Settlement vs. Consolidation

debt settlement can do some serious damage to your credit because it shows things like charge offs for the amount that was reduced from the debt. debt consolidation can temporarily lower your credit but will not lower it much and it can be reversed easily after completion of the program. Debt settlement will be a shorter duation than consolidation however.

oh forgot to mention, the debt settlement company mentioned that they can do it without a charge-off, as I am current on my accounts.

I think ( I might be wrong ) but with a debt settlement program they wait until your accounts become delinquent & in the meantime collect money to settle the accounts. I don't think they can settle accounts unless they are delinquent or in charge off (BUT I COULD BE WRONG).

I'm in a dmp plan with Federated Financial. If you have any questions please feel free to PM me!

If you are current on all of your accounts, they are not going to settle easily.

Not true.

Consumer Credit Counseling/Debt Consolidation services leave a third party fingerprint on your credit report that most banks and finance companies will underwrite as a chapter 13 bankruptcy. It reflects on your credit report for a period of 7-10 years. The creditors that receive the payments from the Third Party agency each month legally have to report to the credit bureaus that your money is being managed by them. Also, the accounts with those creditors will still show as behind, even though payments are made each month, because the amount the creditors are receiving each month is less than what was originally agreed to when you had originally received the cards and/or lines of credit.

Secondly, you will still pay 125-150% of what was orignally owed because those companies only negotiate the interest rates.

I double checked this information with my loan offcier at my local credit union and he told me that everything my debt advisor had told me was correct. He said he never recommends people joining a consumer credit counseling service because of the high costs and severe damage to your credit for nearly 10 years.

I have been in a program for about 12 months. My debt advisor was very knowledgeable and helpful on explaining their program to me as well as the other options that I had. So far, the program is going very well. I did my research before choosing this company, Credit Consultants (1-800-995-7765 x529) out of Stateline, NV. They are fully accredited with the Better Business Bureau and are one of the only nationally accredited settlement companies through the United States Organization of Bankruptcy Alternatives.

They are worth a phone call. They gave me a free consultation over the phone. Their number is 1-800-995-7765 x529.

See if it helps! Good luck to you! :D

I already know how much more I will be paying...they told me $1000 for 4 years. That's less than 125%. That's pretty good compared to what I'm payign now.

By the way, doesn't settlement ruin your credit too?

I have to disagree with the "guest" who posted that consolidation hurts your credit for 7-10 years & is looked at as a chap 13 bankruptcy.

From what I've learned here & in my own dealings with consolidation is that yes, you may take a hit on your credit while in a dmp, but most likely if you are in a DMP its because you are in some sort of problem with payments & can't keep up-so your credit is down. You credit might go down more while you are starting the program, but once you are in it for a period of time then some creditors will mark you as being current or mark you as paying as per agreed. Some might not even make notes on your credit report if you are in a program. After you have finished the program your credit can be restored-like Frogpatch said previously.

In my DMP I'm paying $356 a month for a little over 4 years. That amount is LESS than what I'd be paying to catch up on my own (i think because interest rates/late fees are cut/lowered). I'm still paying off what is owed on the card, but not at such a high rate as before.

Settlement will leave a mark on your credit report. Not sure of the time frame & if its considered as a version of bankruptcy. That's all I know on settlements as I've never dealt with one.

With debt settlement, you will pay monthly installments and I believe that the settlement won't happen for awhile. In the meantime your creditors will still call you and charge more interest if you don't pay them. I was going to do that until I realized that I would be accumulating more debt.

Good point BJ. I've heard the settlement doesn't happen for a while either. They collect your money while the accounts default. Then they make an offer of settlement with the money you've been paying them.

I did consolidation as I didn't want my accounts to lapse even further then I had let them, I didn't want more debt, I wanted the calls to stop. Some creditors when they find you are in a settlement program they will contact the settlement company, but not all do that!!! Some will still hound you.

Swami108, there is a huge difference in working with settlement program as opposed to consolidation. There is a tremendous difference while working with Mr. Lombardo (debtxpert) than any other program out there today. If debtxpert told you your accounts would be settled all before charge off, then he is telling you the truth. My Bank of America was settled by debtxpert for 15% and I have 6 installments. This was a $35,000.00 account settled for $5000.00. I have a Citibank account that was settled for 40% which debtxpert has arranged a 12 month payment plan to cover my $8800.00 settlement saving me $13,200.00. I am now in my final month of settlements. I only have 3 smaller accounts left but have been saving $1000.00 per month so I had enough to settle 3 accounts all around $5000.00 each at 35% settlements with enough left over to pay my first payments towards Citibank and Bank of America. I enrolled 5 accounts and each settled before charge off. I confirmed this with each of my creditors, I have written contracts from each and I know that my decision was the best possible decision. I signed up with over $72,000.00 in debt. I settled all accounts within 6 months saving me over $53,000.00.

