It’s a known fact that debt collection agencies regularly violate the law in the process of collecting debts. Many years of poor oversight and neglect have allowed these companies to cross the boundaries beyond acceptable limits. In 2010 the mortgage industry was exposed for “robo-signing” foreclosure papers on millions of American Homeowners. When it first came out there was a huge uproar and publicity blitz by the banking industry. Sadly, this story has slipped into the shadows of American Consciousness as foreclosures continue to climb unchecked. Many don’t realize that “robo-signing” is the norm for the banking industry, not the exception. Collection Agencies have used pre-signed affidavits for years to validate and confirm debts, many of which are overstated or not even owed at all. This interesting article in the Wall Street Journal – titled Dead Soul Is a Debt Collector chronicles just how bad it is. Thousands of affidavits, signed by a woman who died in 1995 have been used in court to legally validate and document debt. There is no oversight, no morals, no compass for doing a job well. Because it’s in a computer somewhere, right or wrong, consumers are harmed daily by these companies.
Most consumers that I talk with want to get pay off their debt. They simply run into brick walls when attempting to work with collection agencies or original creditors. These tactics clearly outline why it’s important to hire reputable professionals whose objective is to facilitate the mine fields for you. One such company is Debt Pros Group, consumer debt consultants in Redding, California.
In the ongoing discussion of credit scores, it a common belief that credit counseling does not impact the consumer credit score. In fact, some credit counseling companies make the claim that their services do not affect your “Fico Score.” This is normally not an accurate claim. If you had available credit on your accounts, when you enroll in credit counseling, all of your accounts are closed by the creditors. This leaves you with “no available credit” on those accounts and reduces your credit score. Having maxed out credit cards can also be detrimental to your credit profile. The NFCC states “A DMP [Debt Management Plan] could have a negative impact on a credit worthiness decision by a potential creditor, landlord, or employer because it is an indicator that you are or have experienced financial difficulties. In addition, creditors may report that you are on a DMP and are not paying as originally agreed although they have accepted the reduced payment.” In other words, if you ask an auto dealer or mortgage company, they may tell you they consider credit counseling similar to a bankruptcy. Please visit the following links for more information: National Foundation for Credit Counseling
Any choice in life has pros and cons. Credit card debt is no different. Choosing to settle your debt for less than what you owe has some definite pros. Pros: Debt Settlement Save Time and Money.
Cons: Impact of Debt Settlement
In many cases, the financial benefits outweigh the short term inconvenience and impact of creditor calls and even the risk of legal action.
To find out how the programs will work for you, request a debt analysis. One of our qualified debt consultants will go over your details so that you can make the best decision for your unique situation.
This is a question that I hear nearly every day. The financial industry has done an excellent job of drilling the importance of the FICO score into the American psyche. It is an important number, if you want to be in debt. Credit Scores can be re-built. It is sad that many people have no savings, no investments and very little money left over at the end of the month because they are concerned with only their credit scores. I see people struggle to barely make the minimum payments just to keep a credit score. Credit scores can be rebuilt but the damage to a family and lost money thrown away to high interest cannot. Most of us learned in school that if we invested $1000 a month combined with the power of compound interest, most people could easily retire a millionaire. Many elderly people have contacted us with stories how they struggled to pay debt most of their lives and retired below the poverty line. Credit scores will not help you retire, what you do with your money today will. We will be writing on this topic in depth in future posts. It’s important to understand that the credit score, while important, is not always the most important number in your financial profile.
One of the most common questions we get is how debt settlement will impact a credit score. Normally, by the time a client reaches the point of calling for debt settlement help, their credit has already been or is about to be impacted.
