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Should I Go With CareOne or Debtmerica to Eliminate My Credit Card Debt? – Zeeshan

“Dear Steve,

Hey Steve, I recently piled up a bunch of credit card debt trying to pay bills, it wasn’t a problem paying them off until I got into school where I do not have a source of monthly income but do get a little help from my parents. I am just unable to pay rent, food, gas, and credit card bills monthly anymore. The interest is just piling up so the monthly payments don’t really dent the amounts at all.

So I have about $20k in credit card debt, I was looking at working with companies such as CareOne or Debtmerica to settle an amount with my credit card companies. However they said they can reduce my monthly payments to around $370 from the $520 a month I pay and both say by the end of the program I will have paid $16000 total in about 4 years. Of course I would plan in paying it off sooner than that. However each company is taking about $6000 in fees. Is that the way to go for me or is it better to just not pay the cards and try to deal with the credit card companies and go to court personally? Trying to get some advice on which way you would recommend. I feel like paying these companies $6000 is a lot even though it will help me out a lot and save me a lot in the long run.

thanks

Zeeshan”

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The Answer

Dear Zeeshan,

I’m not convinced that entering into any payment program is going to be the right move for you. While entering into a debt settlement program might look attractive it would only lower your payment a bit and not enough to help you save.

As it is now, you’re struggling. So if you pursue the debt settlement route you’ll pay $6,000 in fees, risk being sued by your creditors, wind up in collections, hurt your credit rating and take two to four years to attempt to settle your debt. Even then there is no guarantee you will eliminate all of your debt.

I worry more about you building up some savings at this point in your life. You’ve lived on the financial edge for so long that if you did not have credit to fall back on, what would you do in an emergency? Here is a recent video of mine that seems to address your situation rather closely.

I think before you do anything you need to meet with a local bankruptcy attorney. Bankruptcy would eliminate your debt, give you some real room in your budget to save and protect yourself, and most importantly it would stop all collections and block all lawsuits. Bankruptcy would cost about $1,500 and your debt would be wiped out in a couple of months rather than a few years.

You can click here to find a local bankruptcy attorney and if you’d like a second opinion about your situation or a personal consultation by another debt coach, please feel free to contact Damon Day.

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.

Big Hug!

Should I Go With CareOne or Debtmerica to Eliminate My Credit Card Debt?   Zeeshan
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • DebtGoToGuy.com

    Just to clarify, and not to promote BK or Debt Settlement, what was said above about a bankruptcy disqualifying you from getting a mortgage for 10-15 years is not true. A chapter 7 will disqualify you for 24 months AFTER discharge. A chapter 13 will DQ you for 24-48 months after discharge. Ask any mortgage lender about current underwriting guidelines to verify. During this time, while you are disqualified due to the BK filing, your debt is eliminated, greatly improving your debt-to-income and debt-to-credit-limit ratios. You can also rebuild a good payment history by wisely using secured credit cards so that you will have a good credit score again by the time your disqualification period ends. My girlfriend filed a chapter 7 in April 2008 and her credit score was back up over 700 with all three bureaus within one year. If you want to understand “how credit works” in order to choose your best option to get out of debt, then here’s a free video that makes it easy to learn: http://www.debtgotoguy.com/cre

  • Steve Rhode

    Zeeshan,

    Please come back and update me on what you decide after you talk to the bankruptcy attorney. We can work through this together and the best approach is to consider all options carefully and then make a decision which works best for you, your life and your situation.

    Steve

  • Joe_debt_jr

    How did you settle your defaulted debt Practical? So what happens in this case where Zeeshan has no disposable income left over to even do a debt settlement? If BK was so terrible like you mentioned why is it so hard to get a chapter 7 and why does everyone push so hard to get it?

  • Joe_debt_jr

    Practical you are he should do all his research and maximize all his options out there. 20k isnt alot to consider BK immediately but if his creditors can get him on a repayment plan averaging 1.5% on the 20k which would give him a combine payments of $300 than that would be managable if his budget warrants it at this time. If he is going to consider Debt Settlement, than he should ask himself how much he can save each month to wait for an offer and pay off lumpsum? If his monthly disposable income is negative and he cant see himself getting a decent job in the next 1 or 2 than looking into BK may also a choice he can take. My friend filed BK on a 24k debt, chapter 7 now shes discharged and 6 months later already she is getting offers in the mail to open a new credit card. So credit is not the issue, its being able to live and survive each day stress free and also debt free.

