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 Posted: Wed Apr 16, 2008 8:29 pm |
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Hello all
I recently found this website and I have to command everyone on how good of a resourse it is. I have my own debt issues that I would like to resolve but have some questions about. I am looking at $130k of unsecured credit card. I have yet to have a late payment/missed payment in 10 years of carrying this debt (it ballooned to this, never was this high). I am trying to decide between credit counseling vs. debt settlement vs. bankruptcy. Under all three plans I will get on some payment plan and eventually settle/payoff the debts.
I am curious to hear the pros and cons of the different methods. I am very wary of the settlement approach as I do not want my family/friends involved (via calls from credit agencies etc). I am also wary of just neglecting my payments in order to force a settlement. This debt was incurred by me and I need to pay it off.
I'm open to any and all suggestions...
Thanks!
Dan
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dm1
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| Posted: Thu Apr 17, 2008 12:21 am |
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Okay, so you want to know about the pros and cons of all the options available before you to get out of debt. lemme tell you that its the wisest way to deal with this problem. Often people blindly adopt one, without sparing thoughts to the other available alternatives.
Bankruptcy: if your debt is overwhelming and beyond your ability to repay them, then you may not have any other option other than filing bankrupt. The good thing about it is that
It'll stop the creditors from filing and getting judgment against you. It'll also restrict them form garnishing your wage.
If you're filing ch-13, then you're actually committing yourself to a long term repayment plan that's convenient to you.
The bads of bankruptcy, it'll stay on your credit report for ten years. Moreover, it'll ruin your credit . Lenders may not forward you a loan during this period.
You're losing your possessions. The trust, set up by the court, will liquidate your assets and will pay-off the creditors.
The secured loan lenders (auto, home) can obtain a stay over the court order and can continue with the repossession act.
Bankruptcy can't let you get discharge over the loans like -student loans, child support, alimony and so forth. Hence, you need to continue paying for those.
Debt Settlement: a debt settlement company will negotiate with your lenders and will try to reduce the amount you owe to them. You then need to take up a monthly payment schedule suggested to you by them.
The goods: you no-longer have to deal with the multiple creditors. You're forwarding one single payment to the settlement firm and they'll take care of the rest.
It'll stop the harassing phone calls form the lenders.
You can pay-off all your debts in 4 to 5 years.
It'll stay in your credit report for lesser years (7 years) and also your credit will start improving from the day one as you are saving a substantial amount of money through the settlement.
Now the cons, if you fail to get a written statement form the creditors and collectors, the balance amount may resurface in the future with another CA.
Though it'll improve the score later on but there will be an immediate adverse effect on it.
The debt settlement company will take a monthly maintenance charge for managing your account. Also they may charge a portion of the money you have saved through the deal.
However, if settlement is an available option for you, you may wish to try it out first than filing bankruptcy.
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tweetyturner
Joined: 11 Mar 2008
Posts: 279
Debtcc Points: 3264
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| Posted: Thu Apr 17, 2008 7:47 am |
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Another con of Debt Settlement is you may face lawsuits and the company may not work with the Debt Settlement company. Also, if you pick a company, make sure you check the BBB and google the company. There are many fake companies out there that will take your money and run.
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Ryan_N
Joined: 02 Apr 2007
Posts: 237
Debtcc Points: 4144
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| Posted: Thu Apr 17, 2008 9:11 am |
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Hi Dan
I was still am in the same shoes you are in. I cumulated most of 130k (same amount as you!!) over 5 year period. I am down to 68K debt at this moment. I missed lot of payment here and there so I was near 30% on my APR on most of cards. Credit counseling will spread your debt in to 5 years with about 10 % APR according to counseler I talked resulting 3k payments monthly. To settle your accounts you need about 40 to 60 % of your total debt.
If you have high balances on few cards try to settle before 180 day past due to avoid litigations. Before you do any thing tell all of credit card companys to use only your cell phone as ONLY contact phone #. Otherwise they will drive you crazy night and day.
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scottinred
Joined: 07 Apr 2008
Posts: 18
Debtcc Points: 405
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| Posted: Thu Apr 17, 2008 11:28 am |
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Thanks everyone for the comments/advise. I do have just a few follow up questions:
1. Assets - I do not have any (car, house, etc); what else falls underneath the category of assets?
2. Seeing as I have never had a late payment or missed payment, would that hinder a credit counselor's ability to negotiate with the creditors (I'm not referring to defaulting first, just trying to get on a payment plan, as long as it may be).
3. The debt settlement company I contacted (well I contacted several, but this would be the one I would work with) promised that creditors would not be contacting parents, friends, work; is that a claim that seems reasonable? I don't mind calls made to myself, but I just don't want those close to me involved.
Thanks again...
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dm1
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| Posted: Thu Apr 17, 2008 11:43 am |
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As long as you stay in contact with them, I doubt they would call any of your references. Usually they call your references when you avoid their phone calls.
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Ryan_N
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| Posted: Thu Apr 17, 2008 11:52 am |
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Thats where my issue is. The debt settlement program I am considering specifically advises not to pick up any calls that I can't ID. Supposedly they would be re-routed to the debt settlement co. However, I don't know if to trust that statement that all calls and communications would go to them...
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