“Dear Steve,
I owe more than $16,000 to credit card companies — Capital One, BoA, Chase — got behind and further behind — and am now trying to figure out what to do.
I want to pay what I owe but some of this is late fees, higher interest, etc. My biggest problem is at this point I simply can’t afford to pay each of them what they want in minimum payments.I have not contacted any of the companies at this point because I don’t know what to say. I did work out a payment plan with Chase at one point, but it istoo high.
I talked with a Coastal Credit Solutions advisor who recommended debt settlement,. I am considering whether to use their service …. but everything I read on the internet makes me leery of any of these groups. The appeal is they say they can consolidate it into one monthly payment.
Is there a way to negotiate a debt settlement and a payment schedule myself through letters to the card companies (I can’t afford a lump sum payment at this point). I would prefer to deal with this in writing if possible since I feel I’m less likely to get talked into something I really can’t afford.
Jeff”
The Answer:
Dear Jeff,
Thank you for contacting me.
I’d never visited the Coastal Credit Solutions site before so I took a look around. It certainly is an attractive site and I’m happy they publish their business address.
I’m concerned the advisor recommended debt settlement for you. Since you can’t afford the minimum payments now, and you probably don’t have $8,000 at hand to begin to settle these debts now, starting a debt settlement plan is going to toss you into turmoil. It will land you in collections and hurt your credit report and credit score. You may even be sued during the process and it could result in a big tax bill for you from the forgiven debt.
But don’t take my word for that, even Coastal Credit Solutions says so on their site.
While the little video spokesmodel on the site says most debt solutions are a low or no cost, I find it very hard to believe there would be no cost for debt settlement services. So how much did they tell you they would cost?
I was very surprised to see that they apparently are not the actual service provider but a referral agency. Their graphic on their process page actually says “Our Credit Advisor will help you prepare and package all the paperwork required by the financial service provider.”
Since they may not be the actual company that would provide you with debt settlement services, companies in this position have a vested interest selling you into the program and will most likely get a commission from making that sale.
I did have to chuckle when I saw their client login went to another related company I wrote about just this morning. It must be my GNUSA day. See my post “Have You Heard of the National Debt Crisis Center? – Eric“.
So, if you are going to review all of your options then you need to find a local bankruptcy attorney and make an appointment for a free consultation. A Chapter 13 bankruptcy would allow you to pay what you can afford, would prevent you from being sued, would not result in any tax liability, and would instantly stop all collections efforts.
Seriously, Jeff, even though you might be afraid of bankruptcy or talked out of considering it, it certainly seems like the pros address your needs and it is worth serious consideration.
If you have any documents from Coastal like a client agreement I’d love to see it. You can upload it here.
Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.
P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.
If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.