  • Practical

    Again, do your research and make a decision that you think makes sense. A bankruptcy lawyer is going to sell you on bankruptcy because that’s how they make money just like a settlement company will sell you on theirs. Technically, you can do either of them yourself so talk to both and get the information you can.

    Having been through a very similar situation myself. $20k isn’t a lot of debt. It might seem like a lot to you right now but it isn’t. It probably isn’t worth the headache in the long run.

    If you can avoid either of the above options you should. Maybe you should call your creditors and see if they are willing to freeze your interest as you said. They might be.

    I defaulted and settled a few debts and it was a pain. I did rebuild my credit very quickly though and managed to get a small town home within 5 years of the debacle.

    Cheers

  • Practical

    Unless it’s at a 90% APR he will not be able to get a home loan for over ten years. I don’t care what the underwriting guidelines are. The subprime days are over.

    He is ‘judgment-proof’. “The effect of being judgment-proof is that creditors may not bother to sue you because they will not be able to “satisfy” their judgments against you.” Even if by some small chance he does get served a claim, he can still settle before or during the small claims process.

    Bankruptcy hurts your credit score more than settlement. If you declare bankruptcy you’ll get slapped down to the 400s. With settlement, you can be more strategic about it. Balance transfer everything to one account and if you can’t keep up on the payments default that one and you only have one account on your report that is not good. FICO is based on number of accounts and their histories. If you have many accounts in good standing and one bad seed it won’t affect your score that much. And if you have only one account that is marked as ‘settled’, it won’t do nearly as much damage to your report as a bankruptcy would. Additionally, he can establish a whole bunch of additional accounts that are 100% secured to game FICO.

    This is all besides the point. He only has 20k of debt! Who gives a crap if he’s stressed out at school. I mean REALLY!? School is the easiest time he’s going to have for the rest of his life. Give me a break LOL!

    Why would he ruin his credit history for the next decade over 20k, especially when he claims to want to make good on his financial obligations?

  • Zeeshan

    Thanks for your replies Steve and everyone else. I definitely have some things to look into. Maybe I will speak with a bankruptcy lawyer just to see what they say. Either way I feel like my credit will be affected. Doing the debt settlement route they want me to stop making payments anyways to show that I can’t pay for the credit cards. I would love to just have them freeze, finish school and just pay everything back. I was very good with paying my credit cards and staying on top of my financial situation until this past year where i made a few bad moves and I don’t have anything to really show for it.

    I am back in school and will most likely be in school for the next 7-10 years anyways, not looking to buy a house at any point or anything like that. I just want to do what Steve said and focus on school but everyday I need to worry about paying of this credit card or that one and if I don’t pay it off then I know I am going to get a ton of calls from creditors. I forgot to make my citi card payment a week ago and they call me 10 times a day. Finally picked up yesterday and realized it was them saying I missed a payment but I didn’t notice since I looked at my account and it said payment due in a month but i guess it had last months payment added into the amount.

    I do have a good amount of school loans however they are on deferment since I am in school so I don’t have to worry about them while I am in school full time. I would love to be able to save and I am going in for an interview tomorrow for a part time job but that might only bring in $400 a month.

    I guess I will just speak to someone about bankruptcy on friday and see what they say and also consider the debt settlement. I am just worried that if i go the debt settlement route I might get some added fees down the road or something else. I have no idea what other possibilities may take place with debt settlement. I am in my mid twenties and I still can’t believe I am in this situation. I know I will avoid this at all costs next time but like I said I just made a few big mistakes this past year and now I am paying for it.

    Steve is right about being in debt though, the constant worry about money adds stress and does make one depressed which definitely doesn’t help.

    again, thanks everyone and I will look further into my options further.

  • Zeeshan

    Thanks for your replies Steve and everyone else. I definitely have some things to look into. Maybe I will speak with a bankruptcy lawyer just to see what they say. Either way I feel like my credit will be affected. Doing the debt settlement route they want me to stop making payments anyways to show that I can’t pay for the credit cards. I would love to just have them freeze, finish school and just pay everything back. I was very good with paying my credit cards and staying on top of my financial situation until this past year where i made a few bad moves and I don’t have anything to really show for it.

    I am back in school and will most likely be in school for the next 7-10 years anyways, not looking to buy a house at any point or anything like that. I just want to do what Steve said and focus on school but everyday I need to worry about paying of this credit card or that one and if I don’t pay it off then I know I am going to get a ton of calls from creditors. I forgot to make my citi card payment a week ago and they call me 10 times a day. Finally picked up yesterday and realized it was them saying I missed a payment but I didn’t notice since I looked at my account and it said payment due in a month but i guess it had last months payment added into the amount.

    I do have a good amount of school loans however they are on deferment since I am in school so I don’t have to worry about them while I am in school full time. I would love to be able to save and I am going in for an interview tomorrow for a part time job but that might only bring in $400 a month.

    I guess I will just speak to someone about bankruptcy on friday and see what they say and also consider the debt settlement. I am just worried that if i go the debt settlement route I might get some added fees down the road or something else. I have no idea what other possibilities may take place with debt settlement. I am in my mid twenties and I still can’t believe I am in this situation. I know I will avoid this at all costs next time but like I said I just made a few big mistakes this past year and now I am paying for it.

    Steve is right about being in debt though, the constant worry about money adds stress and does make one depressed which definitely doesn’t help.

    again, thanks everyone and I will look further into my options further.

    • Practical

      Again, do your research and make a decision that you think makes sense. A bankruptcy lawyer is going to sell you on bankruptcy because that’s how they make money just like a settlement company will sell you on theirs. Technically, you can do either of them yourself so talk to both and get the information you can.

      Having been through a very similar situation myself. $20k isn’t a lot of debt. It might seem like a lot to you right now but it isn’t. It probably isn’t worth the headache in the long run.

      If you can avoid either of the above options you should. Maybe you should call your creditors and see if they are willing to freeze your interest as you said. They might be.

      I defaulted and settled a few debts and it was a pain. I did rebuild my credit very quickly though and managed to get a small town home within 5 years of the debacle.

      Cheers

      • Anonymous

        Practical you are he should do all his research and maximize all his options out there. 20k isnt alot to consider BK immediately but if his creditors can get him on a repayment plan averaging 1.5% on the 20k which would give him a combine payments of $300 than that would be managable if his budget warrants it at this time. If he is going to consider Debt Settlement, than he should ask himself how much he can save each month to wait for an offer and pay off lumpsum? If his monthly disposable income is negative and he cant see himself getting a decent job in the next 1 or 2 than looking into BK may also a choice he can take. My friend filed BK on a 24k debt, chapter 7 now shes discharged and 6 months later already she is getting offers in the mail to open a new credit card. So credit is not the issue, its being able to live and survive each day stress free and also debt free.

      • Anonymous

        How did you settle your defaulted debt Practical? So what happens in this case where Zeeshan has no disposable income left over to even do a debt settlement? If BK was so terrible like you mentioned why is it so hard to get a chapter 7 and why does everyone push so hard to get it?

    • http://GetOutOfDebt.org Steve Rhode

      Zeeshan,

      Please come back and update me on what you decide after you talk to the bankruptcy attorney. We can work through this together and the best approach is to consider all options carefully and then make a decision which works best for you, your life and your situation.

      Steve

  • Observer

    Practical,

    At the rate Zeeshan will be able to save and fund settlements, his accounts will have been charged off by the original creditors and he will be negotiating with third parties who have absolutely no control or input for how an original creditor reports to credit reporting agencies. That damage will have already been done.

    Zeeshan will therefore not be in any position to affect trade line credit reporting whatsoever.

  • Observer

    Practical,

    You did not preface your original comment as someone who has been through what Zeeshan is experiencing. Your original comment made assertions that are false on their face while challenging the authority and experience of others who are well established as an authority and as having a plethora of experience. In other words, taking shots at Steve.

    So, as a now self admitted non authority to Zeeshan’s issues you come back and clarify your initial comment and any subsequent comments as opinion based on personal experience. There is nothing wrong with that. It is what I believe part of Steve’s goal for this site is about.

    Having said all that, you come back to continue to propagate and defend a proven falsity you asserted in your original post, by stating:
    “#2 – Wow, sorry you’ll have to wait 9 years minimum to get a mortgage. That’s not a lot of time at all!”
    The underwriting standard used by FHA/Fannie/Freddie when applying for a mortgage after having filed chapter 7 is 2 years from the date of discharge. Please verify this fact directly with FHA/Fannie or Freddie. You can also look to any local bank branch who provides government or quasi government lending options for home purchases for verification.

    Your coming back to post in furtherance of a falsity is a character often found in one exhibiting behavior of a pathological nature.

    You also come back to comment, “#4 – I’ve been through it so it makes me more qualified than you”. You do not know me nor any of what I have/have not been through. This now causes you to appear as egotistical, self righteous and a tad obnoxious.

    You go on to comment, “From what I see he’s an expert in taking pictures of eyes but also spent some time building a company that may or may not have even existed based on the website http://myvestafoundation.org/“. This comment of yours is beyond disingenuous! I cannot fathom the purpose for commenting in this way unless it is due to an axe to grind which causes one to question your sincere purpose to comment or even be on this site. Of course myvesta existed. For many years! There is ample public record to substantiate this, but you either are too lazy to do the research or have an agenda to your posting.

  • Steve Rhode

    Why should bankruptcy ever be the last resort? You make it should as if bankruptcy is not an equal or valid option with other debt relief solutions.

    What other solution provides you with legal protection from creditors, can eliminate your debt quickly, stops or prevents lawsuits, and does not result in any tax liability from discharged debts.

    Your statements about buying a home in the next ten years are completely unfounded. In fact, let’s say he went the debt settlement route as you describe. His defaulted debts will appear on his credit report for seven years. He will probably be sued by one or more of his creditors. He will then have to start saving for a down payment on his new house. It may take him 3 to 5 years to fully resolve his situation on his current limited funds. After than it will take around another 2 years to rebuild his credit and the cost of settling the debt will be around $4,000 when you add in all costs and fees.

    With bankruptcy his debts can be discharged in three months for about $1,500. He will be able to start saving for his new house and emergency fund almost immediately. He will be able to rebuild his credit by year two instead of year five to seven.

    Please factually explain how settling in his situation would be better in case I’m missing something in your position.

    Steve

  • Practical

    I agree, it is up to him to decide. My point was that you made a very clear decision for him which may or may not be the best decision.

    You just said that it’s about the right decision for him. I believe that Bankruptcy should be a last resort. Especially for someone who plans to buy a home in the next ten years. If he was already established and had a home, some states allow you to protect your home from bankruptcy and there are other means of asset protection where he could do that. In his situation he’ll be screwed when he’s just starting out. But hey, with today’s home prices maybe he won’t be buying anything until he’s 35 anyway.

    As for paying expenses, if he defaults he’ll be able to pay for his expenses and if he’s smart he’ll start saving to make settlements… on his own. Ideally he’ll make those settlements on the condition that they are marked on his credit report as ‘Paid’ instead of ‘Settled’.

    I can’t believe that I’ve even spent this much time replying to this thread. I’m done with this conversation.

    Good luck Zeeshan.

  • Steve Rhode

    I guess I’m still stuck on how defaulting helps him focus on his situation and how debt settlement is even a possible option if he can’t afford to get by now?

    Knowing that it is easy to rebuild the credit after bankruptcy would it not make logical sense to address the situation with bankruptcy now, discharge the debt in a few months and move on to focus on school and saving?

    In a consideration of all options, why would you not logically consider bankruptcy as well?

    Steve

  • Joe_debt_jr

    spoken like a true professional… :)

  • Practical

    #1 – I don’t have a website, I don’t work in the industry, and I’m just an “Observer” who has been through the same situation as Zeeshan.

    #2 – Wow, sorry you’ll have to wait 9 years minimum to get a mortgage. That’s not a lot of time at all!

    #3 – Thanks GetOutofDebt.org police

    #4 – I’ve been through it so it makes me more qualified than you. From what I see he’s an expert in taking pictures of eyes but also spent some time building a company that may or may not have even existed based on the website http://myvestafoundation.org/

    I don’t even really care what Zeeshan does with his finances. In my PERSONAL opinion, declaring bankruptcy on a whim like that is a stupid idea.

