlement Program??? Please Help

In August of 2006, I contacted Credit Solutions to help me settle my credit cards for less than I owed.  They claimed that I could settle for 40% of what I owed.  At the time, I had about $42,000 in credit card debt.  I had to pay Credit Solutions a total of $3,786 in monthly installments for them to do this.  I refinanced my house and added in enough money to pay the credit cards off according to what Credit Solutions told me.   I told them that I had the money to settle, but for months, they did nothing to settle my accounts.  Also, once I signed up with them, they told me to stop paying my monthly payments on my credit cards.   Big mistake.... this only ruins your credit history & scores!!
 
In March 2007, I started getting calls from a debt collector for one of my cards threatening to garnish my wages, put a lien on my house and put a hold on my bank account.  I called Credit Solutions to tell them about this and they came back with a settlement that was over 70% of what I owed, not the 40% that they told me they would settle at.  The debt collector kept calling and threatening me, so I contacted a bankruptcy lawyer to see just what he could do to me.  I found out a lot of things that the debt collector was threatening me with that he legally could not do without going thru the courts.  The lawyer said it would take them at least 30 days to get anything approved by the courts.  The lawyer suggested I meet with him and see what my situation was.  I never thought I would ever have to file bk as I was always able to handle my debt.  But, with Credit Solutions doing nothing for me but taking my money and destroying my credit history, I decided bk was my only option.  I felt a huge weight lifted off me and I no longer have to struggle to make my payments on my house and other bills.  I did not lose any of my assets and just had to reaffirm my mortgage with the bank (I filed Chapter 7).
 
I never thought in a million years that I would claim bankruptcy as I was always able to handle my debt and make my payments.  I know it's any easy way out, but I did try to come to a settlement and I ended up a lot worse than if I had just done the bankruptcy straight off.  My debt started growing in 2000 when I was laid off from my job and it took 5 months to find another one in my field.  I also had a string of bad roommates that ended up costing me more for them to live with me than if I had just toughed it out by myself.  I currently have 2 lawsuits against past roommates that total close to $7,000, but I don't think I will ever see any of that money.
 
One good thing about this is I no longer had any credit cards, so you really think about purchases before you make them as you have to pay for everything in cash, and I am really handling my money better now.  I was able to get a credit card for a gas station, but that is it, and that is paid off every month. 
 
One thing I would suggest is for you to contact your credit cards and see if they will reduce your interest rate.  Also, see if they would be willing to settle for less than what you owe on your own before working with any debt reduction place.
 
Kris
 


Message Edited by hisser64 on 02-28-2008 08:46 AM

Message Edited by hisser64 on 02-28-2008 08:47 AM

Message Edited by hisser64 on 02-28-2008 08:50 AM
Message 34 of 60
Celticson
New Visitor

Re: Bankruptcy or Debt Settlement Program??? Please Help

I tried this too. But, this is just a way for the credit problem solving companies to make money. The fact that you went to this company goes on your credit report and it is as bad a mark as Bankruptcy! So I figured if no one appreciates my efforts, and it is only a money scheme for the credit solving company, I filed for bankruptcy and I am very very glad I did it. I paid off one credit card before I filed so that I would have a credit card; incidentally, within three months of being discharged, I began to receive credit card offers, some with not deposit reserve. I got two and I did not use them but kept them for emergencies. My suggestion is don't waste your time with these credit solving companies, they are not there for you, they are there to make money from you and your credit report is just as bad as if you filed BK.
Message 35 of 60
demi
Established Contributor

Re: Bankruptcy or Debt Settlement Program??? Please Help

I have nothing but good things to say about takechargeamerica.  As someone else said there is a real difference between debt management plans and settlement offers.  You will pay off your debt in a dmp...but they negotiate lower payments and lower interest.  They will work with you for a plan you can afford, and my guess if you can't - they will tell you what your best options are, including bankruptcy.  Think about getting a roomate when the family moves out, save some money that way.  And alhtough the IRA is important, so is paying off your debts.
 
Someone else posted that they had negative info posted during their dmp.  I have been in for 3 years, have about 6 months left, and the only negative information posted on any of my 19 credit cards was one in Eperian, where Spiegel (which I was already in collection for) reported 90 days late every month - But it was fine in the others.  I am still fighting that one.  But otherwise, its been great, some say I am in a dmp, but they all show all payments on time.  I think the important thing is to get a reliable dmp agency, if you check around on this site others have recommended some, but I was very impressed with TCA  -- website is www.takechargeamerica.org   I doesn't cost anything to call them an go over your situation.  They have a one time set up fee of $50.00 and charge $35.00.....way less than what a late fee or interest costs.