The biggest difference I have noticed overall beyond the exceptional savings is the fact that Mr. Lombardo has only been paid $500.00 and I do not have to pay anything more until my settlements are completed in 12 months. Not only are his fees significantly less than other companies I spoke to but this program is designed to help people. Helping people is in the forefront of this company's mission. I did not speak to another company who did not look to charge me a minimum of $7,000.00 just to enroll. Credit Consultants wanted $14000.00 as a set up fee. I would have been paying them for over a year before anything was settled while I settled all of my debts with debtxpert. In fact, debtxperts total fees are less than most other companies set up fees. The way I see it is that debtxpert knows we will be sued and prevents that from happening by settling our accounts prior to legal action whereas others know we will be sued also but dont care as long as they are paid.

James Lombardo was the director of operations for a USOBA accredited company in fact, the first fully accredited company wit USOBA for 2 years straight before any other company could pass USOBA's compliance audit. James also served as the "Co-Chairperson" of the USOBA Standards Committee responsible for drafting the requirements for USOBA's Accreditation Program. -This information was provided to me by the Director of Operations for USOBA.

USOBA also confirmed for me the fact that credit counseling is a repayment plan with credit counseling services and is indeed reported the same as a Ch. 13 Bankruptcy. According to my creditors, debt settlement is not reported to the credit bureaus. There is no indication of my participation in any 3rd party program like CCCS or debt management has. My accounts will be reported as settled which is not a good thing and since I enrolled with debtxpert my scores have gone from a 720 to 580. 2 accounts have reported settled already and my scores already improved by 40 points now at 620.

That said, I found Debtxpert through a lender in the Los Angeles area while shopping for a loan to buy a home. World Bank to be exact. I did not qualify for a loan since I have so much debt. My broker proposed an offer to me that if I were able to get rid of all of my debt without having a charge-off on my credit report I would qualify for the loan I applied for. I consider myself quite the skeptic so believe me, I did extensive research into debtxpert, numerous other companies, spoke to lenders, my banks I even called other banks and in the process of doing so, incidentally had been given Mr. Lombardo's contact information on more than one occasion.

Before contacting Mr. Lombardo, I found only positive posts on several different forums, anywhere his name can be found on the internet it is either sifxpert or debtxpert providing free advice as a consumer advocate would or forum members praising his work not to mention the tremendous network he has created for himself and to consistently remain positive with all that I have found deserves commendation but the only one thing I can agree with is it is difficult to communicate on the phone with him. Understandably, his day to day routine must be centered around being on the phone but if there is one thing I could gripe about it would be poor communication but as others have said here, emailing him is the best way to communicate which I could confirm myself is true but I just prefer speaking over the phone. Other than that, his estimates were 100% accurate. Everything he told me about himself all checks out and everything he said would happen with my creditors has happened. My feeling of relief after such disbelief in debtxperts word and the fact that I will be closing on my first home in the next few weeks words can not even describe.

Thank you very much for allowing me to share my experience. I am not one to advertise for anyone but no one should miss the opportunity to work with such a talented individual and everyone in debt knows the misery it creates and knowing first hand the feeling of having the burden lifted and in such a way that James has done for me is absolutely incredible.

debt settlement and Consolidation are a personal decision. You must do your research and be prepared before you make a decision. If you take your debt and figure 60% of it, just to be safe - how long will it take you to save that much money? Can you borrow it? If you can, do it before you start settlement because once you are delinquent you will have a difficult time getting a loan. However, if you are borrowing against your 401k they do not look at your credit report. If you don't think you will be able to save that much money over a 24 month period, debt settlement may not work for you.

You have to be delinquent to do debt settlement and the creditors will pull your credit after 60 days of being delinquent to see how you are paying others,if you are not delinquent with all creditors you will have a hard time settling; you cannot pick and choose. Whether to hire a debt negotiator or do it yourself is your decision as well. A debt negotiator will tell you that they are experienced and know how companies work and they know when the best time to settle is with creditors they work with and have a relationship with. This may be true, but a creditor wants to work with their client and many times you can do the same thing a debt negotiator can if you are truly insolvent and are settling debt because you are avoiding bankruptcy. You have to be patient and negotiate; many creditors will not chargeoff your debt for up to 180 days and you get the best deal the longer you wait and negotiate. Keep it simple when talking to them and stress you are just trying to avoid bankruptcy and looking for alternatives. Sometimes a creditor will accelerate collection procedures when a third party is involved. With that being said, some people are just not confident enough to handle their own settlement. In that case, the fee schedule of paying a percentage of 15-20% of the savings the debt negotiator is able to obtain is a good deal versus paying 20% of your total debt up front as a fee, before they even begin to settle debt for you.

Did you know that when you enroll with a debt negotiator they require you to sign a power of attorney to act on your behalf with your creditors? They then contact your creditors and change your address to a new address (usually a state with strict collection policies) your mail is then forwarded to that address, if you talk to your creditor you may be in violation of your contract with the debt negotiator and your contract can be terminated. Also, if you get sued the debt negotiator will also terminate your relationship because they cannot represent you legally. Just things you need to know before making a decision.