  • Practical

    My only advice was to not put Steve Rhodes on a pedestal and to explore all options.

    I’ve been through the exact same situation as Zeeshan in my own personal finances except I was a student with a lot more debt. I didn’t bother with a debt settlement company, I just defaulted and dealt with the creditors myself. It’s not rocket science.

    I received a LOT of empty threat litigation letters. The reality is that it is all BULLSHIT. They won’t sue you unless it’s a substantial sum of money e.g. 100k+. The amount of legal and operation overhead it takes to do it is just not worth it. Creditors, especially in this economy, write off the debt to a debt collector and it’s easy to settle with them.

    If you’re not comfortable doing it, call a professional debt settlement company to do it for you. I just find the blanket vilification of settlement companies absolutely stupid. Sure there are probably bad apples, but there are bad apples in every industry.

  • Steve Rhode

    Practical,

    Actually, I am serious.

    It takes about two years to rebuild credit after bankruptcy. You can read this guide, How to Rebuild Your Credit After Bankruptcy.

    A Chapter 13 bankruptcy is reported for seven years, the same amount of time that a defaulted debt can be reported. A Chapter 7 bankruptcy can be reported for ten years but there is no limitation on how long a lawsuit can be filed.

    Creditors sue students all the time. As one collection manager explained to me at a major credit card company, “They might not have anything now, but they will.” The judgment will sit and earn interest. Besides, this is not about the individual evaluation of cases, this is about dropping another defaulted debtor into the giant hopper.

    Let’s take a second look at Zeeshan’s situation. He’s a student who needs to focus on making the most of his education. If he’s taking out student loans, one of the most terminal and unforgiving of debts, he needs to maximize the benefit of those student loans by focusing on his education. The last thing he needs is to be under constant stress and worry from collectors, lawyers, and lawsuits. With debt, stress leads to depression, depression leads to the inability to focus or take action, and all of that leads to a potentially long-term negative situation regarding his studies.

    My overwhelming concern with Zeehan’s situation was that he was unable to pay rent, food, gas and his bills. He was just barely getting by, if at all. He also said that the reduction in payments would be from $520 to $370 a month. A savings of $150. That’s not enough money to call it a safe margin. By his own admission he’s already underwater so that would probably leave him $25 positive each month.

    In my opinion this situation is not about if debt settlement or credit counseling would be right, it’s about what solution addresses his ability to focus on his schooling, the debt is not dischargeable, and put him in a safer financial position that would allow him to save money to protect himself.

    As far as me being an expert, I’ll leave that up to Zeeshan to decide. If you want, you can read more about me here.

    Steve

  • Observer

    Practical,

    Your comment has left you appearing to have less of a command of the issues than you think you do. You are propagating lies that, while common, are dangerous.

    Response to Practical lie #1:
    Current FHA/Fannie/Freddie underwriting standards for home loans are 2 years after a chapter 7 filing. This would mean a consumer can qualify to get a home loan much sooner than the 10 to 15 years your comment suggests.

    Response to Practical lie #2:
    Consumers are sued on a daily basis for virtually any dollar amount. Discover will sue on 1500.00. Capital One will sue on 900.00.

    Response to Practical lie #3:
    You seem to want to speak for Steve in some of your comments. Where you say he fails to acknowledge billions of debts having been settled – He has acknowledged it in other articles on this site.

    Response to Practical lie #4:
    You say Steve is not an authority, but he has been working with many thousands of financially strapped consumers since 1994. What have you been doing since 1994 Practical? What makes you so qualified that Zeeshan should weigh your comments? Your comments are wrong, so whatever your official qualification (if you have any) it is not worth what you paid for it.

    Practical, can you please direct me to your website where you assist consumers who are struggling to find direction in this tough economy free of charge or expectations?

    Based on your comment here, I am already cringing at what might be found on your site.

