In a follow-up to our post on Nationwide Asset Services, New York Attorney General Andrew Cuomo filed a lawsuit against Nationwide and Credit Solutions of America last week.
The two debt negotiation firms are being charged with fraudulent business practices and false advertising.
Credit Solutions of America has signed up 18,000 customers in New York State since 2004, earning $17 million in fees, but has settled debts for less than 2,000 of its customers. At its height, Credit Solutions had 200,000 customers with a combined debt of $2.25 billion. Its policy of charging a fee in advance of 15 percent of the total debt drew the attention of state regulators.
Credit Solutions had to refund $700,000 to customers in South Carolina in 2007 after violating the state’s credit counseling laws. It had to pay $588,000 to Idaho customers in 2008 for operating in the state without a license. In March, the company was sued by the Texas attorney general for fraud.
Nationwide Asset has signed up 1,981 customers since 2006, yet has settled debts for only 64 of them.
Andrew Cuomo issued the following statement:
“These companies claim to be the light at the end of the tunnel, but time after time they have shown that they only add to the burdens of Americans dealing with debt,”
Cuomo is initiating a massive investigation into the debt settlement industry, which has grown dramatically as the economy has worsened. He has also filed 15 subpoenas against other major debt negotiation firms in the past month.
Showing posts with label debt negotiation. Show all posts
Showing posts with label debt negotiation. Show all posts
Sunday, May 31, 2009
Wednesday, May 27, 2009
Consumers Beware: Nationwide Asset Services
Nationwide Asset Services, based in Phoenix Arizona, has received a total of 53 complaints with the Better Business Bureau over the past 36 months. Founded in 2001, consumer complaints have included billing or collection issues, contract disputes, problems with refunds and overall inferior customer service.
In defense of Nationwide Asset, all of their complaints with the BBB have been resolved. However, if you are considering working with this company you should take a moment to address these past issues with them to make sure they have improved their service.
Nationwide Asset Services, Inc.
1990 W. Camelback Road Suite 215
Phoenix, AZ 85015
Phone: (888) 837-2930
Contact: Karen Bradley - Customer Service Manager
Have you worked with Nationwide Asset Services? What was your experience?
In defense of Nationwide Asset, all of their complaints with the BBB have been resolved. However, if you are considering working with this company you should take a moment to address these past issues with them to make sure they have improved their service.
Nationwide Asset Services, Inc.
1990 W. Camelback Road Suite 215
Phoenix, AZ 85015
Phone: (888) 837-2930
Contact: Karen Bradley - Customer Service Manager
Have you worked with Nationwide Asset Services? What was your experience?
Monday, March 23, 2009
Save Money or Pay Debts?
In today's dismal economy, many people are facing the choice of paying their or saving money in a rainy day fund. When faced with unemployment and the rising cost of living, paying monthly credit card debts is becoming more of a luxury than a certainty for many consumers.
The solution to this dilemma depends on your personal situation. If you have a healthy savings account, and feel that you could weather the storm if you were to lose your job, then you are in a position to pay your debts without worry.
However, if you are living paycheck to paycheck and have uncertainty in your employment, then creating an emergency savings fund is more important that paying off your debts.
You have two choices in this situation: pay the minimum balances on your cards and stash all your extra cash in a savings accounts or stop paying your credit cards completely and consider debt negotiation.
Both choices have pros and cons. If you choose to pay the minimum amounts on your cards, your balances will not really diminish and you run the risk of incurring late and over-limit fees. However, your credit score will likely remain in tact and you will continue to have good relationships with your creditors.
If you choose to stop paying your credit cards all together and enter a debt negotiation program, your credit will be immediately and severely damaged and you run the risk of entering collections and incurring charge-offs. However, on the positive side, you can start saving all of the money that you would normally use to pay credit card debt and build a savings that you can later use to negotiate with your lenders and try to obtain substantial reductions in your pay-off amounts.
Also, keep in mind that tax debts are in a league all their own, and you should not stop paying these debts without consulting an attorney first. The IRS has the ability to gain control of all of your bank accounts and assets, so you should not stop paying them without obtaining legal counsel.
