debt settlement

Hello and welcome! I am a newer member here who found this site when I was searching debt settlement options. My husband and I did the whole switching to lower interest cards and robbing Peter to pay Paul. You know where I am getting at...

You will find so many people here that are or have gone thru a similar situation as yours. There is a lot of knowledge here. I have considered bankruptcy but when I found this site, I found out about debt settlement and chose to go that route. You can't get any better feedback on companies than from people who have actually used them. I did not like the mixed reviews I read on most companies. I did like one in particular but they never called me back. It gave me time to really research more and decided I can do this on my own. Now, I don't know if you are behind yet on any bills but what I will tell you is...they don't work with you if you are current. I learned that here and thru one of my creditors. If you are like me, your mouth probably just dropped because I was never late on any of my credit cards. Unfortunately nobody will deal if you are still paying. They have no reason to. Before you go down the debt settlement route, really look into your options. debt consolidation is also an option. I see you registered on this site which is great. Take advantage of the free consultation that is offered. It can't hurt to listen.

I chose debt settlement because I am way over my head in the tune of 90k in credit card debt alone. It also didn't help the fact that for many years I dumped the high interest cards into home equity loans and 0% interest cards. That is just a temporary fix. It got to a point, I owed so much that eventually they stopped lending and then...UH OH! :)

Whatever you decide to do, good luck. If you do decide to go with a company...do your research! Too many not so nice people out there!

thanks for your response. I am glad I have found this space. If you have to be in this situation it is nice to not be alone. Sometimes I feel like there is an elephant on my chest and other times it seems like there is hope. Bit by bit I'm doing the research, making some calls,etc.

Its funny you said that about the cc companies not working with you if you're current. I was starting to wonder about that. If they think they can string you along, why woud they accept an alternative? Hmmm.. a lot to think about but again thanks for your reply.

What are the differences, advantages and disadvantages of debt settlement vs debt management? Also do you leave a positive or negative effect on my credit report and credit score? :?

Margie -
debt management or consulting services are where the counselor/company works with your creditors to reduce your interest, late fee's and possibly reduce your monthly payments. This service usually combines all your debts and you make one monthly payment to them. After 5 years all your debts are paid off. This affects your credit alitte while you are in the program but not as much as debt settlement.

With Debt settlement - you let your accounts go late, you stop making payments and put your funds into a savings account, once you have enough funds the DS company will try and settle this account with the creditor for less owed, usually 40 - 60% of the balance. During this time you credit score does take a big hit as you aren't making any payments and these accounts go later and later. For people with huge amounts of debt - sometimes this the only way and to avoid bankruptcy. The time span is usually shorter as creditors won't wait forever to settle accounts, so usually 1 - 3 years depending on the # of accounts and amount of debt.

If you decide to use either of the options above, make sure you check the company out with the BBB, do research here on this forum, and never sign anything until you understand all the fee's!

debt settlement and debt management are both forms of consolidation; you make one monthly payment rather than several payments to each of your creditors. The difference is that debt management usually begins to distribute portions of that monthly payment to your creditors from your first installment. They concentrate on lowering the interest rates. Debt settlement, on the other hand, concentrates on lowering the entire balance and lets those monthly payments accumulate until there are sufficient funds available to negotiate a settlement offer, usually settling your accounts for 30 to 50 cents on the dollar.

Debt Management Advantages:

1) Your creditors continue to get paid, typically without any missed payments;

2) You only make one smaller monthly payment to the service, who manages your accounts for you.

Debt Management Disadvantages:

1) You are paying back the full amount of debt, plus interest, plus fees-you generally end up paying back 130% or more;

2) Your credit report indicates a Third Party Assistance (TPA), which stays on your report for up to seven years after you????????ve completed the program and can be almost as damaging as having a Chapter 13 bankruptcy listed;

3) It takes an average of 60 months to complete a debt management program.

4) Some creditors may refuse to lower the interest rates (many credit card companies fund the companies/services who offer debt management programs, so lowering their interest rates are not as profitable).

Debt Settlement Advantages:

1) Your accounts get settled for 30 to 50 cents on the dollar;

2) You can usually complete the program in 36 months or less;

3) Your accounts should be listed as "settled in full" or "paid in full;"

4) Your credit score may see an increase due to the drastic change in your debt to income ratio;

5) The accounts should remain in your name, so no TPA is listed on your credit report.

Debt Settlement Disadvantages:

1) Your credit score could possibly take a dip during the program because your creditors are not receiving a monthly payment;

2) It can take an average of 6 to 8 months to settle your first accounts, and creditors can get aggressive trying to contact you (the debt settlement company you choose should offer instructions on what to expect and how to handle this situation).



As you can see, there are advantages and disadvantages to both options. When you decide which option is best for you, be sure to do plenty of research on several companies and evaluate their Better Business Bureau rating. If choosing debt settlement, also review the International Association of Professional Debt Arbitrators (www.iapda.org) which is a helpful site as well.

Thanks everyone for your input. I LOVE THIS FORUM!!!! :D :o :lol: :wink: :!: :!: :!: :!: