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2 1/2 yr old debt, Debt Settlement Agency involved


Holy Cow
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I am NEW, and I have been reading the info on the website and the posts to learn. I've decided to throw my situation out there.

Here's the background:

I have 4 CC's that I stopped paying in Oct 2004. I entered into a debt settlement program and I have a monthly payment to them for the service, but I have not settled with any of the cards yet. When I stopped paying on the cards, I owed $28,400 total. Today, I owe $39,000--yikes. 2 yrs ago, we had many financial difficulties and were unable to put any money aside to settle. More recently, our situation has changed and we are able to put aside $4,000 per year. However, as you can see, the additional charges and interest being tacked on at $5,000 per year are catching up with us.

I have an opportunity to obtain a home equity loan (with help from my parents) that would run us $298 per month for 7 yrs. This would be for $19,000 with the assumption that I could settle for at least 50% on my cards.

I have 2 of my 3 credit reports. All of my accounts are paid as agreed with the acception of the 4 CC. Cap 1, Citicard, Discover and Citibank are all marked as "charged off", DOFD is October 2004.

My contract with the debt settlement agency will be paid June 2007. I have been paying $114 per month and the total contract amount with them was $4305. Last Oct, the DSA enlisted the services of a law firm. This began a charge of $40 extra per month, totaling $154. The reasoning behind this was that they said that a law firm can be more effective in stopping creditor harrassment.

My questions are:

1. The SOL for my state is 6 yrs. I'm half way there. Should I wait this out? The debt settlement agency will continue to represent me after I've finished paying off my contract in June 2007 (although I will probably have to continue paying the $40 per month charge for the lawyer representation). Is it possible to ride this out until the SOL is up? I've had no law suits filed against me at this point. I can see where entering debt settlement programs are a taboo on this website, but I'm already there. I'm wondering if I can make a postive out of it. Paying for the DSA and the lawyer are much less expensive than settling and I've avoided law suits thus far.

2. I've conisdered dropping the DSA with the reasoning that my contract breaks down the way that the agreement amount is earned and since 30% is earned when I authorize them to settle and the final 10% is earned upon completion of the program, this means I could potentially collect back 40% of the $4305 contracted amount. If I do this, then I am on my own to negotiate settlement and to deal with the phone calls. I could do this, but my greatest fear is that by losing the attorney representation, I may be opening the door for law suits.

3. If I attempt to settle using the loan, I would end up paying on a loan for 7 years, which is longer than my SOL is at this point. In addition, I will still have to try to have the negative charge off details on my CR removed. I can live with the bad credit report and obviously, I don't need a perfect CR to obtain a loan if needed since I have terrific parents. My big fear that keeps me up at night is that they come after me in court. I know settling would take some of that headache away, but I'm still left with a 7 yr. loan to pay off...a payment I'll be making even though the debts will have already fallen off my report by then.

I'm not much of a "forum" person (this is my first EVER), so forgive me if I'm not up to speed on the flow of things here. I'm trying! Any ideas you have are welcome!

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Welcome....we'll all be glad to help if we can...

Now...what exactly is this debt fixer doing for you? Your bills are still going up, the accounts are marked as charge off, your credit is trashed, and you need a lawyer to help protect you from law suits?

I'm sorry...but...unless I'm missing something, you've been scammed.

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I didn't mean to sound flipant...and I'm not trying to just blow you off here...you've got a real problem. And the debt fixer that's been taking your money has just made it worse.

Debt fixers come in two general categories...

1. Out right scams that take your money and do nothing. You wind up with your credit trashed and lawyers pounding on your door.

2. Or, collectors who work our side of the street, and make you feel good about being screwed. Their plan is that you stop paying your creditors, put the money in the bank, and then at some magic moment (they call it "charge off", but its really a misnomer) you declare yourself "insovlent" and they'll step up and "settle" your debt for you. In truth, they're talking to your creditors already and putting them off until the last possible moment. When the creditors are about to sue, they'll raise the insolvency flag, offer some low percentage, and SOMETIMES get the creditor to bite. Since you haven't saved any money for settlement, I'm thinking the debt fixer is just going to dump you when the creditors start to sue.

What happens to you is your credit gets trashed, you pay the debt fixer to do something you could do yourself, you turn over your savings to someone else, and you get to pay taxes on what you didn't pay the creditor.

So...my advice...cancel the debt fixer NOW. Demand ALL your money back. Call your creditors and see what you can work out on your own. Don't mention the $19,000 until you're sure you can settle them all. If one or more won't play along, look into declaring bankruptcy. If you have income, it would probable be a BK 13, which means that your creditors will get paid back at least a portion of what you owe...and you'll have the courts to make them play nice.

Oh...and...learn to be a forum person...at least for this one here. There's lots and lots of information you're going to need to know.

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Thanks for your advice. After surfing around this website (I stumbled upon 2 and a half yrs. later than when I really needed it...) I've learned what I already knew to some extent: I've made one bad decision after another. Debt, as I'm sure you already know, is a huge social problem and people keep it silenced. I'm ashamed of my situation. My co-workers, my friends and relatives (other than my parents) don't know about our debt. Credit cards give you a false feeling of security when you have them. You use them and think, "I'll make the payments in increments", makes my life easier--especially when you fall on tougher times. After a while this adds, and adds and pretty soon you're transfering balances to other cards with lower interest. Then these cards revert back to the date you transfered the balance since you haven't paid them off in time and add more interest. Then, you get charges because you're over your limit because the fees and interest brought you there. Then, as you said, there are the scammers out there ready to prey on the vulnerable who have a history of making bad decisions---Why isn't any of this a high school subject? They never had a class in my school that teaches you about basic financial management and personal household budgeting. Young people really need to hear about the horror stories and be "scared" into thinking twice about the financial decisions they make as young adults.

Again, thanks for your advice and I will continue to educate myself through this website and other resources.

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No problem. If we can answer any questions, don't be afraid to ask. And, beleive me, you've got nothing to be embarassed about. I'd bet that 80% of your friends and coworkers are in the same boat....or about to climb on board.

The credit industry has learned that they can make a lot more money off people that are in credit trouble than from those that pay their bills every month. The system is set up to make you fail. (I'm not saying its not our fault...just that they laid out the trap and we were trusting enough to fall into it).

Anyway...like I said...if we can help, let us know.

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Many debtors are shamed into making decisions that are not in their best interest. The first step to dealing with your situation in a way that is favorable to you is to stop feeling shame or embarrassement. My debt is almost five times yours and I'm not feeling shame. Things happen.

Creditors foreclose. Debtors go bankrupt. That's just capitalism. Everybody should use all the legal finacial tools available to them. There is no shame on a balance sheet.

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After reading more about bankruptcy, debt settlement company pros/cons, I'm more confused and frankly, scared to death about dealing with this on my own. There are threads here that say, debt settlement companies can work and then others that totally dis them. There are threads that say bankruptcy is the way to go, then others that say, avoid at all costs. Feeling a little like a yo-yo.

I'm tempted to just sit and wait my situation through. I've nearly paid off this debt settlement company contract. According to the contract, they are supposed to continue to work with me until I settle and they have the services of a law firm involved. They don't take any portion of what I "save" when settling. I'm half way to my SOL. I hate the thought of borrowing to settle. I'm thinking that I should continue to just set money aside. If I am able to save up enough to settle some of my smaller cards without borrowing, then I will attempt to do so. By then, maybe some of my larger cards will hit the SOL. Worse case, I could borrow if I encounter a law suit along the way. Changing my debt from unsecured to secured is a scary thought and doesn't seem much different then transferring balances from one credit card to another. It's still debt.

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After reading more about bankruptcy, debt settlement company pros/cons,
I would bet that 90% of the good things you've found about debt fixers comes from a guy name sifxpert...a debt fixer himself. So, yes, he's gonna claim its a good thing (he makes money off it!). He does, however, downplay all the bad things that go along with it.
I'm more confused and frankly, scared to death about dealing with this on my own.

Understandable. Its a confusing and scaring subject. But, you better figure out how to do it, because it ain't going away on its own.

There are threads here that say, debt settlement companies can work and then others that totally dis them.

There are indeed instances where settlement can work...but...you need to have a through understanding of the ramifications...AND...you need to have large chunks of money to work with. The debt fixers claim it works for everyone, and then they take your money, and then they say "well, gee, BofA won't deal with us...or, AMEX is hard to get along with this month...". You need to know exactly what you're in for.

There are threads that say bankruptcy is the way to go, then others that say, avoid at all costs. Feeling a little like a yo-yo.

Sometimes, its the only way to go. But, you need to decide that for yourself. Go talk with a couple lawyers and see what your options are. It might not work for you.
I'm tempted to just sit and wait my situation through.
Unfortenately, that's not an option. Your creditors won't let you. The only reason you haven't been sued yet is that your debt fixer's lawyer is delaying things. He's not fixing them...he's putting them off until they get all the money out of you they can. Then...when your "contract" is paid off, the delaying tactics will stop and everthing will hit the fan.
I've nearly paid off this debt settlement company contract. According to the contract, they are supposed to continue to work with me until I settle and they have the services of a law firm involved. They don't take any portion of what I "save" when settling.
"supposed to" is the operative word. I'm guessing they'll find a reason why their support will either terminate or their price will go up. As for them not taking a portion of your what you settle...two reasons for that 1.) they've already got your money, and B). I would bet that they realize you're not going to settle anything.
I'm half way to my SOL.
Sorry...its highly unlikely you'll make it all the way without being sued.
I hate the thought of borrowing to settle.
Good. Trading unsecured debt for secured debt is almost always a bad move.
I'm thinking that I should continue to just set money aside. If I am able to save up enough to settle some of my smaller cards without borrowing, then I will attempt to do so.
The problem here is that once "settled for less than full amount" or "paid in full" start showing up on your credit reports, the feeding frenzy will start.
By then, maybe some of my larger cards will hit the SOL.
Highly unlikely this will happen. The suits will start long before that.
Worse case, I could borrow if I encounter a law suit along the way.
Again, ALL your creditors are monitoring your credit reports right now. Any hint that one is getting paid will set the other ones off...
Changing my debt from unsecured to secured is a scary thought and doesn't seem much different then transferring balances from one credit card to another. It's still debt.
Exactly. But, sticking your head in the sand and hoping its going to go away isn't going to work.
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If sticking my head in the sand won't work, how about just hiding out in my bed under the covers? UGH. I know I have to deal with this. I just don't feel "smart" enough yet. It's just been a couple of weeks since I found this site and I'm not sure I'm ready just yet. I guess that I'm not a put-on-the-boxing-gloves kinda girl. I need to really learn what my rights are and when they are violated before I throw myself out there to the lions. I've lost alot because I wasn't careful. I realize this means a crash course in the law and the debt validation process and being a Mom of 5 kids--working full time, I've got to make an extra effort to make this happen. The incentive you give helps tremendously though! Thanks. As people continue to read this thread, I still welcome any other thoughts and "incentives". The more I know what I'm doing is right, the more confident I'll be I guess!

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