Are you considering debt negotiation? If so, leave us a comment.
The solution to this dilemma depends on your personal situation. If you have a healthy savings account, and feel that you could weather the storm if you were to lose your job, then you are in a position to pay your debts without worry.
However, if you are living paycheck to paycheck and have uncertainty in your employment, then creating an emergency savings fund is more important that paying off your debts.
You have two choices in this situation: pay the minimum balances on your cards and stash all your extra cash in a savings accounts or stop paying your credit cards completely and consider debt negotiation.
Both choices have pros and cons. If you choose to pay the minimum amounts on your cards, your balances will not really diminish and you run the risk of incurring late and over-limit fees. However, your credit score will likely remain in tact and you will continue to have good relationships with your creditors.
If you choose to stop paying your credit cards all together and enter a debt negotiation program, your credit will be immediately and severely damaged and you run the risk of entering collections and incurring charge-offs. However, on the positive side, you can start saving all of the money that you would normally use to pay credit card debt and build a savings that you can later use to negotiate with your lenders and try to obtain substantial reductions in your pay-off amounts.
Also, keep in mind that tax debts are in a league all their own, and you should not stop paying these debts without consulting an attorney first. The IRS has the ability to gain control of all of your bank accounts and assets, so you should not stop paying them without obtaining legal counsel.
Are you considering debt negotiation? If so, leave us a comment.
Wednesday, February 25, 2009
AMEX Paying Customers to Pay off Balances
American Express, in a move to lessen their liability load, is offering select customers $300 to pay off their remaining balance and close their card accounts. This is not surprising, considering the extreme moves AMEX took in 2008 to scale back borrowers' credit lines.
A number of small business card holders reported that AMEX dramatically reduced their lines of credit in 2008. One small business owner reported his credit line being reduced from $165,000 to $5,000 in one month, in spite of the fact that he never had any delinquencies and had been in good standing for the entirety of his account.
AMEX is running scared in these days of financial turmoil. And ironically, they are punishing small business owners, whom the Federal government desperately needs to keep injecting capital into the economy.
One of the major problems resulting from the collapse of the credit markets is that both small and large businesses are being forced to scale back their operations and fire employees. This creates a domino effect of people losing jobs and not being able to spend money, which creates even worse economic conditions. Rather than indiscriminately punish card holders who have been responsible and paid their debts on time, creditors like AMEX should be thinking of ways to reward small business owners that have historically been good customers.
Do you have an American Express card? Have your lines of credit been reduced? Leave us a comment.
A number of small business card holders reported that AMEX dramatically reduced their lines of credit in 2008. One small business owner reported his credit line being reduced from $165,000 to $5,000 in one month, in spite of the fact that he never had any delinquencies and had been in good standing for the entirety of his account.
AMEX is running scared in these days of financial turmoil. And ironically, they are punishing small business owners, whom the Federal government desperately needs to keep injecting capital into the economy.
One of the major problems resulting from the collapse of the credit markets is that both small and large businesses are being forced to scale back their operations and fire employees. This creates a domino effect of people losing jobs and not being able to spend money, which creates even worse economic conditions. Rather than indiscriminately punish card holders who have been responsible and paid their debts on time, creditors like AMEX should be thinking of ways to reward small business owners that have historically been good customers.
Do you have an American Express card? Have your lines of credit been reduced? Leave us a comment.
Tuesday, February 24, 2009
The Recession is a Good Time to Re-Negotiate Debt
In spite of the fact that many credit card companies have been increasing interest rates and significantly reducing credit lines, the recession is proving to be a great time to re-negotiate your credit terms.
Credit card companies are desperate these days and will go to great ends to keep you as a customer. Keeping in constant and direct contact with your creditors could end up saving you a great deal of money.
The first step is to write down what you want; lower interest rates, waived late fees, and even settling card balances for less than you owe. Next, call your creditors and tell them what you want. At the end of the day, you have absolutely nothing to lose and everything to gain.
For example, Bank of America, among the biggest card issuers, stepped up efforts to waive fees and lower interest rates for distressed cardholders in 2008, spokeswoman Betty Riess said. It modified nearly 700,000 credit card loans last year. [sun-sentinel.com]
"We would evaluate any pricing decision based on the individual customer's performance with us as well as external credit risk factors," she said. "We understand that many of our customers are struggling to meet their financial obligations and our objective is to help customers who are experiencing financial hardship."
If you are struggling with credit card debt, pick up the phone and call your creditors today. Every moment you wait is another dollar you lose.
Have you re-neogiated your credit card debt recently? Leave us a comment and tell us about your experience
Credit card companies are desperate these days and will go to great ends to keep you as a customer. Keeping in constant and direct contact with your creditors could end up saving you a great deal of money.
The first step is to write down what you want; lower interest rates, waived late fees, and even settling card balances for less than you owe. Next, call your creditors and tell them what you want. At the end of the day, you have absolutely nothing to lose and everything to gain.
For example, Bank of America, among the biggest card issuers, stepped up efforts to waive fees and lower interest rates for distressed cardholders in 2008, spokeswoman Betty Riess said. It modified nearly 700,000 credit card loans last year. [sun-sentinel.com]
"We would evaluate any pricing decision based on the individual customer's performance with us as well as external credit risk factors," she said. "We understand that many of our customers are struggling to meet their financial obligations and our objective is to help customers who are experiencing financial hardship."
If you are struggling with credit card debt, pick up the phone and call your creditors today. Every moment you wait is another dollar you lose.
Have you re-neogiated your credit card debt recently? Leave us a comment and tell us about your experience
Sunday, February 1, 2009
Negotiating IRS Debts
People often wonder if it is possible to negotiate IRS debts in the same way that you can credit card debts. The answer is yes and no. You can directly contact the IRS and attempt to negotiate a payment plan with them, which they are usually very flexible about. However, if you are looking to re-negotiate your total debt and pay significantly less than you owe, this is more difficult and most people are turned down by the IRS. If you try to take action without an agreement in place and completely stop paying your IRS installments, the IRS will likely garnish your income, place a hold on your bank accounts and re-posses your personal effects. Unsecured debtors, like credit card companies, cannot take these sorts of actions. At most, they can file a law suit, which most companies try to avoid because it is costly and time consuming.
If you do decide to negotiate your IRS debt, you should definitely consult an attorney first. If you owe over $10,000, you may qualify for an "Offer In Compromise". Visit the IRS website for more information. The IRS may accept less than you owe based on your ability to pay. They take a look at everything you own and your future earning power to determine if you can pay or not. Two things to remember are that the IRS has up to two years to decide whether or not to accept your offer and they say "No" over 85% of the time. If after researching the Offer In Compromise, you believe that you may qualify, contact a CPA or EA in your area that has experience with these.
If you do decide to negotiate your IRS debt, you should definitely consult an attorney first. If you owe over $10,000, you may qualify for an "Offer In Compromise". Visit the IRS website for more information. The IRS may accept less than you owe based on your ability to pay. They take a look at everything you own and your future earning power to determine if you can pay or not. Two things to remember are that the IRS has up to two years to decide whether or not to accept your offer and they say "No" over 85% of the time. If after researching the Offer In Compromise, you believe that you may qualify, contact a CPA or EA in your area that has experience with these.
Thursday, January 29, 2009
Capital One Increases Rates by 7%
Capital One, a credit card company that primarily targets low-income borrowers, has increased its interest rates by a whopping 7%.
This will result in some cardholders paying 26.01% on purchases and 29.94% on cash advances, depending on their credit rating.
Capital One defends the rate increase by saying:
“Changes in the credit and lending environment mean that it is now costing us more to lend, and so we are increasing the standard interest rates for some of our customers."
This does not seem like a logical rationale, to further punish customers that are already struggling to make payments and are likely facing a host of other issues, such as unemployment and foreclosures.
Capitol One's decision is yet another reason for consumers with large amounts of debt to consider entering a debt negotiation program and avoid paying unfair and excessive interest rates.
Thanks to The Times UK for the update.
This will result in some cardholders paying 26.01% on purchases and 29.94% on cash advances, depending on their credit rating.
Capital One defends the rate increase by saying:
“Changes in the credit and lending environment mean that it is now costing us more to lend, and so we are increasing the standard interest rates for some of our customers."
This does not seem like a logical rationale, to further punish customers that are already struggling to make payments and are likely facing a host of other issues, such as unemployment and foreclosures.
Capitol One's decision is yet another reason for consumers with large amounts of debt to consider entering a debt negotiation program and avoid paying unfair and excessive interest rates.
Thanks to The Times UK for the update.
Sunday, December 28, 2008
Americans Spend More Than They Make
At nearly $64 billion, Americans are still spending $2 billion PER DAY more than they make - on a global basis. We make up the shortfall, as we all know, with debt. Corporate debt. Government debt. And my personal favorite, private debt.
Thanks to dailyreckoning.com.au
Thanks to dailyreckoning.com.au
Wednesday, December 24, 2008
The Decision to Negotiate Debt
Making the initial decision to negotiate my debt was a big step. However, the hardest part of process was just beginning; figuring out what company to use.
There are tons of debt relief scams out there. Google “debt negotiation” and you’ll see that the paid inclusion section on the right is flooded with companies offering you immediate freedom from your debt. Many of these debt settlement services are actually looking to tie you up in long-term programs that charge non-refundable fees and never actually achieve the desired result of negotiating and eliminating the debt.
1. Speak with the debt negotiation firm by phone before signing up. You want a firm that is committed to building a relationship with you, are knowledgeable about all of the major credit card companies’ collection processes and will contact your creditors directly. The debt negotiator should act as an arbitrator on your behalf and be in constant interaction with your creditors. You do not want them to simply charge you fees and neglect contacting the creditors to resolve the debt. This seems like a no-brainer, but it is surprising by how many consumers fall into this trap.
2. Make sure that you will have a dedicated representative assigned to your case. It is important that you are able to easily reach your debt negotiator and that you know exactly who to call when you have questions or issues that arise. Don’t let your case fall into a black hole wherein you have no idea who is managing your case or how to get in touch with them.
3. Get a detailed fee schedule from the debt negotiation service before signing up. You want to know exactly how much in fees you are paying, when the negotiator’s fees are paid and what portion of your monthly payments are directed towards your debt and what is directed towards paying their fees. Avoid companies that use your money to pay their fees rather than immediately start paying your debt. Typically, debt negotiators will allocate 40% - 50% of your monthly payments to their fees and 50% - 60% to paying off your debt.
4. Make sure that the negotiator will set up a trust account in your name. A legitimate debt settlement company will arrange a FDIC insured trust account through a third party bank that is created in your name. The purpose of this account is to allow you to save money in a separate account and to give the negotiator easy access to the funds needed to settle with creditors. You will make one monthly payment into this account. Month over month, the funds will accrue in your account. The typical debt settlement trust account does not earn interest, however it is FDIC insured up to $100,000 dollars. Companies that utilize a trust account model usually have a higher success rate than those that don’t.
5. Check the debt negotiator’s history with the Better Business Bureau. Do your own due diligence on the debt negotiation firm before you sign up to see what their reputation in the industry is like. The best way to do this is through the BBB or by Googling the firm’s name to see if any consumer complaints come up.
In our next installment, we will discuss how bankruptcy compares to debt negotiation.
There are tons of debt relief scams out there. Google “debt negotiation” and you’ll see that the paid inclusion section on the right is flooded with companies offering you immediate freedom from your debt. Many of these debt settlement services are actually looking to tie you up in long-term programs that charge non-refundable fees and never actually achieve the desired result of negotiating and eliminating the debt.
1. Speak with the debt negotiation firm by phone before signing up. You want a firm that is committed to building a relationship with you, are knowledgeable about all of the major credit card companies’ collection processes and will contact your creditors directly. The debt negotiator should act as an arbitrator on your behalf and be in constant interaction with your creditors. You do not want them to simply charge you fees and neglect contacting the creditors to resolve the debt. This seems like a no-brainer, but it is surprising by how many consumers fall into this trap.
2. Make sure that you will have a dedicated representative assigned to your case. It is important that you are able to easily reach your debt negotiator and that you know exactly who to call when you have questions or issues that arise. Don’t let your case fall into a black hole wherein you have no idea who is managing your case or how to get in touch with them.
3. Get a detailed fee schedule from the debt negotiation service before signing up. You want to know exactly how much in fees you are paying, when the negotiator’s fees are paid and what portion of your monthly payments are directed towards your debt and what is directed towards paying their fees. Avoid companies that use your money to pay their fees rather than immediately start paying your debt. Typically, debt negotiators will allocate 40% - 50% of your monthly payments to their fees and 50% - 60% to paying off your debt.
4. Make sure that the negotiator will set up a trust account in your name. A legitimate debt settlement company will arrange a FDIC insured trust account through a third party bank that is created in your name. The purpose of this account is to allow you to save money in a separate account and to give the negotiator easy access to the funds needed to settle with creditors. You will make one monthly payment into this account. Month over month, the funds will accrue in your account. The typical debt settlement trust account does not earn interest, however it is FDIC insured up to $100,000 dollars. Companies that utilize a trust account model usually have a higher success rate than those that don’t.
5. Check the debt negotiator’s history with the Better Business Bureau. Do your own due diligence on the debt negotiation firm before you sign up to see what their reputation in the industry is like. The best way to do this is through the BBB or by Googling the firm’s name to see if any consumer complaints come up.
In our next installment, we will discuss how bankruptcy compares to debt negotiation.
Wednesday, December 10, 2008
Part Four – Debt Negotiation and Your Credit
Don’t trust debt negotiators that promise to eliminate your debt for cents on the dollar without affecting your credit score. The harsh reality of debt negotiation is that for the duration of your program your credit score will be extremely negatively impacted. There’s no way to avoid this. However, many people do not realize that there are several components to your FICO credit score and entering a debt negotiation program will affect each part of your credit score in a different way.
a. Payment History (35% of score) – This part of your credit is based on how good you have been at making your regular monthly payments to debtors. If you’ve slipped behind on your payments, this part of your score is already decreasing.
The following factors are taken into account:
i. Payment information on many types of accounts: This will include credit cards, retail accounts, installment loans and mortgage loans,
ii. Public record and collection items – reports of bankruptcies, foreclosures, suits, wage attachments and judgments;
iii. Details on late or missed payments and public record and collection items;
iv. How many accounts show no late payments
If you are still current on all of your payments, this part of your FICO will be immediately impacted by joining a debt negotiation program, because you will need to stop making your monthly payments. Your payment history will likely only begin to improve once you have fully completed your settlement program.
b. Amount Owed (30% of score) – This part of your credit is based on how much debt you owe. Even if you have been a good and timely payer of your debts and have a strong credit history; if you have a ton of debt then this part of your score is decreasing.
The following factors are taken into account:
i. The amount owed all on accounts
ii. The amount owed on all accounts, and on different types of accounts
iii. Whether you are showing a balance on certain types of accounts
iv. How many accounts have balances
v. How much of the total credit line is being used on credit cards and other “revolving credit” accounts.
Once you and negotiators begin paying off creditors, this part of your score will immediately improve.
c. Length of Credit (15% of score) – This is based on how long you have been using credit, both secured and unsecured. The following factors are taken into account:
i. How long your credit accounts have been established
ii. How long specific credit accounts have been established
iii. How long it has been since you used certain accounts
Debt negotiation will not dramatically affect this portion of the score - although over the long-term, these factors will have a gradual effect.
d. New Credit (10% of score) – Credit reporting agencies also take into whether or not you are trying to access new debt. Research shows that opening several credit accounts in a short period of time does represent greater risk, especially for people who do not have an established credit history.
The following factors are taken into account:
i. How many accounts you have
ii. How long it has been since you opened a new account
iii. How many recent requests for credit you have made, as indicated by inquiries to the credit reporting agencies
iv. The length of time since credit report inquiries were made by lenders
v. Whether you have a good recent credit history
Debt negotiation will not affect this component because you will not be able to open to new credit during the course of your program.
e. Type of Credit (secured vs. unsecured) (10% of score) – Your FICO score will also represent the mix of credit that you have, such as unsecured and secured debt. This factor becomes more important when you do not have a significant of other information to score.