Message Edited by demi on 02-28-2008 09:25 AM

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Message 36 of 60
beenthrumostofit
New Visitor

Re: Bankruptcy or Debt Settlement Program??? Please Help

I was $200K upside down at one point between what I owed the IRS and credit card cos.  I made too much money so the IRS would not settle.  In hindsight I wish I had gone debt settlement, because with the govt liens my credit was in the toilet for 3 years anyway.  I would always avoid BK at all costs.  My friend went BK over $50K and says it has cost him over $150K in excess interest since then.  His credit is still not all the way back and he's in his eighth year.  BK will destroy your credit for much longer than debt settlement and also will typically hinder things like starting a business, you're only allowed one car, etc.  I mean, they are in your life a bit.  Some companies will not hire people who have gone BK (not that they'll tell you that, of course)  BK is far from guaranteed these days.  If you end up with a reorg then you may even pay more than you would've for debt settlement.  They cut the overall debt down to 60% or so including their fees.  When I looked, reputable debt settlement companies graduated 70-80% of their enrollees, but there are enough chopshop types that you should select carefully if you go that route.  And try to keep at least one card for renting cars, hotels, etc.  Just make sure you're doing debt settlement and not debt consol or credit counseling, I've heard bad things there.  I'd say your credit will normally recover from debt settlement 3 years faster than in BK and the effects are smaller.  Also, I worked with Federal loan programs for awhile, and you can't get rid of those in either plan.  Good luck!
Message 37 of 60
haulingthescoreup
Moderator Emerita
Moved:

Re: Bankruptcy or Debt Settlement Program??? Please Help

I have moved honeybun's question about FHA loans to a new thread, also here on BK. It is unrelated to the topic of this thread, but it has valuable information. New title thread: FHA loan after BK 13

Message 38 of 60
creditfixed
New Visitor

Re: Bankruptcy or Debt Settlement Program??? Please Help

There are several issues here and the exposure an be different.  A bankruptcy filing is the first step towards the restructuring and rehabilitation of a credit file.  Most consumers don't understand that filing a bankruptcy is just the beginning.   With Chapter 7 "liquidation"  and Chapter 13 "adjustment of debt", there are numerous affects to one's credit file, all derogatory and harmful. The events leading up to bankruptcy more than likely included late payment history, charged off accounts, slow pay or no pay.  With credit files based on credit scoring, which is widely used, each and every derogatory mark subtracts from the credit score total.  Bankruptcy does not resolve derogatory information history bankruptcy absolves debt.
 
For the Debt Management programs you can expect to lengthen the 7 year statue and wll most like fin yorself with lots of late payment history.  Almost none of the debt management company(s) avert this and they allow your accounts to go 90 days late which will expose you to late payment history, settled for less than owed, paid copleections and chargeoffs.  Everything including the OUTCOME OF THE PROGRAM credit reporting should be negotiated before payment negotiations.
 
Both affect the credit, it all depends on how yuou want it to "read" and when do you want the statute of limitations to begin!
Message 39 of 60
jacimac
New Member

Re: Bankruptcy or Debt Settlement Program??? Please Help

I just did this a month back, and received similar advice. Hopefully you went with one of the accredited consumer debt counseling services. From your payment structure, it sounds like you did. Accredited services charge minimal fees for their monthly administration and incorporate a large educational component to the consumer (you.)

From what I understand, all the legit services have known pre-negotiated rate of interest reductions available to them from the various banks. Ahead of time. Once you are signed up, they take care of sending the payments, and the banks agree to the lowered fixed interest rate. It is much the same from one to another, I checked it out a little.

Seems somewhat standardized so long as you don't hook up with a predatory consolidator. Sounds like you have not.

I've owned homes, was in real estate sales, and been high-earning. After a car accident, I went through bankruptcy, then slowly rebuilt my credit back to great. It can take ten years. Once finally restored to good credit, my youngest kid became very ill, and I began using my credit cards. Sold my house. Used my credit cards some more. Kid's better now. Credit cards are maxed, though my payments are timely. I live at a friend's house. Thank you friend, but, still...

Now I find my credit card interest rates were about to zorch up in two cases to 28%. Yikes. Long term good customer, no matter. It came about from high use of available funds. So I turned to a good non-profit credit card consolidating company also.

I will be paying off $23,500 in unsecured (credit card) debt over 56 months at 10%
(now fixed) interest and monthly payments of $522. My monthly holding pattern payments on all had been $594. The non-profit monthly admin fee is $9. Really decent.

The critical difference is that they said I'll be paid free and clear in 56 months, instead of 256 months. Wow! Sign me up.

If your debt settlement program is one of the upstanding ones, you'll have been told your participation is voluntary: you can opt out of their assistance at any time. Conversely, you may also send them extra money, and prepay accounts at any time. All
good.

Only a financial advisor can know your total current and future earnings prospects, and other relevant financial details, so bankruptcy could be an answer. Do be sure to ask some one objective. Having already done it, and gone the required ten years to get beyond it (have it fall away from credit reports) I don't want to do it again.

As to buying a home, know that with no bankruptcy on your record, you'll be able to qualify better, for lower interest rates, and sooner, than with a bankruptcy on your record. Though it is not impossible to borrow after a bankruptcy. Credit unions can often be your best source of car and other loans post-bankruptcy. It doesn't hurt to call some and ask what-ifs, before actually taking the B-step.

Finally, per home purchase, it could actually be in this market, that you will be well-served by waiting longer. The national market adjustment is not over. Best to you. Write me if you wish. jacimac@mac.com
Message 40 of 60
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