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Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

Rhonda9080
Member

Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

I'm on a fixed income after devastating divorce (35 yr marriage) I found myself with no basically no credit. Worked really hard to build up credit to 715, bought a home last year with my widowed daughter, quit my career to stay home with her small children, then - Wham! Since we moved in Jan. 2016, got hit with TWO hurricanes (Matthew, Irma), and had a broken water main that flooded the home one week after Matthew. Still no response from FEMA for 1st hurricane, daughter works on a ship and missed 2 weeks of work with each storm, all our food had to thrown out and damage sustained came to just $7 under our astronomical hurricane insurance deductible. Long story short, to keep our home livable, I had to max out credit cards, then medical issues and lack off income forced me to even put groceries and children's school supplies on a new card for which I had slated for balance transfer. I already had a Peer-lending loan taken out to pay attorney fees for divorce. Because I need to stay home for sake of the children, I exist on my alimony of $800 (with daughter paying major bills). Somehow, I have made sure I've not missed a payment, EVER, but the loan burden ($278) and the added balance on the cards has given me less than $150 to live on each month. Worse - we both have Lupus and deal with an inherited immune disorder, as do the children, so we are sick a lot. 

 

Up until this year, I had built my credit by putting small amount purchases on cards then paying back. I had been so discliplined! But I am just so overwhelmed right now with abt 18,000 debt I knew I had to do something. I researched many options - got turned down in negotiations with Peer lending company to lower payment; got turned down for any type of debt consolidation loan in an amount that would be helpful. Finally, I did research on debt settlement and called DMB Financial because they seemed to have good reviews and an At score from Better Business Bureau. They ask for no money up front, but you have to start putting money in account each month (for me, $255). The term in for 46 months, which is about where I am at on my loan. The savings in the end for me should be about $3336 if all creditors agreed to settlement, I did keep open my x2 (oldest) Capital One cards, but will be terminating communication with x3 other cards and the loan. I feel so sick to my stomach right now about this!

 

So I have signed agreement, no cold feet allowed now. Anyone else have experience with debt restructure or debt settlement through 3rd party?

 

They couldn't tell me how long it would take before any settlements could be reached so I know my credit will take a BIG hit! But now - due to my income to debt ratio - my credit score is down to 603 anyway. That was a key reason I went with this option. Otherwise, I may never get debt off me, and no chance of ever rebuilding credit. What I am hoping for is within a couple of years, I will be able to start over with a fresh slate. I will go make to my policy of using the cards only for what I can pay back right away. but is there anything else meanwhile I can do?

 

We struggled but have no missed mortgage payments or late bill payments so far. 

 

Another worry I have is x2 small peer-to-peer lending investment accounts I have - one with the company I have to stop paying. Can they seize my investment account? There is no way to liquidate this so I am stuck there. Its not very large and I guess any money I could have earned would go toward the debt anyway. I do still have an investment account with another P2P entity, and this has given me a small extra amount each month, while I am careful to reinvest half of it.

 

Any advise or comment is appreciated. I guess I feel so all alone and like a failure right now. Smiley Sad

 

Message 1 of 23
22 REPLIES 22
capabk
Frequent Contributor

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

You are not alone and you are not a failure. I live with chronic pain dx 12 yo so I feel for you & daughter/grandkids too. I understand that it is a lot to juggle and things can easily fall by the wayside, esp when you are dealing with catastrophes! I hope you are all safe.

 

Is there a reason you would have been ch 13 not 7 at only 800/mo?

 Did you also look into DMP at reputable credit counseling agency?

 

If you feel backed into a corner, iirc some states have cooling off periods on certain contracts. Try googling around to see what you find.

 

Best of luck with everything.

Ch7 discharged 10/2017. Pre-file FICOs high 400s.
04/2018 EX 644; EQ 670; TU 648
Message 2 of 23
Rhonda9080
Member

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

I guess I am not sure of difference between ch 13 and 7. Better look that up! I meant I chose the debt settlement option over bankrupcy. I don't want to default on every creditor -want to keep my bank car and two oldest credit cards open, but I can no longer afford to keep all. I tried some negotiations on my own with credit cards and P2P lender, but no help there. Its a shame because I could probably make a reduced payment and I have never missed any payment. Meanwhile, couldn't get any kind of consolidation loan, so... Here I am. Credit score seems in the tank anyway due to debt to income and high balances on 4 cards. Paying off and paying down has barely budged the score. Lost 10 points after emergency hurricane purchases.

 

I felt I didn't want to declare bankrupcy because I wanted to be able to keep a few credit lines open in case of emergency, and to remain in good standing with my bank. Now I am worried that the non-payment period until negotiations can come to fruitition will cause problems with my remaining cards. Does anyone know how existing cards are effected? One is zero balance, the other - I am about to make a large payment after being paid back by a friend who needed $1,200 quickly for storm damages. This drove balance up greatly, but hopefully, paying back before due will negate this one. Would they still potentially close me down if my credit takes tremendous dive? I hope not. Capital One had actually just increased my balance recently - another reason I want to keep that card for emergencies.