The following factors are taken into account:
i. What kinds of credit accounts you have
ii. How many of each
Debt negotiation will not dramatically affect this part of your credit.
You can download a free guide on understanding your FICO score from myfico.com >
a. Payment History (35% of score) – This part of your credit is based on how good you have been at making your regular monthly payments to debtors. If you’ve slipped behind on your payments, this part of your score is already decreasing.
The following factors are taken into account:
i. Payment information on many types of accounts: This will include credit cards, retail accounts, installment loans and mortgage loans,
ii. Public record and collection items – reports of bankruptcies, foreclosures, suits, wage attachments and judgments;
iii. Details on late or missed payments and public record and collection items;
iv. How many accounts show no late payments
If you are still current on all of your payments, this part of your FICO will be immediately impacted by joining a debt negotiation program, because you will need to stop making your monthly payments. Your payment history will likely only begin to improve once you have fully completed your settlement program.
b. Amount Owed (30% of score) – This part of your credit is based on how much debt you owe. Even if you have been a good and timely payer of your debts and have a strong credit history; if you have a ton of debt then this part of your score is decreasing.
The following factors are taken into account:
i. The amount owed all on accounts
ii. The amount owed on all accounts, and on different types of accounts
iii. Whether you are showing a balance on certain types of accounts
iv. How many accounts have balances
v. How much of the total credit line is being used on credit cards and other “revolving credit” accounts.
Once you and negotiators begin paying off creditors, this part of your score will immediately improve.
c. Length of Credit (15% of score) – This is based on how long you have been using credit, both secured and unsecured. The following factors are taken into account:
i. How long your credit accounts have been established
ii. How long specific credit accounts have been established
iii. How long it has been since you used certain accounts
Debt negotiation will not dramatically affect this portion of the score - although over the long-term, these factors will have a gradual effect.
d. New Credit (10% of score) – Credit reporting agencies also take into whether or not you are trying to access new debt. Research shows that opening several credit accounts in a short period of time does represent greater risk, especially for people who do not have an established credit history.
The following factors are taken into account:
i. How many accounts you have
ii. How long it has been since you opened a new account
iii. How many recent requests for credit you have made, as indicated by inquiries to the credit reporting agencies
iv. The length of time since credit report inquiries were made by lenders
v. Whether you have a good recent credit history
Debt negotiation will not affect this component because you will not be able to open to new credit during the course of your program.
e. Type of Credit (secured vs. unsecured) (10% of score) – Your FICO score will also represent the mix of credit that you have, such as unsecured and secured debt. This factor becomes more important when you do not have a significant of other information to score.
The following factors are taken into account:
i. What kinds of credit accounts you have
ii. How many of each
Debt negotiation will not dramatically affect this part of your credit.
You can download a free guide on understanding your FICO score from myfico.com >
Tuesday, December 2, 2008
Part Three – A.B.C's of Debt Negotiation
Debt negotiation is a long process that requires discipline and consistency.
How Debt Settlement Works:
When you sign up with a debt negotiation firm, they contact your creditors on your behalf and attempt to negotiate your unsecured debts down to 30-50 cents on the dollar. The settlement company will require you to stop paying your creditors and save money into a bank account each month. The bank account is a FDIC insured special purpose account and is used for settling your debt. The debt settlement company will typically handle one debt at a time until all are settled. They will often try to deal with the most difficult creditors first.
Here is some useful information to be aware of when considering debt negotiation:
1. A Debt Negotiation program should take no longer than 36 Months to Complete. Beware of ones that take longer - they might just be in it for the fees and are not focused on eliminating your debts.
2. Most Debt Settlement Programs Require that Your Accounts be Delinquent before they begin negotiations. That means you will likely have to stop paying your bills and that your credit is going to suffer significantly in the short-term.
3. Most programs require that you have a minimum of $10,000 in debt. Negotiators want a significant amount of debt to work with.
