Debt Management Program... Worth it?

[anabolina]

My FICOhas already been trashed. I lost my job back in July of 2009, but found a part time one in October 2009 and continued to make payments until it occured to me that I had no money for living expenses after making payments and kept accruing overdraft fees. This kinda led to my decision to stop paying until I found a job again that paid $30,000+ and I made my last payment in January 2010.  The amounts owed have gone up to $8600 for one card and $7200 for the other. I now work full time and was recently granted a raise and  bring home approximately $2050 per month($32,000) so I'd like to start paying my debts off. I haven't incured any debts since January 2010 except for getting a car after mine died and have an 'emergencies' card which is used only for tolls and sometimes gas and is paid off each month.

So I tried calling the first collection agency and they wouldn't consider anything without a $1000 down payment. Then I called the local CCCS and made an appointment for today. The counselor said the minimum payment they can negotiate will be $504 dollars for both cards and fees. This includes charging a $19 a month administrative fee despite the paperwork they gave me before beginning the appointment saying that these fees are usually paid by the credit agencies and that they aren't mandatory are paid paid 'voluntarily'. When I asked about lowering the fee to $10, she said she couldn't do that since it's determined by the system.

I suppose I could have misunderstood and $19 isn't a lot unless you take into account that after working out a budget, we were still $200 short and that left the budget stating I would have to take a part time job to make up the difference.  I've tried looking at the numbers to see where I can take money from, but even after cutting the numbers down even further, I am still short $100.

I'd really like to start taking care of this, but I don't know that I feel comfortable committing to the payment which hinges on me finding a second job that will work around my current job's hours.

I'd appreciate hearing from anyoen else who's done  a debt management program and completed it. The counselor said the program should by completed after 42 months and that would be really nice.

I'd also appreciate hearing from anyone on here with a government security clearance. I received notification last week that I;ve been tentatively selected for a position that would raise my income by 60% plus have benefits like health insurance and retirement(no I don't have either now and they're not included in my budget). The only problem is that I have to pass the background check and the two defaulted credits cards should be the only negatives in the background check. The thing is that they are substantial enough to have my clearence denied. I think anything about $3500 is a potential disqualifier.

I SO want this job, but am trying really hard not to think about it since I know my chances aren't good right now. My parents are both federal employees and say that if I show I am working to resolve the debt, it can go a long way to helping mitigate it's consequences during the background check. Thus the unaffordable DMP...

[IOBA]

I, personally, would rather work with the original creditors.  I don't like the debt management companies.

Companies are very unlikely to turn down money.  I have always handled them with politeness and determination.   I know BEFORE I call them what I can pay.   And I tell them, I don't have cable, satellite, eat top ramon, etc.   I have x amount to give them.   Period.

I send it to them - Orginial creditor when possible.  Usually cashier's check and CMRR if they are being buttheads.  But ya know, they cashed the checks.   It wasn't the amount they wanted, but they accepted it.  I also send payments EVERY payday, even if it's only 25 cents (Yes, I have sent checks for 25 cents - it was all I could afford - and it kept with my pattern of sending money every two weeks.)

When they threatened to sue me, I encouraged them to do so.  I pointed out that I was sending them money every two weeks and they were accepting money every two weeks.   No judge was going to listen to them.     They never do sue.

What do you want to do?   My suggestion is make payments - what you can afford - every two weeks.    Send it CMRR.   Then you can prove that you did it.  

[thankfulheart]

We worked with a credit counseling company. Our last payment is today, as a matter of fact! Ours charged a flat fee of $3 per account in the program with a minimum of $5/mo, I believe. They did an automatic debit and were super-easy to work with.  Whenever I had extra, I could send them a check and they would distribute it either how I asked or how it most benefitted me if I wasn't specific.  It took us 50 months to pay off $17K in debt.

In my initial counseling, they went over the budget with a fine-tooth comb, but told us that if we couldn't meet all of our obligations, they couldn't help us and to consider bankruptcy.  I appreciated their honesty and bluntness about the situation.  Fortunately, they were able to negotiate with the CC companies and we were able to dig out.

It was a long road and there were times that it was tough to come up with the payment, but we felt good that we were paying our debts and hadn't gone the bankruptcy route.  BTW, I had tried to negotiate with the CCs, but were unsuccessful; none of them were interested in helping.

[Anonymous]

I don't have a clearance, but I come from a long line of mid-level civil servants, so I have a little knowledge of it. There's no way to tell about the clearance, although bad credit with bad explanations for it will keep you from getting it, and can get it revoked when it comes up for renewal. (That is, you'll have a harder time of it than someone with good credit and no debts.) You need to talk to your interviewer about it; it depends on many factors, personal and algorithmic, of which you can not (or, at least, should not wisely) speak.

