If you are like a lot of people, you no longer have access to the easy money your home created for the last few years. With that spigot of cash turned off, many people are turning to their credit cards to survive. The problem with that is the more you use them, the more you become a slave to them. Ultimately, it leads to a death spiral where you start to fall behind, and are unable to catch up. If that is the case, you might want to find out how Debt Settlement could help you.
With the mortgage bubble bursting, many people no longer able to extract equity out of their homes. Lenders have significantly tightened their standards, and the liar loans, where you did not need documentation, are over. Many people have switched over to using their credit cards to make ends meet. While this is a temporary fix, it could come back to haunt you.
Credit card companies are the legalized Mafia, and their lending practices make Tony Soprano jealous. Miss one payment and your interest rates could shoot up to over 30%. Go over your credit limit, and they tack on up to $49 per month. Soon, your minimum payments are mostly interest, and you realize you will never pay off the debt in this lifetime.
Maybe you or a spouse became ill, was laid off, or had to take a job with a cut in pay. Whatever your hardship, you come to realize that you either can't, or don't want to pay the credit card companies anymore. At this point you have a few options; and they all will hurt. Besides bankruptcy and Consumer Credit Counseling (CCC), which will hurt for ten to thirteen years, there is a little known process called Debt Settlement that can have you out of debt in two to four years, and can lower your monthly payments if you need relief.
Debt Settlement is a hardship program, and we call it chemotherapy for your debt. It is a process where a mediator, or neutral party, helps bring about a peaceful compromise between you and your credit card companies. By showing them that you are in a hardship, it is possible to get the credit card companies to accept 50% or less of it as full and final payment. Each creditor settles differently, and the older the debt is, and the worse your hardship the less it is worth.
Then, a payment plan is set up where you make one monthly payment to pay it back over two to four years. If you have high interest rates, and you have no problem making the payments, then you could finish in about two years. If you have problems making the payments because your income is too low, your payments could be lowered twenty to forty percent and you would be finished in three to four years.
There are three steps to making Debt Settlement work, though you must realize who we are dealing with here, big computers, and you are a number to them. The only way they will work with a mediator is if the credit card companies fear they will not get money from you.
Step 1:
You have to stop paying the creditors, not a penny, though we can't tell you to do that, you have to make that decision by yourself. What will happen when you stop paying is the computers will flag your account as a statistical possible bankruptcy. They will transfer you to a different department called loss mitigation, or recovery; those are the people the mediators work with. At this point, the credit card companies want to "recover" whatever they can, write off the losses on their taxes, and loan the money to the next victim.
Step 2:
Retain a competent mediation firm to represent you. The first thing that needs to be done is to issue cease & desist orders to the creditors. This stops the calls, as they can't call you if you put your request to stop calling you in writing. Congress passed a law called the Fair Debt Collection Practices Act, and you do have some rights regarding harassment by the creditors, one of them is they must stop calling. They can be sued for $1,000 a call if they don't stop. Any letters they send you, forward to your mediator to respond for you to take you out of the loop.
Step 3:
Instead of paying them every month, you put the money in a secure trust to accumulate. It normally takes four to eight months to save up the money to settle an account. Once you have the funds saved, your mediator can settle your first account.
Let's say you have a $5,000 credit card; you need to save up $2,500 in your trust before you can settle. Once you do, the mediator will get the creditors to take the lower amount as full and final payment, and they will notify you in writing they accept it. That's when you have your trust company send them the money, and then you are done. You then go after the next one, one at a time.
Then, the mediator will get the creditors to agree to clean up your credit report within 30 days after they receive their money, and change it back to a paid account. They normally won't do it for you on your own, however, the mediators work with many customers, so they get the credit card companies to do things they won't do for you.
Thirty days after the end of the program, you run your credit report and double check. If there is anything left over that would hurt you from getting new credit, that's when you contact the largest credit repair company in the world. They are the best, and they are attorneys, and they go through a dispute process with the 3 credit bureaus, and in about 2-3 months, hey can get line items removed s for about $200. You can do it on your own, though they are attorneys and they are the best.
That's the good, the bad, and the ugly about Debt Settlement. While it is a hardship program, and it affects the credit for 2-4 years, it's usually a much better option than bankruptcy or consumer credit counseling for the right person.