HELP Need advice re: Debt negotiation co
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HELP Need advice re: Debt negotiation co
| Thu, 04-14-2005 - 4:32pm |
Hi. I'm in a lot of debt and got so scared back in November 2004, that I signed up with a debt negotiation company, which is like a debt consolidation that collects payment from you and then pays your debtors. However, this group actually negotiates down your debt once they collect money from you and try to settle your debt. The problem is the creditors are calling and the debt negotiation company isn't doing anything yet because they say they don't have enough funds to settle the debt yet.
My question is -- has anyone ever worked with such a company before? and /or have any advice?
Thanks!

Hello traygirl and welcome to the board.
All my best,
Danni
I know, just from being in the field, that any company that offers to 'negotiate' or 'settle' on outstanding debt is just a way for the settlement company to make a fast buck.
These companies will require the debtor to make a consistent, monthly payment into a specific account. Out of this money, the settlement company will take their monthly fee and the rest will remain in this 'account'.
The settlement company will wait until this account has enough funds to begin settling with one creditor at a time. Lets say you have saved $6,000.00. The settlement company contacted one of your creditors to offer, lets say a 50% payment. This amounts to $4,500.00. The paid account may still show 'negative' on your credit report. Or worse, 'settled' which is a clear sign that the full amount was not paid.
So, now that one of the creditors is paid, you begin saving, again, to pay the next creditor and so on, until all creditors are paid. Depending on the amount of creditors/debt, you could be paying on this for 1 year or 10 years!
Your creditors will see that you are not making payments to reduce your account. The creditors will begin late payment calls, collection calls, legal proceedings, possible judgment which can lead to a wage garnishment or lien on your personal property.
Your credit report will show you are late on paying your creditors. Your credit report will show if an account has gone to collections, judgment, garnishment or lien.
If you are only able to save enough money for one account per year and you have seven creditors, the last creditor may have to wait seven years to receive a payment. By that time, you wages could be garnished so why pay the settlement company?
If you are past due, as hard as it may be, contact your creditors to explain your situation. Ask for a lower payment, lower APR or a deferred payment. You may not even get a positive response from the creditor but make every effort to make a payment. It seems like once the ball of 'late' 'over the limit' and 'past due fees' begins rolling down that hill, it is hard to stop.
With the new bankruptcy law to be signed , creditors will have no incentive to assist a cardholder that is down on their luck. Why should they, if they know filing bankruptcy is going to be harder for debt ridden cardholders? Late, over the limit, past due fees along with APR's, enrollment fees, credit card maintenance fees will most likely continue to increase.
If a account goes to a collection agency, the fees can amount to double of what the bill started at. That is why the creditors offer settlements. They may purchase the debt from a creditor at 10 cents on the dollar. They buy the account, tack on fees, court costs, and now the debt is double, or triple. If they collect 1/3 of what they say you now owe, they have made 25% on their initial 'investment'. Free money! Your money.