The point of "clearance" is that you have been "cleared" of all red-flags for security risk (i.e. no allegiance, political ideology, financial problems, drug abuse, etc. etc.), and, as the government sees it, a pattern of debt and default makes it more likely that you will sell what your clearance gives you access to (even though most of it's so pedestrian it would make a conspiracy theorist blush to know what "top secret", let alone "classified", actually is) if you can in order to pay off the debts, although I would think (not certain) that debts incurred as part of gambling, alcoholism, mistress, high-flying lifestyle, etc. would be looked upon more harshly than those from losing a job - debts that are likely to be hidden or hard to find, and are pressing or of great importance (i.e. higher than patriotism) for the man who incurs them.

I've heard, although I'm not sure, that the Air Force, the Marine Corps, and even the Coast Guard now run credit checks against potential recruits, and wash out those with bad credit - and that's just for being an FNG. 

[marty56]

I completed a DMP program a few years ago and have a security clearance.  The DMP will help you get out of debt and help with the clearance.  As long as you show them you have a plan to attack the debt, disclose everything, you should be ok.

DMP programs are 1000% worth it.  It is unlikely you would be able to get any CC to lower their interest rates and DMP programs will not damage your credit once compeleted and  are use a FICO friendly way (debt snowball) to get out of CC debt.

The only down side of a DMP program is you must be able to afford the payments and you cannot apply for new credit while in the program.  I would also leave a single CC card out of the program, probably your oldest account since the CCC will most likely close the account when you enter the program.

[anabolina]

Thanks for the replies everyone. It is a hard decision to make, I've been going back and forth about it all night. I just hate to commit with the supposition that I will find a second job when that is out of my control. I have applied for both waitressing and retail jobs over the past year or so and never even received a call back. I also tried applying to a lot of part time jobs from Craigslist this weekend and have yet to hear from any of them.

 Thanks for the insight into the process Chrysostom. I'm preparing the SF86 right now and will disclose everything. It's interesting that there is so algorithm at play here.  Fingers crossed that this won't be the huge problem I'm anticipating. 

 I wonder if it matters which Credit Counseling Agency  you go through? The one I talked to yesterday was a CCCS and I would be able to make online payments through their web portal for an additional $1 fee and that would be convenient.   Has anyone here ever worked with NovaDebt? They were the second nearby agency I found while searching.

[marty56]

I sent you a PM of the DMP company I used.

[RobertEG]

I was, for years, the senior manager of a division of a federal agency where all employees were required to have a national security clearance.

Management, for the most part, does not make the decisions... external investigation, primarily through OPM if a civilian job, make the decision, so it is usually difficult to inject personal support by an employer or potential employer into the decision.

Credit report issues did arise, but were not always a decisive factor in denial of a clearance, particularly if only at the Confidential level.   What is the level of the required clearance?

Paid delinquent debt was not an issue relating directly to the more serious concern of potential susceptibility to coercion, but an issue primarily regarding moral character. A much more subjective determination that has no explicit rules.

One consistent fact, which applies to both credit report and other history information, is that any attempt to conceal information will almost certainly lead to clearance denial.

Be totally honest.  Dont assume that CR exclusion is sufficient reason not to disclose unpaid, bad debt.  Personal interviews will most likely be conducted, particularly if the clearance is at the Secret level or above. 

Some clearances and job sensitivities do set regulatory thresholds for unpaid bad debt above which denial of clearance is pretty objectively mandated. 

All you can do is to try to pay off old bad debt, removing the possible coercion issue, and be totally honest.

[Anonymous]

Robert said it more eloquently than I could.

However, you state that paid delinquent debt is not a decisive negative influence (from my reading of your post, you give it - paid debt - more importance than I would have). From my reading of the original poster, the issue is with unpaid delinquent debt, which certainly can be, as it does go straight to coercion: my main uncertainty is if the origination of delinquency - presumably in a lay-off or no-fault firing as opposed to something indicating degraded integrity such as gambling, coke addiction, or alarge donation to the Communist International - will be taken in to account by Personnel or the SSBI process. As always, you make a good point in that a path to clearance for filing, pushing, or stamping (or classifying, if they still do it by hand) paper (etc., or just dealing with CUI or SBUI or whatever it's called today: an intern's job) with a less than perfect financial or personal history is not lined with the stumbling blocks to get TS/SCI (which is not going to be needed in an entry-level career).