If you are current on all of your payments, debt settlement will negatively affect your credit score. With that said, if you can afford to pay off your debt in full on your own, you should do so. There are non hardship programs available that can help you get your spending under control. It is important to note that even if you are current with your payments but your credit cards are maxed out, your credit score profile can be negatively impacted. If you are struggling, are already behind in your credit card payments or feel you may be in the near future, your first goal should be to get out of debt then rebuild your credit profile. As you move through the debt settlement program, each time a debt is settled, the creditor is required to report a 0 balance owing on the credit report. Every credit situation is unique. We cannot predict or make any promises regarding your individual credit outcome after debt negotiation. Please visit the following links for more information:
Bankruptcy is a serious decision that comes with serious consequences. It should be considered only as a last resort, based on the advise of a qualified attorney. Choosing bankruptcy over debt settlement will depend on your individual situation and circumstances. There is no single best answer to the question of bankruptcy or debt settlement – which is better? There are comparisons that can be drawn that can help you determine the right choice for your situation: Bankruptcy laws changed in 2005 making it more difficult to discharge unsecured debt. Since 2005, people who don’t qualify for a chapter 7 bankruptcy can only file a chapter 13 repayment plan. Chapter 13 repayment plans can last from 3 – 5 years and the payments are usually deducted from your paycheck. Here are some things to think about when considering bankruptcy to debt settlement: Bankruptcy: Matter of Public Record Debt Settlement: Is private and not a matter of public record Bankruptcy: Impacts credit score for up to 15 years. Normal is 10 years Debt Settlement: typically only impacts credit score while in program. Inaccuracies on the credit report can be cleaned up after graduating from the program. If you are still considering bankruptcy, please contact us. We can provide information to for local bankruptcy attorneys in your area who will give you a free and no obligation consultation. Here is an excellent resource regarding bankruptcy. Debt Settlement is very different from Credit Counseling. With debt settlement the principal balances of your credit cards are negotiated and settled at a lower balance. This means that you typically repay less than the balance.
By contrast credit counseling programs do not negotiate your balance, they reduce your interest rates, though not all creditors may give you a reduction. There is data that shows fewer people graduate these programs because the payments are often about the same as making minimum payments. Also the debts are typically paid down – usually over 5-7 years, which can be faster than just making minimum payments. Although they may claim to be non-profit, credit counseling companies are paid by the creditors themselves for collecting the debt on top of the fees they charge the consumer. In the past, many have had their non-profit status revoked by the IRS. Here is an article from the Washington Post that talks about this issue.
Often, I will get calls from clients who have been told that the credit card company told them won’t settle. In most cases, this is absolutely NOT true. Collectors may try to tell you that they do not settle with negotiation companies or even attorneys. That is simply untrue. They often use many unscrupulous practices to try to collect as much as they can from you. Individual collectors are often paid a commission on what they collect from you. If you are legitimately struggling and/or do not foresee being able to pay your debt in the near future, creditors would generally much rather settle than risk getting nothing or risk that you file bankruptcy. Also, it is common practice for credit card companies to sell delinquent accounts to collection agencies, often for just a few cents on the dollar. A settlement tends to make economic sense to creditors. Debt settlement helps them recover a portion of money that they otherwise may not have. Also, most people who have been struggling for years have already paid their creditors back more than what they borrowed in just fees and interest. Consider this scenario while keeping in mind that you have probably already paid back what you owe your creditors because of all the interest. Let’s say you loaned your neighbor 400 dollars a year ago. In this example, your neighbor has never re-paid you anything. Imagine you knew your neighbor lost their job. Then you saw a moving truck outside of their house. That day, your neighbor comes to you offering you $200 because they simply could not afford to pay the full $400, would YOU settle?
Typically you will qualify for debt settlement if you have a minimum of $10,000 in unsecured debt. There is no cap on the amount of unsecured debt that may be enrolled, as we have had clients with several hundred thousand in credit card debt alone. Unsecured debt is typically credit cards, but can also include medical bills and most loans that are not tied to collateral. Our programs cannot negotiate car or mortgage loans because the lender can repossess the car or foreclose on the property. We can help you if your car or home has already been repossessed or foreclosed on, and you are left owing the bank money which is called a “deficiency balance.” We cannot help you with student loans because they are usually secured by the federal government. You must also be in a financial hardship. This could be a range of circumstances. Some clients have experienced a job loss or other reduction of income; a medical condition or even just unable to afford to pay off the credit cards because of rate and payment increases. Some clients have to struggle just to make minimum payments, they always carry credit card balances and borrow from one to pay another, and some may have already fallen behind. If you qualify, you can enroll whether you are current or behind in your payments. Request a debt analysis to see exactly how the program will work for you.
Debt Settlement is simply the process of negotiating a reduction in the principal balance in your credit card balances. Often it creates a win/win scenario for both the creditor and the consumer. The process is simple, but important, as not everyone will qualify for the program.
To request a free debt analysis, call us directly at 530-222-9500 or request an analysis right here. We will call you back and have an honest discussion with you.
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