4. Most debt negotiation firms will only negotiate unsecured debt. Secured debt, such as a mortgage or a car loan, can simply be foreclosed or repossessed if you stop paying. While there are some firms that will try and re-negotiate these debts for you, and some that are successful at doing so, be careful - you could get your property taken away if you stop paying your secured debt.
5. Your credit will be negatively impacted in the short term if you enter a debt settlement program. See #2.
6. Once you stop paying your creditors they have a right to file judgment against you and potentially try to drag you into court. Most creditors want to avoid filing a judgment because it is more expensive and time consuming, but it is still a possibility.
7. Creditors will continue to harass you once you enter a debt settlement program. The calls will keep coming and coming until your negotiators start settling with your creditors.
8. You should have complete control over your special purpose account that is used to settle your debts. A special purpose account is set up when you begin your debt settlement program and is used by your negotiators to settle your accounts. You should make sure that you have complete control over this account and that it is set up in your name before you sign up with a program.
9. You should review your debt negotiator’s fee schedule before signing up for a program. The debt negotiator should provide you with a precise accounting of their fees on a month-by-month basis for the entire duration of your program.
10. A debt negotiator’s fees are typically 15% - 18% of the total debt that you are settling. Law firms that settle debt will usually charge twice as much. A worthwhile debt negotiator should start accruing money into your trust account before their fees are paid. Typically, the negotiator will take a portion of the money that you pay into your special purpose account for the first 12-21 months of your program and apply it to their fees. Beware of companies that charge more than 20% of your total debt in fees, and that do not start applying money into your special purpose account until their fees are completely paid. Also, beware of companies that charge a monthly fee for the entire duration of your program.
11. You Need Contracts! All of the points discussed above should be represented in a comprehensive contract that your prospective negotiator provides you upon signing up with a program.
12. If you would like to attempt to negotiate directly with your creditors, this is also your option. And it might actually work. However, from my personal experience, most credit card companies are pretty inflexible until the situation reaches a crisis level, at which point they are typically, but not always, willing to re-negotiate.
How Debt Settlement Works:
When you sign up with a debt negotiation firm, they contact your creditors on your behalf and attempt to negotiate your unsecured debts down to 30-50 cents on the dollar. The settlement company will require you to stop paying your creditors and save money into a bank account each month. The bank account is a FDIC insured special purpose account and is used for settling your debt. The debt settlement company will typically handle one debt at a time until all are settled. They will often try to deal with the most difficult creditors first.
Here is some useful information to be aware of when considering debt negotiation:
1. A Debt Negotiation program should take no longer than 36 Months to Complete. Beware of ones that take longer - they might just be in it for the fees and are not focused on eliminating your debts.
2. Most Debt Settlement Programs Require that Your Accounts be Delinquent before they begin negotiations. That means you will likely have to stop paying your bills and that your credit is going to suffer significantly in the short-term.
3. Most programs require that you have a minimum of $10,000 in debt. Negotiators want a significant amount of debt to work with.
4. Most debt negotiation firms will only negotiate unsecured debt. Secured debt, such as a mortgage or a car loan, can simply be foreclosed or repossessed if you stop paying. While there are some firms that will try and re-negotiate these debts for you, and some that are successful at doing so, be careful - you could get your property taken away if you stop paying your secured debt.
5. Your credit will be negatively impacted in the short term if you enter a debt settlement program. See #2.
6. Once you stop paying your creditors they have a right to file judgment against you and potentially try to drag you into court. Most creditors want to avoid filing a judgment because it is more expensive and time consuming, but it is still a possibility.
7. Creditors will continue to harass you once you enter a debt settlement program. The calls will keep coming and coming until your negotiators start settling with your creditors.
8. You should have complete control over your special purpose account that is used to settle your debts. A special purpose account is set up when you begin your debt settlement program and is used by your negotiators to settle your accounts. You should make sure that you have complete control over this account and that it is set up in your name before you sign up with a program.
9. You should review your debt negotiator’s fee schedule before signing up for a program. The debt negotiator should provide you with a precise accounting of their fees on a month-by-month basis for the entire duration of your program.