  • Joe_debt_jr

    oh I forgot, you mentioned Zeeshan has no asset for the creditors have nothing to go after? lol are you forgetting that anything can change a year from now, what if Zeeshan situation improves, and Zeeshan finds a well paid job, these creditors can summons him to court and most likely win a judgement and begin garnishing wages? Let suppose Zeeshan situation hasnt changed, still not getting sufficient income from his parent, that wouldnt stop a creditor filing a summonsand most likely will win a lawsuit to place a judgement, which will remain on the credit report for more than 7 years as well?

  • Joe_debt_jr

    Practical, I am sorry but your advice is even worst. If you read Zeeshan can barely pay for his rent and food but yet you still suggest him to research on debt settlement versus bankruptcy? You did not make any mentioning of him contacting his creditor of his current situation before it gets worst. I am sure being a student these creditors can see there is a financial strain on him already and in most cases would come up with different hardship plans. I have witness case scenario where a creditor would reduce his interest to 0% for a year or even lifetime of the balance if he is able to meet the monthly requirement. Other plans I see creditors offer is to have their client pay a very small monthly payment which is being applied to interest only. I strongly recommend him consult with his lender first and explain his situation to see if they have anything that would work for him, if all fails than I would put off making any payments towards them and save as much as I can until they offer me a settlement which they normally do once they realize the debt is severely past due. If collection calls are starting to be annoying, I contact a performance based debt settlement company which only collects their fees once an account is settle and not front load it thru monthly payments. If I see the settlement process is dragging on too long than I seek advice from a BK attorney. For your information Practical, as soon as you stop making your payments, it remains negative on your credit report for 7 to 10 years. If Zeeshan qualifies for a Chapter 7 and it gets discharge than Zeeshan has a fresh start again and will be able to get credit and buy a home. If you want to learn more about your credit go to http://www.myfico.com a lot of great basic information. I have a question for you Practical, knowing that this person is a student and the only resource this person is receiving is from their parents which can barely cover for rent, food and gas would you suggest they research more on debt settlement instead of helping this person explore every option that might work or fit for them?

  • Practical

    Steve, are you serious?!? Recommending bankruptcy to a student with only $20k of debt and no assets to even be sued for? That is terrible advice!

    Zeeshan before you run out and declare bankruptcy as Steve suggests, ask yourself if you want to buy a house sometime after you graduate? Because you can forget about that for at least the next 10-15 years. It will take a minimum of 10 years to get the bankruptcy cleared from your credit report, during which time you will not be able to qualify for a mortgage. After this waiting period you’ll still need to build your credit to a point that you qualify for a mortgage. Debt settlement affects your score too, but not nearly as bad.

    As for the protection from lawsuits… on $20k of debt the chances of a lawsuit happening are slim to none. Especially when considering that you are a student. I’m guessing you don’t have any assets a creditor can even go after?

    Steve has strong opinions about debt settlement and is quick to illegitimize it as an option. He fails to acknowledge that, literally, billions of dollars in unsecured debt has been settled on behalf consumers.

    I would recommend this article. It’s a fair comparison between debt settlement and bankruptcy.

    http://www.ehow.com/how_200228

    Above all, do your research and compare all options. Don’t think that Steve Rhodes is an authority because, he really has no official qualifications to be giving anyone advice.

  • Practical

    Steve, are you serious?!? Recommending bankruptcy to a student with only $20k of debt and no assets to even be sued for? That is terrible advice!

    Zeeshan before you run out and declare bankruptcy as Steve suggests, ask yourself if you want to buy a house sometime after you graduate? Because you can forget about that for at least the next 10-15 years. It will take a minimum of 10 years to get the bankruptcy cleared from your credit report, during which time you will not be able to qualify for a mortgage. After this waiting period you’ll still need to build your credit to a point that you qualify for a mortgage. Debt settlement affects your score too, but not nearly as bad.

    As for the protection from lawsuits… on $20k of debt the chances of a lawsuit happening are slim to none. Especially when considering that you are a student. I’m guessing you don’t have any assets a creditor can even go after?

    Steve has strong opinions about debt settlement and is quick to illegitimize it as an option. He fails to acknowledge that, literally, billions of dollars in unsecured debt has been settled on behalf consumers.

    I would recommend this article. It’s a fair comparison between debt settlement and bankruptcy.

    http://www.ehow.com/how_2002283_debt-bankruptcy-settlement.html

    Above all, do your research and compare all options. Don’t think that Steve Rhodes is an authority because, he really has no official qualifications to be giving anyone advice.