 

Thank you so much for your response and well-wishes. Now at least we are probably not getting Cat 5 Maria! No way my family could take another financial hit.

Message 3 of 23
rako
Established Member

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

800 a month... 18000 debt... and you havent looked into chapter 7?

 

you make under 10k a year if thats correct and definitely puts you in a financial hardship.

 

I would look into filing... often times you can keep your car and even redeem it at market value.

DISC 8/14/17: EQU: 494 TRS: 469 EXP: 492
GOAL: GET BACK TO 760
CURRENT: EQU: 598 TRS: 624 EXP: 605
Credit Karma: TRS: 678 EQU: 652
Rebuild Progress: PENFED Member, Chase Checking Account, Credit One Unsecured 300, Milestone Gold Unsecured 300, Sonoma Williams Comenity 250
Message 4 of 23
kcam213
New Member

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

I agree with above.  You shouild really look into a chapter 7. I was able to keep my car and home.  I gave up all credit but within 1 month, I already have new credit card.  If having a card available for emergencies is important, I believe you can do that, and also keep your income to start over, possibly save an emergency fund savings account so that the next emergency you won't have to rely on cc, you can go to your rainy day fund. And I feel you on the terrible divorce.  I divorced after 20 years and that ruined my credit as well.

 

 

Message 5 of 23
Rhonda9080
Member

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

Hey everyrone! I was shocked to come online and see such responses. I guess I'm not alone. Other nice people have these things happen too!

 

I thank you for all the advise. I did seriously consider bankruptcy, but because I co-own my home with my daughter and her children, I was very concerned about creditors putting liens on home. I'm also worried about my small savings and investment account - which I don't touch for any reason short of life threatening (like hurricanes). Total worth - abt $3,400, including investment accounts, which aren't liquid.  I guess the deciding factor that made debt settlement more attractive was (hopefully) less threat to assets. For example, BMB did advise I not include my Wells Fargo credit card, because they can then take my savings and whatever money in my checking. Alimony is direct deposit to there from state, and it is really complicated dealing with them, then also the alcoholic/druggie ex husband. 

 

Also, I will be in debt now for 3 yrs 8 months if I continue to faithfully pay into settlement account. Otherwise, I could struggle along for another 11 1/2 yrs like this. They hope to get me relief of about $3,670.50 of $14,682 (total debt enrolled). Payments are a more doable $255.34 - and on the x3 cards I kept, I will owe abt $90 (one is completely paid off to zero balance).  Because my daughter pays mortgage and other major bills in exchange for my role in child and household care, I should still be able to swing my insurance plus these bills - then just be very frugal with my personal needs. I got by for 5 years during divorce living on my own with less disposable income (after bills) so I am hoping I can return to my former discliplined self. 

 

*****My biggest concern is the impact on the cards I plan to keep. Does anyone else have experience with Capital One or Wells fargo as far as a big credit plunge or default to other creditors? Hopefully, creditors will settle soon in process, and I can start building back credit with my open cards? I know this will also mean I should put as much extra as I can into the DMB account so they have money to work with...

 

****Per advise of poster above - I did find out that my state requires by law that the debt settlement company allow me until the day I first put money into the account to back out of the agreement, and they did enclose written form for this in my packet. So, I have until October 15 to firmly decide. There are many things I have found out after reading through these forum posts. So glad I found this site! Thank you all so much for the advise and the warm welcome.

Message 6 of 23
rako
Established Member

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

debt settlement companies WRECK your credit score.

 

think about it... rather than just filing bk and in chapter 13 receiving a stream of cash or chapter 7 charging it off..

 

the accounts go sometimes 4 years past due?? and you expect them to not sue you???

 

not only is it bad but more than likely youll have at least 1-2 collections out if not all your cards and your credit will take over 5 years to heal after that... sometimes 7 years.

 

so 11 years to rebound when a chapter 7 the debt is gone AND you get to redeem your car for less and sometimes even the house!!

 

and within 2 years you can qualify for an fha loan and there is a guide here how to get a 700 fico in less than 2 years.

 

seriously the debt settlement idea is a horrible idea, you will get destroyed in the long term and you have to pay them 15-25% of the original amount in those fees.

 

i would contact a bk attorney asap if i was you and get some in person info from a professional, you're throwing away money and ruining your credit at the same time.

DISC 8/14/17: EQU: 494 TRS: 469 EXP: 492
GOAL: GET BACK TO 760
CURRENT: EQU: 598 TRS: 624 EXP: 605
Credit Karma: TRS: 678 EQU: 652
Rebuild Progress: PENFED Member, Chase Checking Account, Credit One Unsecured 300, Milestone Gold Unsecured 300, Sonoma Williams Comenity 250
Message 7 of 23
capabk
Frequent Contributor

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

It is complicated if the alimony direct deposit has to get changed from WF prior to BK'ing. However, OP, I banked with a credit union prior to my BK and faced the same issue (cross-collateralization means they could claim any money in my account) so I moved my direct deposits and the balance of my accounts prior to filing. I checked with every atty that I consulted with and more than one of them said yes, it was fine to do this at least in my state. This is something to ask a BK attorney though.

