Are credit card debt solution companies legit? ?
TR asked:
This is a tad disconcerting that, but coming from a family of lower middle class and having to go almost entirely through student bar association and I have racked up a significant amount of debt in the credit card. My share and I just can not seem to save ninguÌ? N money. My question is whether anyone has used those companies that require debt reduction and if so what was the outcome? thanks.
- Tags: Credit Card Debt, Credit Debt, Middle Class Family, Money, Tad
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April 3rd, 2009 at 10:42 am
I did try to use it and they are no good..They claim that they will reduce all your creditor’s payments and you will promise to pay them one month of the reduced monthly payment. If you do not pay the debt solution company monthly, they will terminate your agreement in 3 months after missing payment. You are still in charge of the interest rates even though you are paying less then your minimum and most of the time, it isn’t half of the minimum due that these companies tried to work out with your creditors. Try to pay more then the minimum or call the creditors yourself to work out a payment schedule. Good luck.
April 5th, 2009 at 7:45 am
Greetings,
Many, many of these are NOT legit. I used to work for a bankruptcy law firm and we saw plenty of clients who tried to help themselves by going to one of these firms and wound up getting ripped off and further in debt.
The worst of them do the following: Tell you that you must pay them $xxx per month and they will reduce your debt and then serve as a debt management company distributing your payment to creditors. What they ACTUALLY do is never even contact a single creditor, make off with the first 3 or 4 months worth of payments you’ve made to them and disappear into thin air. Our state’s attorney general has been chasing after a gaggle of these companies for years, but they come and go like mist in the night and it is extremely difficult to nab the bad actors behind them.
The very very best of them (and there are VERY few of these) might manage to reduce your INTEREST RATE that you are paying to around 10%. Then they will collect the money from you and distribute it to creditors, adding monthly fee on top of that.
There is NO – repeat – NO credit card company (regardless of what anyone else might say) that will reduce the total principal owed as part of a payment plan. At BEST they will reduce the INTEREST RATE you are paying (which can make a difference). You don’t need a credit card solution company to negotiate this for you — if your credit card company is willing to do this at all, you can just as easily negotiate it yourself.
Also … all these credit card solutions that urge you to consolidate your debts — the main point to remember is: You can’t borrow your way out of debt.
Either you can pay the debts you owe or you can’t. If you can’t, bankruptcy may be the solution (note: student loans cannot be discharged in bankruptcy).
Good Luck!