Regarding debt consolidation; it is viewed by lenders the same as a Bankruptcy 13 and many times you cannot get a loan until the debt consolidation is complete. FHA will allow someone who has paid for one year on a debt consolidation plan to buy a home if they never reached a chargeoff status and they had extenuating circumstances. If you have to go through debt consolidation, it will hurt your credit for a while, but not paying your bills at all hurts more. Generally, 24 months after you have completed your debt consolidation, your credit scores will rebound and lenders will be more likely to work with you.

Lostindebt, thank you . It is a wonderful post.

Swami...I am no credit expert but I know once you start defaulting on credit agreements it will eventually show-up on your credit report. I really think it depends on how much debt your have and how long you want to deal with a debt settlement or debt consolatdation program. I am in a debt consolidation program they worked we me and we set-up a budget...my monthly payments are easy to handle and I get regular monthly statements from my creditors..which I like..I can see my debt going down. I talked with debt settlement companies and really did not care for the program of saving up and then dealing..I am not that patient and I could not handle all the phone calls from creditors.

Well all I can add is that any settled accounts either thru settlement or consolidation will show up as negative on your credit reports. I am a novice in this area,but creditors can do rule 5000 reages to change reporting after a debt plan,but again it is not necessary for them to do this. I don't mind any debates we have here,but if companies wish to have a larger presence here,then they should register with our website.

Thanks Cajun!

Well put Laura! I love getting my monthly statements as well-seeing my debt go down in the dmp.

I also got nice letters from my creditors congratulating me on the hard decision to go into a DMP. They clearly spelled out my responsibility while in the plan & what happens if I ever leave the plan before the debt is paid.

debt settlement do affect credit scores. But if you look at the reason why you are entering into a debt settlement you wont think twice about your score getting affected because your score is already ruined. Negotiating reduced settlements with your creditors, through debt settlement,can save you money as well as help you in avoiding bankruptcy and finally it can actually get you to the stage of being debt-free and stress-free in a span of two years. Being debt free is not an easy task but its surely not unattainable.

First, remember that settlements and DMPs (credit counseling/consolodation) are both bad for your credit. Yes, credit card companies will report both to the credit bureaus. Settlements will report as legally paid in full for less than the full amount for 7-10 years. Also, if there is a charge-off of more than $599, you will receive a 1099 for your taxes. Simple as that. Yes it is quicker, and the faster you begin rebuilding your credit, some argue, the better.

Also, settlement negotiation companies take your money and escrow it (charging you fees all the way usually) eventually waiting until you are 90-120-150 days just before a creidt card company will sell your account to an outside agency....the your settlement company begins negotiating. That is when they will get closer to 50% on the dollar. Credit card companies will not go into principle (actual charges/purchases) until it gets that far along. A current account (not del) will not get a settlement offer. An account 30 days del might get 85% etc. You don't need to pay someone to negotiate a 120 day account...the credit card company will have probably sent you a settlement offer in the mail by that time! Do it yourself. It does not have to be lump sum either...you can get a 3 month installment or possibly a 6 month installment on a settlement.

dmp (debt management Programs) are offered by most credit card companies even on current accounts if you can show a need to the DMP company. Credit Care companies accept a proper proposal for a monthly payment (usually 2.25-3% of the balance) and the interest rate lowers to 6-9% with late and over the credit limit fees stopping. DMP is a long term program designed to pay the account off in 5 years (or slightly less..do the math depending on the rate and payment size). Yes, a mortgage lender will treat it like a bankruptcy in their mind. Remember, if you go on a DMP and you are past due, you will continue to report past due the entire 5yrs unless you make some more payments. You can directly make a payment to the credit card company (though a lot of DMPs say never to do that). It is in your best interest to try and pay the past due amount when you can to begin reporting current to the credit bureaus as del status affects about 35% of your FICO score. Be very careful and monitor your DMP payments by reading your statement. They send one large file a month to the credit card companies and if your payment is near your due date each month it could miss the cycle date (date your statement prints) and you will be late and possibly dropped. You may not be able to get back on a DMP. Again, make the payment yourself by calling the credit card company immediately if you see a missed payment.

Companies also have internal hardship programs, but they have more stringent requirements than DMP which is a much better solution for multiple credit cards. It's entirely up to you, but remember, no matter what option you choose, all cards with that company will be closed usually as you are now a known credit risk. Good luck!

please, please tell me you poeple do not believe this tale at all. if it sounds too good to be true then it is too good to be true. these debt settlement companies are not telling you the truth. LOOK at FDCPA, FDC, AND pl95-109. collections companys and creditors have to tell the truth by law. debt settle has no law gov'ing them at all. look for yourselves. learn, or lose your money.