 

OP, bankruptcy is complicated and it has long term effects and  that may be why you take one look at it and run. But so many of us are so much better off the minute we file. ESPECIALLY if you have managed not to be late for a single payment so far, that is amazing on your income and let me tell you, it may not last long with all that has happened to you. You will likely reach a tipping point with maxed out cards. 

 

You may have to wait some time to file because you have made some purchases/BTs recently. But that gives you time to 1) consult with a couple BK attorneys without feeling rushed, 2) save up a BK attorney fee (you cannot charge this fee), 3) research and learn more about BK. NOLO is a great website for reputable, free legal information. 

 

I am obviously slightly biased based in the direction I went in. You must know that in debt settlement, during the time you are saving up for your lump sum payment, legally you are still technically required to make payments on your cards/loans and creditors are allowed to come after you/enter judgments against you if you go delinquent enough (which over several years, you will). So the effects are at least as bad as any BK. In BK, the ill effects are usually already over by the time you file - you've done the damage to your credit already; once you file and then receive discharge, you can begin rebuilding. It does stay on your credit report for 10 years (for Ch7 which I believe you would fall under, but I am not a lawyer) and may affect things in the early days like access to credit, finding apartments, jobs, etc. however that lessens after the first 1-2 years and as far as credit goes, there ARE options and that's what this forum exists to help with.

 

I would think BK would be the better option. However, you know your situation best. I recommend you spend the next week ish doing some serious research on BK and possibly even consulting with an attorney or two, just so you know what your options are, and have time to make a decision without feeling rushed before the 10/15. Best -

Ch7 discharged 10/2017. Pre-file FICOs high 400s.
04/2018 EX 644; EQ 670; TU 648
Message 8 of 23
Rhonda9080
Member

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing

I am hearing all of you here, but was hoping to not put my home, small savings or liquidity in jeopardy. BTW - car is paid for, no bills are late or behind at this point. My daughter - whom I share home and mortgage with - feels I am jumping the gun and should continue to pay, seek my disability, perhaps seek additional options for some home income. I once ran a sucessful ebay business, or I might be able to take in babysitting. We are also hoping Fema will finally come through for us for our damages not covered by $4,000 deductible. Also - hopefully get back to normal and nix further credit card debt. I am leaning toward putting the whole thing on hold until I can research further. Once again - the benefit to me of settlement would be gaining a little breathing room - plus paying off debt within about 3 1/2 years - versus 18 to 20 years (with interest). Would end up paying company, but still would save about $3.6k. 

I still can't see how full-on bankruptcy would be less damaging. 

Message 9 of 23
SteelerNYC
Valued Contributor

Re: Went with reputable debt settlement company instead of Ch 13 - hoping I did right thing


@Rhonda9080 wrote:

I am hearing all of you here, but was hoping to not put my home, small savings or liquidity in jeopardy. BTW - car is paid for, no bills are late or behind at this point. My daughter - whom I share home and mortgage with - feels I am jumping the gun and should continue to pay, seek my disability, perhaps seek additional options for some home income. I once ran a sucessful ebay business, or I might be able to take in babysitting. We are also hoping Fema will finally come through for us for our damages not covered by $4,000 deductible. Also - hopefully get back to normal and nix further credit card debt. I am leaning toward putting the whole thing on hold until I can research further. Once again - the benefit to me of settlement would be gaining a little breathing room - plus paying off debt within about 3 1/2 years - versus 18 to 20 years (with interest). Would end up paying company, but still would save about $3.6k. 

I still can't see how full-on bankruptcy would be less damaging. 


Talk to a few attorneys about BK. Everyone's situation is different based on where they live, etc., but in many places you can file Ch 7 and keep your home & car.

 

As others have said debt settlement will wreak havoc on your credit anyway. I have far better credit now two years post BK than I did nearly my entire adult life before it.

 

Imagine if you could start completely fresh while keeping your car and your home. Then imagine if some additional disability, part time work, or FEMA comes through on top of that. A year from today this whole debacle could be a distant memory.

 

If for some reason I wouldn't/couldn't do bankruptcy, I would start socking $$ away in savings, quit paying the bills, and see how cheap they would settle for when they get serious about collecting. This is basically what a debt settlement company does and you don't need to pay them when you can do it yourself.

 

But still . . . call a few BK attorneys today and make appointments. I would think that if you had any financial obligation to this debt settlement company that a BK would wipe that out too.

 

 

Ch 7 Discharge May 2015
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Spending 2021 in the Garden
Message 10 of 23
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