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-   -   "Do you have more than $10,000 in credit card debt" (http://www.homebrewtalk.com/f19/do-you-have-more-than-10-000-credit-card-debt-156785/)

Mike35673 01-13-2010 10:13 AM

"Do you have more than $10,000 in credit card debt"
 
I swear on a typical 4 hour drive, I will hear 5 of these commercials on the radio, all from different companies. Has anyone ever tried these things?
I'm assuming it's a scam......the commercials make me furious with their veiled lies about it being a "government buyout" and "the credit card companies are being ordered to clean up their books"

I would think if it is THIS easy for a company to just spring up like a weed to help these poor saps, they could probably do it alone. Anyone have insight?

janzik 01-13-2010 10:44 AM

These are debt negotiators/consolidators/settlers. Basically, what you do is you stop paying your credit cards (if you haven't already, for whatever reasons), you send them a lump sum (if a final number was settled upon, or monthly payments, it varies) and they may or may not pay them. They call the cards and "settle" your account for a percentage of what you owe. This will damage your credit, of course. If you are making this call, it's probably already screwed up anyway. Assuming everything is done "right" then your card companies list your account as "paid as settled" or some other term. Which may or may not hurt you in the future for buying a house or whatever

I would definitely suggest visiting http://www.daveramsey.com/ before you even consider debt settlement.

<edit>Yes, you can do the same thing that they are doing, with the same ramifications</edit>

smitty2324 01-13-2010 10:44 AM

Basically, they tell you to stop paying your credit card bills and to start paying them. They will then proceed to not pay your credit card bills for a period of at least a year, during which time you will begin to get calls from collectors and your credit will be shot, but the credit card companies may now be open to negotiation.

After this, the idea is that they begin to negotiate a settlement on he debt for you. This is the part which is open to debate, b/c they may fail and many of these companies just keep the money that you have paid them and never do a thing. They're very good at collecting, but not so good on the follow-up.

Bottom line is "yes", you can do it yourself, but you really don't want to. The point that you have to take it to is way beyond the stress level of having a difficult amount of debt. Tear up those credit cards and live like a pauper for a couple of years. The freedom is worth the cost.

Mike35673 01-13-2010 11:56 AM

I have no interest in doing this, I was just curious what the scam is.

WIP 01-13-2010 12:25 PM

Yes, some are horrible for your credit. If you do some research, you can find a few that HELP your credit.

I got in a bit over my head when I lost my job. I did some research and came up with a company that DOESN'T negotiate your debt, but they do lower interest rates. The trick is never missing a payment. If the consolidator misses one, pay it and call the consolidator to fix the problem. The company I went through didn't save me any money monthly that was noticeable, but they prettey much froze my interest and I had it all paid off (12k) in 2 years. My credit was crap when I started, but it slowly went up until I paid the last payment, now it is great. The good thing was the day I paid it off, I suddenly had $500 a month extra that I used to pay off the wifes car. Now we are putting approxamately $850 a month in savings.

Moral of the story, do research if you need help paying off your credit cards. Look for reviews of the companies etc. If you realy need help, they can change your life for better or worse, it is up to you. I will NEVER have credit debt again. I now have one credit card with a $2500 line for emergencies only.

gratus fermentatio 01-13-2010 12:33 PM

Quote:

Originally Posted by Mike35673 (Post 1805963)
I swear on a typical 4 hour drive, I will hear 5 of these commercials on the radio, all from different companies. Has anyone ever tried these things?
I'm assuming it's a scam......the commercials make me furious with their veiled lies about it being a "government buyout" and "the credit card companies are being ordered to clean up their books"

I would think if it is THIS easy for a company to just spring up like a weed to help these poor saps, they could probably do it alone. Anyone have insight?

Scam city! I friend of mine went to one of these to get some help getting out of debt & they kept his 1st payment & did NOTHING to help him, not so much as a phone call to his creditors. So he climbed out of debt all on his own; a very long & difficult process, but he did it. These scam artists should have all their assets siezed & be pilloried in the town square. Regards, GF.

Hinermad 01-13-2010 01:15 PM

Keep in mind that not only do these debt settlement companies wreck your credit rating, the amount that you don't pay to your creditors because of the settlement is taxable as income. (I found that out when I settled my late wife's estate. Bummer, that.)

The service WIP talks about is a debt management service. I've used one myself, to the tune of almost $50k. They do negotiate with your creditors but what they work out is a repayment plan that you can live with. They help you set up a budget to cover your living expenses (and they don't squeeze you for every penny; they take your word for how much you need for gas, groceries, and everything else) and see how much you have left over every month. Then they contact your creditors and ask if they'll waive or reduce their interest charges and stop making collection calls in exchange for you 1) paying an agreed amount every month and 2) not charging anything else until everything is paid.

Most creditors prefer this because they know they'll get back the money they loaned you. With a debt settlement they'll lose part of that. Also, when you complete the program your credit rating is a lot better off - all it shows is late payments instead of settled debts.

Dave

hal2814 01-13-2010 02:48 PM

Quote:

Originally Posted by Hinermad (Post 1806141)
the amount that you don't pay to your creditors because of the settlement is taxable as income. (I found that out when I settled my late wife's estate. Bummer, that.)

I was looking for this and if it wasn't there I was going to post it myself. If you settle for less than the amount you owe, you WILL get a 1099 for the difference and you will owe the IRS roughly 30%-40% the amount on the 1099. And the IRS can do more damage to your finances than any mere lender can do. If anyone here is negotiating some sort of settlement, consider if you're better off not paying the debt or settling for a smaller amount and then owing the IRS about 1/3 of the difference.

riverfrontbrewer 01-13-2010 03:21 PM

Hal- why would you owe the IRS "30-40%"? If it is taxed to you as income it should be taxed at whatever your effective rate is.

dwarven_stout 01-13-2010 03:46 PM

Quote:

Originally Posted by DurangoHomeBrewMafia (Post 1806467)
Hal- why would you owe the IRS "30-40%"? If it is taxed to you as income it should be taxed at whatever your effective rate is.

I'm not 100% on this, but I believe you get a 1099 when you settle any debt and in doing so save over $600. The difference between your amount of debt and the amount of your settlement is then treated as a capital gain that is taxed at a higher marginal rate.

Again, not 100% on that, but I had a buddy go through that a while back and I think that's how it went down.


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