What to tell creditors when I stop paying?

$90,000 in unsecured debt? Is this personal or business related? If this is personal, I would definately be speaking with an atty regarding BK.

I have spoken to two BK attorneys. I don't qualify for Chapter 7 and Chapter 13 would be a 5 year, court controlled, 100% payoff plan.

I have done extensive research on all my options and debt settlement seems to be the best way out for me at this time.

Glad that you have done your research, but I would be very careful who you use for the DS. There are more unethical companies than ethical ones out there! If you can't guess, I am not a big fan of that business...

Believe me I know. I have spoken with 6 of them so far. I don't think I can name them here but I can tell you that:

3 of them wanted 15% of the overall debt as a fee paid out over 15-22 months. That is $13,500. Basically half of my payment for almost 2 years would go to them. No thank you.

1 was a law firm that just wanted a flat fee of $7500 paid out over 15 months, plus a $500 retainer plus 10% of the savings. Again, no thanks.

The other two I am considering only wanted $100 per creditor up front. The rest of their fees were taken on the back end - one 15% the other 25% of the savings they get. A much better proposition.

El Suavo, any company that does that as far as I know personally isn't reputable. I may be wrong... I've been wrong in the past, but, they are rarely ever reputable.

The reason debt settlement companies take their fees up front is because their doing a LOT of work on your behalf starting immediately upon your signup. It costs money to run any business.

15% over X months is the industry standard. The truth is though, any good settlement company will have you ACTUALLY saving money into your account immediately and not paying off all of their fees up front completely.

There are several models i've run across. The one you're talking about DOESN'T work from a business standpoint. you NEED TO KNOW FOR SURE that these guys are going to stay in business if you're giving them all of that money.

Think about it. a good majority of people who sign up for these programs haven't paid their bills for a LONG TIME. What makes you think they'll pay a company for doing all of that work for them after the work's done????? Not only that, but most will never complete the program.

Also, with a model like that, when they are taking the spread, you aren't saving as much.

the last thing i'll say is that, they have NO incentive to work for you IMMEDIATELY when you're paying on the back end. your accounts will sit there without being touched for much much longer.

A good company will settle 2 to 4 creditors in the first 12 months. if they do not, then they are not the ones to go with.

if you have any questions PM me..

info5555,

I find a lot of problems with your logic.

Three of the six companies I talked to charged 15% of the total debt as their fee to be paid out over the course of 15-22 months. Now, I don't mind paying someone to perform a service and I understand a retainer, but I am sure as hell not paying you anything until you perform the task given. The three were pretty much the same so I will use one as an example as to why this is a bad, bad policy.

Company Breakdown:

Fee: 15% of total debt = $13,500
Paid to Creditors: 90K x 40% = $36,000
Total cost to me: $49,500 (out of $90K in debt) = $40,500 in savings which is 45%
How fee is paid: First 4 payments go straight to the company. Payments 5 thru 16 are split roughly in half (45/55). 45% to the company and 55% to the trust account.

They offered a 40 month payment plan at $1,224 per month. Let's do some math. After 4 months of paying, I would have NOTHING. After 12 months I would have paid $14,688. The company would have received $9,360. I would have $5,328 to settle with. How far do you think I will get in settling $90K with only $5K to work with? Not very far. By 24 months I would have $15,660 and the company would have all their fee ($13,700). I would start getting sued and eventually screwed. THIS DOES NOT WORK!

I also have a problem with your idea of incentive. The other two companies only wanted $100 per creditor to start and then a percentage of the savings only as their fee. One was 25% of the savings and that's it. The other was 15% of the savings plus $50 a month. These are fees that I feel are fair and have no problem paying. If you save me money, than you deserve to be paid for it. There is incentive there. The harder they work / more they save you, the more money they make. The other 3 companies will be less likely to help you once their fee is paid in full. What incentive do they have?

Let's do more math.

Paid to Creditors: 90K x 40% = $36,000
Fee: 90K x 60% = $54,000 x 25% = $13,500
Total cost to me: $49,500 (out of $90K in debt) = $40,500 in savings which is 45%

Gee, its the same. I have actually found two companies that offer 15% of savings with a $50 a month fee. $54,000 x 15% = $8,100 + $50 x 36 = $9,900. So even more savings. The company that wants 25% of savings is a law firm so I can understand their fees being higher.

Like I said, I do not mind paying the fee, but let's see some results and then you will get paid. The law firm has an A- rating and the other company has a B+, so I think they are reputable.

If you want peace of mind...do it yourself. There are plenty of threads in here on how and why to do it. Chapter 13 is a waste of your time.

There is no way you can stop paying your bills and not get phone calls. I just changed my contact info with the cc's to reflect my cell phone. All my calls go to it, I have not had one call to my house. They will keep this model as long as you occasionally answer their calls or call them every couple of weeks FROM that same cell #. So they can see that you do use this #.

I won't mention the name of the company, but there is a DIY debt settlement program out there that is quite popular and highly recommended, i think it's around $300 or so...w/email support, cd's, extensive workbook, all the answers you need to diy. Do some google research and you should find him.

Settling before chargeoff is best...not the end of the world if this does not fit your budget, but it is best. CA's are unpredictable...if you get one that is tough to settle with, move on to another acct and try this one later.

DON'T freak out, you can do this, they will settle...just be patient and proactive!

You are not permitted to list the name of the DYI Debt Settlement Program here? I have googled it - there are many.

I don't believe we can name them. Just google this:
debt settlement & negotiation
should be the top one.

info5555 is so silent. I wonder why?

I believe you can name any company you want here and list your experience with that company. That is pretty much the point of this site. If you had a good experience with a particular company then list them and tell why. If you had a bad experience with a particular company then list them and tell why.

As far as settlement goes, I have always been an advocate of DIY. I see no reason to drop a large chunk of money up front for a settlement program. Frankly it is not that difficult to work out arrangements, so in my opinion settlement by a company on your behalf does not warrant a large amount of money. Really it is just as easy to settle a 4 ~ $500 dollar bills as it is to settle 4 ~ $25,000 dollar bills. They both take neither more nor less work so why should one pay $15,000 up front or whatever to settle some debts. I could maybe agree with a percentage of the savings on the back end capped at a max amount but large up front fees to some random debt settlement company off the net with nothing to show for the fee is not a wise choice in my opinion. I could however see the benefit in paying a decent local lawyer a retainer to represent and settle for you. I would be more apt to pay them a larger up front fee then somebody off the net with the catch that they represent if you end up in court.

As far as the calls go I changed my phone number. I have two delinquent accounts that were not generated by me. I feel no obligation to pay or settle them but I cannot get the collectors to oblige. I currently only carry one cell phone and I don???t give out the number. I have not received a collection call in almost a year now.

Do it yourself. There are 3 things to look out for and a company can't help you with any of them. 1. Being called. You are better off talking with them every 2 weeks. They will be less likely to sue or charge off or send to collections. 2 .. 1099. Unless you are insolvent you will pay the IRS. I lucked out - I was insolvent and avoided this. So if you are not - calculate that into the savings. 30% of the savings you will pay taxes on. 3. Being sued. If they want to - they will. Good Luck - I settled 120,000 and am stuck with 12,000 left.

BLL, how long did it take you to settle your 120,000? Our debt is that high also. If we do it ourselves, we're hoping to be done in 24-30 months. We don't have huge chunks of money we can access so can only save monthly.