Debt management/consultation services

[scottmandue]

We have decided we need to pay off all our credit cards. Wife had heard of these "services" that roll all your debt into one and pay it off for you, the advantage being that they negotiate with the CC company to settle for a fraction of what you owe. Downside being they charge for the service.

I met with a friend of the family last night that is a retired financial councilor and he seemed to be under the impression CC companies only negotiate if you have missed several payments.

Now I have always been a pay my bills kinda guy so I'm not behind on anything.

So has anyone ever negotiated their debt down with a CC company?

After talking with our friend it seems like a refi might be the best solution.

[Rick Lee]

I did it right out of college. It's to be avoided if at all possible. Those fees can end up being a large portion of your monthy payment. And your credit score will definitely take a hit with a big "consumer credit counseling" entry on your report too. You can call the credit card companies on your own for free and see which ones will play ball. I'd do that before paying one of those sheisters a hefty monthly fee (for years) to do it for me.

[id10t]

I looked into it... $50/mo fee to the company (a non-profit) but they met with me for a few hours, we looked at my debt, their process would have made it much easier to pay off but using some of their ideas and information I was able to negotiate with CC companies and reduce things greatly. Been 3 years, got several BIG ones paid off, and we're doing it wihtout the debt services people.

If you have the home equity, etc. then I'd just get a loan from a credit union to pay off everything (call the co's - I owe you 2500, if I send 2k will you cancel the other 500, etc). I didn't have that option...

[Scott Watkins]

Get Out of Debt with the Debt Snowball Plan - daveramsey.com

Get signed up for FPU locally.

[motion]

Grrrrrrrrrrrrrr. A great example of what's wrong with this world these days.

[Dantilla]

Originally Posted by scottmandue

I met with a friend of the family last night that is a retired financial councilor and he seemed to be under the impression CC companies only negotiate if you have missed several payments.

A friend looked into this. First thing the "councilor" told them was to stop making any payments, to intentionally get behind so that the CC companies would be willing to negotiate. And to start paying the councilor a fee.

After one meeting they decided it was basically a worthless scam. Paid off the cards on their own and are very well off now.

[genrex]

I have a relative who did that.

Three years ago, she negotiated her c/c debt directly with Citibank, and paid about 1/3 of the $5000 that she owed. At the time, she thought it was a good thing. Since then, she has applied to several c/c companies -- even the ones who give a card to anybody -- and all of them turned her down. I think she uses a debit card now, which means she's kinda limited in what she can do.

So basically it's not a good thing.

_

[Noporscheform]

The credit card companies will negotiate on the amount due, however they will generally report the write-off. It is best to negotiate on rate and work to payoff as quick as possible. This includes not using the credit cards any more. Two steps forward and one back is not good. If you want them to give you a discount you generally will need to make a lump sum one time immediate payment with an agreement to not report the write-off to the credit reporting bureau.

The Dave Ramsey approach works very well if you can keep up the discipline for a long period of time.

I never allow a client to use home equity to pay off other debt. You must first develop the discipline to live within your means and then learn how to save, invest and live below your means. It is the only way to improve your personal balance sheet.

Using home equity before the lesson is learned generally results in no equity and a return of the credit card debt as the spending pattern has not changed.

Good luck

[Chocaholic]

Here's an idea. Why not pay them what you owe them? Is there a reason you feel entitled to get some of your financed stuff for " free"...while the rest of us actually pay for what we buy?

Don't mean to be condescending, but I'm amazed at how "matter-of-fact" your request is being received.

[id10t]

Originally Posted by Chocaholic

Here's an idea. Why not pay them what you owe them? Is there a reason you feel entitled to get some of your financed stuff for " free"...while the rest of us actually pay for what we buy?

Don't mean to be condescending, but I'm amazed at how "matter-of-fact" your request is being received.

Not wanting to put words into scottmandue's mouth, but one of the cards I negotiated with (and payed off on the spot) I hadn't made a charge on in over 2 years... I had credit open. It helped probably that I had a second account with them that was in trouble.

