Deliberate default
Date: Tue, 03/28/2006 - 02:18
I have been in contact with a company which makes bulk offers to creditors to liquidate the unsecured debt of their clients. They charge a commission for this service, but my total debt would be reduced by 50% (which includes their commission). This debt is then paid in installments at 0% interest.
The problem is, they can only accept me in the program if I am in default (which I am not). In this case, I would actually have to deliberately default on my debts. Aside from the ethical dilemma, is this really a good idea?
No, it's not a good idea! That sounds like some type of settlem
No, it's not a good idea! That sounds like some type of settlement company, which will close the accounts out on your report, and pay them less than what you owe, which is shown as a negative in your report.
If you register with this site, someone can get in contact with you about debt consolidation which will work with your creditors to work out a more reasonable payment, while keeping your CURRENT with them to keep your credit score good.
Registration to this site is free!
There's also a lot of do-it-yourself information on this site (D
There's also a lot of do-it-yourself information on this site (DebtCollectionCare) accessible from the home page, if you don't want other people mucking about in your financial data. Either way, the worst thing you could do is an intentional default.
The only other thing I would recommend if the negotiation strategy doesn't work, is a Chapter 13 bankruptcy. That's not really "bankruptcy" (and if it shows up as such on a credit report you can sue someone) because it's "personal reorganization". It means you plan to pay everyone, you plan to pay them at a certain percentage of the debt (your choice, although the creditors can get together and demand that you change it with the judge's approval) and at the end of it all (usually three, five or in extreme cases, seven years) you'll be out of debt completely. It's the only thing that will effectively deal with the IRS, state and local back-taxes, too. Most people who try to do Chapter 13 fail at it, because they lack the resources to carry through on it; it usually gets converted to a chapter 7 (uh-oh!) or dismissed. But if you can afford to pay up on a regular basis, you pay the U.S. Trustee (who usually charges a 10% fee) every month, and he pays what you've agreed to pay the creditors for you. They can't sue you or take any adverse action against you while the process is going on, they have to accept the payment plan and when you're done they can't come after you for the difference. Filing a chapter 13 is a red flag for lots of creditors who will swoop in like vultures on the assumption that you're destitute and desperately clutching at straws to buy yourself time, since that's why the overwhelming majority of people file Chapt. 13. When they see you're not dead yet, the vultures will tend to leave you alone.
In theory, a chapter 13 discharge should look great on your credit report (since most are dismissed or converted to chapt. 7), and what it means is that you pay your bills responsibly. Too many people don't understand that, though, and will jump to the opposite conclusion when they hear the word, "bankruptcy". So, while it should not, it may have an adverse effect on your ability to obtain credit.
