Credit card debt reduction programs to avoid BK?

[bentbad]

Hi,
We are struggling, like everyone these days so it seems.
My wife wants us to go into one of the credit card debt reduction programs, or file BK.

I have been working my a** off trying to keep my head above water but it's getting old, and a layoff looms.

Talked to a lawyer once about BK and he advised it, but isn't it in his best interest for me to do so?

Are the credit card debt negotiation programs for real? I've never talked to anyone who had complete success with them and some have lost a lot of money.

CCCS wants more then I can afford to do any good.
I guess that's my real question at this time, are debt negotiation programs a viable alternative to BK, or is it just another trap?
Thanks.

[DivorceRuinedMe]

TRAP. Stay away from them. They take your money and lots of times don't even pay your creditors on time or at all. This makes going to one of those places all for naught and most people that have gone that route end up in BK anyway.

[HHM]

CCCS wants more then I can afford to do any good.

I would think that statement answers your question. Even if they are legitimate, if you cannot afford the payment they are asking for, then of what use is it?

On the one hand, these programs (at least some of them) are for real and they are legitimate. BUT, they are NOT an alternative to BK. These programs are more of a financial management tool. Most people who go into these programs end up filing BK anyway. Debt management programs are only for those have a become "a little bit" over extended whereby the reduction in interest on the payments brings them back to even or puts them in the black.

If BK is a viable option, then its probably too late for debt management to work.

[bentbad]

[Lindsay]

I think it depends on your income, assets, and debt ratio. We tried alot of things before we decided bankruptcy was our only option. We tried the debt reduction systems, refinanced our home to pay a portion of the debt, ect. The debt just ended up getting bigger and bigger. The stress has been beyond belief in our home. I didn't want the kids to see how stressed I was so I started spending alot of time in the bathroom with the door locked, crying. And taking valium because my nerves were so bad. This is very counter productive and I wish we had just filed years ago. I've gotten so many gray hairs in the past three years that I've had to start dyeing my hair a few months ago. I'd get myself so worked up that I'd have chest pains and get scared and take aspirins just in case.

Sometimes you are just truly bankrupt and nothing else will help. We owe $90,000 on a house appraised at 92,000. We owe $14,000 on a vehicle with a NADA value of $17,000. We have credit card debts of $80,000. There is nothing else, I don't even own a wedding ring. Our household belongings consist of old furniture and 2 computers, one six years old and one Dell that is 2 years old. My husband makes well under the medium income and I go to college full time and I've sold on eBay for 9 years. It used to be good and we made a good income, but then things started going sour and I kept beating a dying a horse. So bankruptcy really is our only option.

I guess the best advice I can give is to not prolong the agony with credit counseling or debt companies unless your debt is relatively small and you have alot of assets. I see now that we were bankrupt three years ago and I just refused to admit it. The past years were the most horrible in my life, borrowing from Peter to pay Paul, while the debt kept getting bigger and bigger each month.

Those debt reduction companies have great advertisements of happy people out of debt after using their services. I'd love to see some statistics on how many people with high debts actually end up filing for bankruptcy instead of completing their debt reduction plan.

[ssdsco]

I was considering debt negotiation until I found out my 401k was exempt in bankruptcy and I passed the means test..

If you're considering debt negotiation, from the research I did I'd recommend finding an attorney that does this. From what I understand the attorney would send a letter to each of your creditors with a starting offer of 20 cents or so on the dollar in the hopes of reaching a final agreement with all your creditors for 50 cents or so on the dollar. The attorney would also make sure all the paperwork was done so none of your creditors could come after you down the road and would negotiate creditor comments on your credit report.

A big downside to this is any debt that is for forgiven is taxable.

I never actually did this so take my comments with a grain.......

[HHM]

Debt reduction programs tend to be more fraud than real.

After you factor in the cost of the program, the injury to your credit, the cost of paying off the creditors, and the income tax liability, Debt negotiation is rarely an option for anyone.

The only people that should consider debt negotiation are those with high value, non-exempt assets, and a relatively high income.