[mikester]

What about a simple debt consolidation loan? Lower interest rates typically. Lower overall payments most likely and you meet the obligations you made when you used the cards.

[RANDY P]

Its a defacto BK- you are forcing the creditor to renegotiate terms after the fact.

these negotiation services exist to receive a portion of the money you agree to pay the CC companies- the creditors know that if you were inclined you could file BK and they get nothing out of the deal.

You see, CC companies fund these debt negotiation deals hoping you do that instead of BK.

2nd thing, avoid sticking all the debt under a consolidation loan tied to the house, not if you value the house that is.

Easier to tell the back to go cram it, and you get to keep your house if you keep them seperate.. You put it under the house you have to pay it off, or lose the house. Take advantage of any Homestead laws (I think CA has such a thing, unsure)

just the way I'd do it...


rjp

[aigel]

Originally Posted by genrex

I think she uses a debit card now, which means she's kinda limited in what she can do.

So basically it's not a good thing.

_

What can't you do with a debit card that a credit card does? Get an advance? That may actually be a very good thing for someone that got into a hole using CCs. Getting used to only spending what you actually have in the bank is a really good idea.

As a matter of fact, my advice to the OP is to quit using CCs altogether and switch to cash and one debit card on one account for items that can't be bought with cash. Reduce your spending to where you can start paying off the CCs, starting with the one that carries the highest interest.

I would also recommend to see what can be sold off for paying towards the CCs. Any extra cars, guns, watches, jewelry that can be cashed in?

G

[74-911]

Originally Posted by motion

Grrrrrrrrrrrrrr. A great example of what's wrong with this world these days.

+1

It seems "personal responsibility" is in the eye of the beholder...

[Rot 911]

I'm with the "personal responsiblility" camp. You said you aren't behind payments. You bought the stuff. Why do you feel like you now shouldn't have to pay for it.

I don't care for Dave Ramsey, but he does have some good advice for paying off credit cards. Pay off the smallest debt first, then the next, then the next.

[Bob Kontak]

Originally Posted by Chocaholic

Don't mean to be condescending, but I'm amazed at how "matter-of-fact" your request is being received.

Welcome Choco - You just came out from under the rock you have been under since 2007.

You have had a constant job the last five years, right? How can I tell? From your condescending statements and questions.

Do you have any idea what the unemployment rate is for men over 40? The real rate? Bad stuff has been happening.

I was like you and used to shoot righteous statements from my hip until I had to eat me some humble pie.

[masraum]

We looked into it at one point and decided it sounded like a very bad idea. Yes, as mentioned, for the CC co to want to negotiate, you have to stop paying on all of your credit cards and get way behind (means the hassle of many, many collections calls).

Not only that, but when they "write off" some of your debt, for instance you owe $20k, but they settle for $5k, you may get a 1099 for the other $15k which would bump your income tax.

Not a good idea. I'd avoid it if at all possible.

[GH85Carrera]

About 25 years ago I went to a local free credit counseling place. I showed them my debt load and the guy said I should just go into bankruptcy. I rejected that idea. I owed the money. The one thing that came from the meeting was I got a list of phone numbers. Remember this was long before the internet.

I called every company that I owed money to and discussed it with them. The only card I kept active was my American Express. I knew I HAD to pay it off evey month but if I had some emergency I would have 30 days to pay it off. I had the major parts paid off in three years. It took me almost 7 years to get out of debt. I will never go into debt for just stuff again.

[Chocaholic]

Bob K,

Yes, I like my rock. Here's why it has me in a cranky mood over this. The OP didn't indicate unemployment or any inability to pay. In fact, he said he pays his bills on time.

Perhaps you know more about his personal situation than he indicated here (or perhaps I missed it).

Assuming no extensive hardship beyond normal over-spending, I stand by my "condescending" position.

Back to my rock now!

[Bob Kontak]

Originally Posted by Chocaholic

Yes, I like my rock.

Doh. OK - I see your point. One thing to be sucking wind and another to be inconvenienced by debt.

Meesa will eat s*it and say I am sorry. And eat the rock statement.