Questions about Debt Negotiation Companies

[Drake]

My husband and I have unsecured debt that we feel we are never going to get out of even paying more than our minimums. This debt came during a time of our lives when income was low and now we are making almost twice as much, but by paying more than the minimum each month we look at the following statement and we don't even see a dent made. We have decided that in order to save for our future and that of our children we have to get rid of this debt!! We have briefly looked into some of our options and one of them is to go with [company name deleted by mod]. They claim they will negotiated our balances down and through payments we make monthly to an account will eliminate our debt in 36 months. They have been upfront about the fees and what is expected of us each month and it is very doable, but my fear is what will happen to our credit by going with a program like this. They did say our credit will worsen over the next 6-9 months, but slowly work its way back up and end up better than when we started. Any info you can share will greatly help!!

[lrprn]

My husband and I have unsecured debt that we feel we are never going to get out of even paying more than our minimums. This debt came during a time of our lives when income was low and now we are making almost twice as much, but by paying more than the minimum each month we look at the following statement and we don't even see a dent made. We have decided that in order to save for our future and that of our children we have to get rid of this debt!! We have briefly looked into some of our options and one of them is to go with [company name deleted by mod]. They claim they will negotiated our balances down and through payments we make monthly to an account will eliminate our debt in 36 months. They have been upfront about the fees and what is expected of us each month and it is very doable, but my fear is what will happen to our credit by going with a program like this. They did say our credit will worsen over the next 6-9 months, but slowly work its way back up and end up better than when we started. Any info you can share will greatly help!!

Frankly, the experiences of our members has not been good with debt negotiation or debt management companies.

The major problems are:
- It's impossible for these companies to get every single one of your creditors to cooperate
- The creditors that don't cooperate often will use your going with one of these companies to increase your APRs to 25-30% or more, effectively buring you even further in debt
- If the company does manage to get your creditors to renegotiate your balance, whatever is taken off the balance the IRS considers income and will send you a 1099 to pay taxes on it.
- When you send in your monthly payment, over time you will see little coming off what you owe. Most of it is going to the company for "administrative purposes".

Bottom line - in my experience, debt management and debt renegotiation at best delay the inevitable - filing for bankruptcy. At worst, these actually can accelerate the financial downward spiral as increases in APRs are triggered and late fees pile up as you can't make even the minimums.

Don't waste your time and money. Instead make 3-4 appointments for free initial consultation visits with bankruptcy lawyers in your area. Find out where you stand now. Most lawyers say they wish debtors would have come to them long before they do. Much stress and often a lot of cash given to these debt management companies could be saved.

[BKTango]

I have had personal experience with a debt negotiation company, following a debt management company. While there are some reputable companies out there, most times people who are involved end up in bankruptcy anyway. If you do a quick search on debt negotiating and similiar terms in the forums you wil find numerous posts including my own regarding these companies. Most of the posters who have been invloved in these companies didn't have a very good experience with them. Your credit will take a huge hit and depending on whether this is the type of company that tells you to quit making your credit card payments in order to fund your account to negotiate settlements with...it will take an even bigger hit. This is why they tell you your credit will worsen over the next 6-9 months. Because that is the time the creditors will charge off your account and third party scumbag collecting and threats of lawsuits and actual lawsuits usually begin. You will have charge offs and over deliquent accounts on your report for 7 years. Yes, over time your credit will improve. However you have to judge whatever is best for your situation. With a debt negotiating company, not all creditors will work with them even when they tell you they will. You will get harassed by the creditors and like in our case and in the case of several posters you can get sued by your creditors regardless of you trying to work with them. It's a tough decision, in the end after a few years with these type of companies and several lawsuits later we decided it would be best to go ahead and file bankruptcy. With BK you are under the protection of the automatic stay, therefore no creditor can contact you, Depending on whether you would qualify for a ch.7 , you would be done in 4 months, a ch. 13 usually 5 years. Our credit improved greatly after our bankruptcy and we were able to retain our home, cars, and all of our possessions. Look into your situation, find out the best way for your family. Read up on the bankruptcy laws for your state. If you choose to go with the debt negotiation company be sure you understand what you are really getting into. Good luck to you and your family.