Credit Counseling/Debt Settlement /Bankruptcy

[eee]

The thread on credit cards got me thinking and searching on the net,looks to me like people who are in debt up to there eyeballs can get help from credit counseling or debt settlement instead of bankruptcy.
1.The credit counseling approach,the agency is paid a fee by the creditors to help recoup the money through consolidation of ones accounts,usally paid back in 5 years.
2. Debt settlement, the agency works for the person in debt and not the creditors,they take a small % to pay there wages and represent the person in debt. You pay so much money to a trust fund and once enough money is saved in the trust fund,the company representing you approaches the credit card company and agree on a settlement.,usually 60% to 70 % of total amount owed. The one thing to remember is any debt forgiven can be turned into the IRS as a gift or earned income and have tax implications.
3. Bankruptcy is the last thing the creditor wants,because usually they don't get anything.

 

[btolle]

Please be very careful with those debt counseling services. The Federal Trade Commission is about to nail a bunch of them and the IRS is looking at revoking the non-profit status of a bunch of them. See FTC website for information about those services.

I would not touch any service that says they will hold your money until you get 60% of the debt amount in the account. You may very well find that when you get to the 60% the agency will have disappeared and your money is gone!

Before you go to one of those agencies I beg you to read the FTC website and then call your creditors yourself and tell them you are in trouble and see what they will do. I have helped a couple of friends out who were in trouble and managed to get some of their old debt reduced and a livable payment worked out. You can do it yourself just as well, or maybe better, than a debt service company can.

Bill Tolle

 

[Bird]

Very good advice, Bill. I'm sure there are some legitimate credit counseling firms, but there have been a number that were not, also.

 

[frank_f15]

sound thinking! But there are some good services out there. i think the bigest thing is for them to not only help folks get rid of debt, but to teach them how to stay out of debt.

 

[sendero]

It is my personal opinion with little more than anecdotal experience to account for my position.

Most if not virtually all of the so-called "credit counselling" agencies are just agents of the credit card companies.

Their main modus operandi seems to be to try to keep you from declaring bankruptcy and to figuring out exactly how much you could pay per month if every last dime you have is accounted for. Then they set up a payment plan to soak that last dime from you each month. They promise interest rate abatement and other remedies but rarely deliver on that promise.

I have family who have used them and they have universally gotten taken for a ride.

If you are really in over your head, stop buying and figure out if you can realistically pay off your debts. If there is no way, take advantage of the bankruptcy laws, they are about to go away.

 

[MF1455v]

A few years ago some friends were trying to be a new house. They had previously worked with a credit counseling agency, corrected there spending habits and all was going smooth. When they started talking to mortgage companies the shock set in. They were told that credit counseling was just as bad of a mark on a persons credit score and a bankruptcy and were unable to get a mortgage for a new home (either denied or APR to high).

In there case filling bankruptcy would have erased most of there debt, been finically sound sooner, and no worse credit score.

 

[Wannafish]

MF,

Just a note to confirm what you said. I am a "Budget Counselor" for members of several churchs in our area, and I can affirm from experience that what you said is correct. It has been my experieince that as far as a lending institution is concerned, using a credit counseling firm is the same as filing bankruptcy in their eyes.

Please note: I do not condone bankruptcy as a means of someone avoiding their responsibilities. That is a personal decision each person must make on their own.

Just my 2 cents worth. /forums/images/graemlins/crazy.gif

 

[DannyD]

I remember once when I worked in finance and insurance, a couple was so far in they could not get out. The bread winner had a heart attack and could not go back to work. One card they had would bill them for the minimum, plus the late fee, which put them over their limit, so the fee for that was added. I contacted the company, explained the situation, was told that the company wanted them to file, they knew there would be no recourse and no money paid.

They did file bankruptcy, 2 years later they had a new car, and where able to adopt a baby, and I beleive they now have a new home. Most cc companies will send you an app if you file chapter 7 within a few months of closing your debts. They know you can not file it again for like 7 years.

 

[LBrown59]

</font><font color="blue" class="small">(
1*( The thread on credit cards got me thinking and searching on the net, looks to me like people who are in debt up to there eyeballs can get help from credit counseling or debt settlement instead of bankruptcy.
2*.The credit counseling approach,the agency is paid a fee by the creditors to help recoup the money through consolidation of ones accounts,usally paid back in 5 years.
3*. Debt settlement, the agency works for the person in debt and not the creditors, they take a small % to pay there wages and represent the person in debt. You pay so much money to a trust fund and once enough money is saved in the trust fund, the company representing you approaches the credit card company and agree on a settlement, usually 60% to 70% of total amount owed. The one thing to remember is any debt forgiven can be turned into the IRS as a gift or earned income and have tax implications.
4*. Bankruptcy is the last thing the creditor wants, because usually they don't get anything.

======== )</font>


1*It may look that way at first glance but in reality it's not the case.
2*These out fits are in many if not mist cases owned & operated by the creditors, whose only interest is in protecting their wallets at the expense of trashing your credit which results in jacked prices of insurance and loan rates.
Credit counseling is almost as bad and in some ways worse on your credit than is bankruptcy.
With credit counseling you get to pay em for trashing your credit.
Bankruptcy hoses your credit also but at least you don't pay them for trashing your credit.
3* Debt settlement is a scam unworkable usually leads to you're being sued by one or more of your creditors and further damages your credit. Probably the worst choice between the 3 options.
4*Why do you think the creditors prefer credit counseling?

 

[LBrown59]

</font><font color="blue" class="small">(

I would not touch any service that says they will hold your money until you get 60% of the debt amount in the account. You may very well find that when you get to the 60% the agency will have disappeared and your money is gone!

Before you go to one of those agencies I beg you to read the FTC website and then call your creditors yourself and tell them you are in trouble and see what they will do.
Bill Tolle )</font>
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The problem with the holding policy is that your creditors won't wait that long and they sue you in the mean time.
Now you have law suits on your credit reports in addition to the delinquencies.
You don't need someone else to withhold your money from your creditors.
You can do that your self with less risk.

There is a right way and a wrong way to do this.
Chose the wrong way and your credit remains damaged
Do it the right way and save your credit.

http://consumers.creditnet.com/straighttalk/board/showthread.php?s=&postid=410243#post410243