Do Not Hire a Debt Settlement Firm to Eliminate Credit Card Debt
Debt settlement firms expect you to have at least $10,000 in credit card debt. They expect you to pay them $1500-2000 or more of that $10,000 in fees before they settle your debt. They also expect you to stop paying your credit card and give those monthly payments to them for their fees and your eventual lump-sum settlement all for their promise to eliminate credit card debt.
What happens if they cannot settle with your credit card bank? What happens to the money you have paid them? What happens to your credit card account that is in arrears? What happens to your credit rating? How long will it take you to save $7000, $2000 for the debt settlement firm and $5000 for a 50 percent lump sum settlement?
To bank $7000 you will need to save $500 per month for 14 months. At that rate, it will be over a year before you can settle that $10,000 of debt for 50 percent. The credit card companies typically charge off unpaid debts after six months. They often sell those charged-off debts within the year.
That means your debt is owned by a junk debt buyer before the debt settlement firm has settled it. It also means the bank has no motivation to remove that debt’s bad mark on your credit report and that the negative listing will be there for seven years.
The junk debt buyer will make an effort to collect the debt, and you need to be ready for that, according to the Credit Card Debt Survival Guide. On the other hand, if you are unaware and waiting for the debt settlement firm to finish what they started, you could be vulnerable to a debt collection attorney.
So, your debt is not settled. Your settlement fee is spent. You have debt collection problems. The promise to eliminate credit card debt did not happen. And, your credit rating is below par. Just maybe you still have $5000, but that is only if the settlement firm escrowed it with a third-party.
You are invited to learn about the many strategies to eliminate credit card debt; some for those who can pay, some for those who cannot pay. Read all about them in the 230-page Credit Card Debt Survival Guide at www.credit-card-debt-survival.com
Tags: credit card debt, debt collection, debt settlement, Personal Finance
One Comment
This is a great article on the potential pitfalls of hiring debt settlement firms. The truth is, it is like flipping a coin, and when you are dealing with money, it just isn’t worth it. You can consider credit counseling if you are in a deep whole, as those companies keep your accounts current and try to drive down your interest rates. Or, you can follow the excellent debt survival guide and start driving that debt down!