A question for those in credit card debt

My question will be - What is the best way to get out of debt in an eco-friendly way?

Fear - can anyone end up in jail for when trying to pay off his debt through debt relief programs?

Debt snowballing has been into practice for a long time, does it really helps to get rid of credit card debt in a faster an effective manner?
I am not sure what is the greatest fear regarding the life after debt settlement. probably,falling back into a similar situation is the greatest fear according to me.

Renne:

Thanks for you questions. To answer #2: No, you will not go to jail when trying to pay off debts through the debt-relief programs. The worst thing that could happen is that your creditors refuse to work with the company - and then sue you, instead. If that happens, they do not get a judgment against you overnight. You have to appear in court, they have to win, and it can take months or years to get to this point.

If anyone threatens you with jail time, they are breaking the Fair Debt Collections Act. You should report them.

Sincerely,
Aaron

Fred: Thanks for your questions and answers.

To answer your question, YES, you want to get rid of credit card debt faster (and in a more efficient manner). Here is an example:

If you have $30,000 in credit card debt, your interest rate is 29%, and you pay a monthly minimum of $900 a month (which is pretty high), it will not only take you 53 years and 8 months to pay off your credit cards, but you will pay back a total of $105,473.87 in interest, as well.

If you contact your creditors and try to work something out with them - paying back anywhere from 20-50 cents on the dollar of what you owe, you could get out of debt in 2-4 years, save $15,000 to $24,000 right off the bat, and save on the $105,473.87 in interest, as well. I don't really vouch for companies, as I've seen too many people get ripped off by them.

Regarding your fear of falling back into debt (after getting out), that is a realistic one. The best advice I could give you is to ween yourself off the dependence of using credit cards. They are important for your credit score, but if you use debit cards, you can only spend what you have. This is the most important lesson to being debt free - changing your spending habits.

Sincerely,
Aaron

And I quote Aaron:

"Regarding your fear of falling back into debt (after getting out), that is a realistic one. The best advice I could give you is to ween yourself off the dependence of using credit cards. They are important for your credit score, but if you use debit cards, you can only spend what you have. This is the most important lesson to being debt free - changing your spending habits."

Good advice, very good advice indeed!

Regards,
King "Kash" Jabba Labba

Thanks King Jabba Labba!

I sign up with this company called please reduced my debt settlement program. The program is to be run for period of 24months as stipulated on the contract i sign with this company. The 24 months will end in January 2011 and this company has not directly settle any of my credit cards bill for me. I negotiate with a credit collector myself after i was sue to court. My debit settlement program company only helped in transfer the last payment installment to the collection company to date. They only collected up front fees from me, charged me maintainers fees every month, and nobody to answer my phone calls anymore. My question is can i sue this company and if not what option do i have?

Hi Jaco,

It sounds like you were taken advantage of at your debt relief company; this is nothing new.

The short answer to your question is: Yes, you can sue the company. You can sue anyone at any time anywhere. The longer answer is: Your chances of success depend on what is in that contract you signed. Chances are, it was written by a bunch of smart attorneys who put language in your contract to give them the upper hand.

Your only recourse is to contact your state's Attorney General and file a complaint. Do the same on complaints.com and with the BBB. They most likely won't get your money back, but it will stick against the company.

If your creditor is still suing you, your only recourse is to try and settle with them. Otherwise they can get a judgment against you, garnish your future wages, and they'll collect the full amount. If you try to negotiate now, before your trial, you can settle for 20-50 cents on the dollar of what you owe. Just make sure you get a release from them stating you have paid them in full. Otherwise they can sue you in the future for the full amount.

Sincerely,
Aaron

Sorry to jump in the on the conversation, but I need to ask...do you reccomment try to settle direct (in my case it would be with Chase) with the cc company first? Or using a management company, I would rather not pay a fee, but then again, I don't know the language to use etc?

Thank you,
Lucy

Hi Lucy,

I don't recommend using a company. Too many of them rip people off.

If you are current with your creditor, they won't negotiate with you. If you are behind by 3+ months, they will talk. Getting a settlement at 50% is pretty easy. With a little effort, you can get it down to 30% or even 20%.

I would tell them you are going to have to file for bankruptcy, and would like to work something out with them so they at least get something instead of nothing. Often times they'll play ball. If they tell you no, I'd wait a few more months and try again.

But if you are still giving them money, they will just laugh at you and won't even entertain an offer.

BTW: What is your biggest fear about getting out of debt, Lucy?

Sincerely,
Aaron

Thanks Aaron! I am afraid of damaging my credit that I have spent a lifetime building, that said, I am not planning on making any major purchases and am in a solid home loan, vehicles paid for etc so I guess I can take the hit since I am not planning to "need" the credit for a few years.

I am dealing with Chase Bank in CA and have heard they are not friendly, I do not want my wages garnished! Or to be sued, that scares me. I just cannot stay on this ride, my husband is a Union Carpenter, has not worked in months and we are starting to use our savings to pay this stupid cc bill, I guess I would rather deal with this headache that jeopardize my house, THAT is what my saving cushion is for...

Still nervous...Lucy

Hi Lucy,

I understand you are afraid of damaging your credit, but if you are using your savings to pay your credit cards, that is a MUCH worse situation. Also, if you have sizable credit card debt, chances are your credit score has already taken a hit.

Even if Chase is not friendly, that does not mean that they won't negotiate with you - if you say the right things and are in the right position (payment wise). Being sued is not the end of the world. It is NOT fun. But often times the attorney suing you on behalf of the credit card will work something out with you - especially if you tell him, "Hey, I'm about to go to an attorney to file for bankruptcy. I can give you (lowball number - about 10% of your debt to them) right now." He'll counter with 60%, and you go back and forth until you get to a number you can handle.

Do NOT jeopardize your house though. The mortgage company CAN foreclose on you. The credit card company, on the other hand, cannot take your groceries and clothes away from you though (that you used your card to pay for).

Sincerely,
Aaron

Does anyone else need help? If you could let me know what your fears are about getting out of credit card debt - and what's the one question you'd like to ask a debt expert, I'll do my best to answer it for you!

Sincerely,
Aaron

Hi everyone,

My article is almost complete. But I need help from a few more people!

1. What is the one question you would like to ask a debt expert about getting out of credit card debt?

2. What is your biggest fear about getting out of credit card debt?

Thanks so much for any help you can be. I'll do my best to get answers to any questions you have - and post them here.