10. A debt negotiator’s fees are typically 15% - 18% of the total debt that you are settling. Law firms that settle debt will usually charge twice as much. A worthwhile debt negotiator should start accruing money into your trust account before their fees are paid. Typically, the negotiator will take a portion of the money that you pay into your special purpose account for the first 12-21 months of your program and apply it to their fees. Beware of companies that charge more than 20% of your total debt in fees, and that do not start applying money into your special purpose account until their fees are completely paid. Also, beware of companies that charge a monthly fee for the entire duration of your program.
11. You Need Contracts! All of the points discussed above should be represented in a comprehensive contract that your prospective negotiator provides you upon signing up with a program.
12. If you would like to attempt to negotiate directly with your creditors, this is also your option. And it might actually work. However, from my personal experience, most credit card companies are pretty inflexible until the situation reaches a crisis level, at which point they are typically, but not always, willing to re-negotiate.
Sunday, November 23, 2008
Part Two – How to Know When You Need Debt Settlement
If the symptoms below apply to you, you should consider debt negotiation or bankruptcy.
- Your credit card balances are increasing while your income is decreasing
- You have no savings
- You can barely make the minimum payments on your debts
- You are near, at or over your credit limits
- You regularly charge more each month than you make in payments
- You are using your credit to buy necessities like food and gas
- You use one credit card to pay another
- You are already getting calls from collectors because you are late with payments
- You have been denied credit
- You’ve lost track of how much you owe to creditors
- You are charged exceptionally high interest rates
- You have four or more credit cards
- Your credit is negatively affecting your family relationships
Friday, November 21, 2008
Part One - The Decision to Eliminate Debt
The road to unmanageable debt is a long, windy and often murky journey. In my case, it started with student loans. I finished my undergraduate studies with a little less than $35,000 in debt, out of a total of $150,000 in total education costs. At the time, this seemed like a bargain, and I felt good about the Federal loans that I had taken on, which were discounted at exceptionally low interest rates.
If my debt had ended there, I would have been in good shape. However, this was just the beginning. I finished college without acquiring any unsecured debt, but after college I was flooded with a deluge of credit card offers, which I happily accepted. 10 years after finishing college and accepting my first credit cards, I found myself with more than $80,000 in secured, unsecured, government and tax debt. Whoa.
Last week, after struggling to make the minimum payments on my credit cards and realizing that my balances were not diminishing, my interest rates were sky rocketing, and my credit score was plummeting, I made the decision to negotiate with my debtors and join a debt negotiation service.
Debt negotiation, otherwise known as debt settlement, is a process aimed at getting creditors to agree to accept a reduced amount in a lump sum payment in full settlement of a debt. A debt settlement company acts on the consumer’s behalf in negotiating with creditors and settles each debt one by one. In turn, the creditor agrees to report to the credit bureaus that the consumer no longer owes them anything. For example, a client who owes $10,000 may pay as little as $4,000-$6,000 to settle the debt. Your accounts must be in arrears before the creditors will agree to negotiate.
This calculator helps you determine how much interest you will pay and how long it will take you to pay off your credit card if you make the minimum monthly payments.
If my debt had ended there, I would have been in good shape. However, this was just the beginning. I finished college without acquiring any unsecured debt, but after college I was flooded with a deluge of credit card offers, which I happily accepted. 10 years after finishing college and accepting my first credit cards, I found myself with more than $80,000 in secured, unsecured, government and tax debt. Whoa.
Last week, after struggling to make the minimum payments on my credit cards and realizing that my balances were not diminishing, my interest rates were sky rocketing, and my credit score was plummeting, I made the decision to negotiate with my debtors and join a debt negotiation service.
Debt negotiation, otherwise known as debt settlement, is a process aimed at getting creditors to agree to accept a reduced amount in a lump sum payment in full settlement of a debt. A debt settlement company acts on the consumer’s behalf in negotiating with creditors and settles each debt one by one. In turn, the creditor agrees to report to the credit bureaus that the consumer no longer owes them anything. For example, a client who owes $10,000 may pay as little as $4,000-$6,000 to settle the debt. Your accounts must be in arrears before the creditors will agree to negotiate.
This calculator helps you determine how much interest you will pay and how long it will take you to pay off your credit card if you make the minimum monthly payments.
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