    • Anonymous

      Practical, I am sorry but your advice is even worst. If you read Zeeshan can barely pay for his rent and food but yet you still suggest him to research on debt settlement versus bankruptcy? You did not make any mentioning of him contacting his creditor of his current situation before it gets worst. I am sure being a student these creditors can see there is a financial strain on him already and in most cases would come up with different hardship plans. I have witness case scenario where a creditor would reduce his interest to 0% for a year or even lifetime of the balance if he is able to meet the monthly requirement. Other plans I see creditors offer is to have their client pay a very small monthly payment which is being applied to interest only. I strongly recommend him consult with his lender first and explain his situation to see if they have anything that would work for him, if all fails than I would put off making any payments towards them and save as much as I can until they offer me a settlement which they normally do once they realize the debt is severely past due. If collection calls are starting to be annoying, I contact a performance based debt settlement company which only collects their fees once an account is settle and not front load it thru monthly payments. If I see the settlement process is dragging on too long than I seek advice from a BK attorney. For your information Practical, as soon as you stop making your payments, it remains negative on your credit report for 7 to 10 years. If Zeeshan qualifies for a Chapter 7 and it gets discharge than Zeeshan has a fresh start again and will be able to get credit and buy a home. If you want to learn more about your credit go to http://www.myfico.com a lot of great basic information. I have a question for you Practical, knowing that this person is a student and the only resource this person is receiving is from their parents which can barely cover for rent, food and gas would you suggest they research more on debt settlement instead of helping this person explore every option that might work or fit for them?

      • Practical

        My only advice was to not put Steve Rhodes on a pedestal and to explore all options.

        I’ve been through the exact same situation as Zeeshan in my own personal finances except I was a student with a lot more debt. I didn’t bother with a debt settlement company, I just defaulted and dealt with the creditors myself. It’s not rocket science.

        I received a LOT of empty threat litigation letters. The reality is that it is all BULLSHIT. They won’t sue you unless it’s a substantial sum of money e.g. 100k+. The amount of legal and operation overhead it takes to do it is just not worth it. Creditors, especially in this economy, write off the debt to a debt collector and it’s easy to settle with them.

        If you’re not comfortable doing it, call a professional debt settlement company to do it for you. I just find the blanket vilification of settlement companies absolutely stupid. Sure there are probably bad apples, but there are bad apples in every industry.

      • http://GetOutOfDebt.org Steve Rhode

        I guess I’m still stuck on how defaulting helps him focus on his situation and how debt settlement is even a possible option if he can’t afford to get by now?

        Knowing that it is easy to rebuild the credit after bankruptcy would it not make logical sense to address the situation with bankruptcy now, discharge the debt in a few months and move on to focus on school and saving?

        In a consideration of all options, why would you not logically consider bankruptcy as well?

        Steve

    • Anonymous

      oh I forgot, you mentioned Zeeshan has no asset for the creditors have nothing to go after? lol are you forgetting that anything can change a year from now, what if Zeeshan situation improves, and Zeeshan finds a well paid job, these creditors can summons him to court and most likely win a judgement and begin garnishing wages? Let suppose Zeeshan situation hasnt changed, still not getting sufficient income from his parent, that wouldnt stop a creditor filing a summonsand most likely will win a lawsuit to place a judgement, which will remain on the credit report for more than 7 years as well?

    • Observer

      Practical,

      Your comment has left you appearing to have less of a command of the issues than you think you do. You are propagating lies that, while common, are dangerous.

      Response to Practical lie #1:
      Current FHA/Fannie/Freddie underwriting standards for home loans are 2 years after a chapter 7 filing. This would mean a consumer can qualify to get a home loan much sooner than the 10 to 15 years your comment suggests.

      Response to Practical lie #2:
      Consumers are sued on a daily basis for virtually any dollar amount. Discover will sue on 1500.00. Capital One will sue on 900.00.

      Response to Practical lie #3:
      You seem to want to speak for Steve in some of your comments. Where you say he fails to acknowledge billions of debts having been settled – He has acknowledged it in other articles on this site.

      Response to Practical lie #4:
      You say Steve is not an authority, but he has been working with many thousands of financially strapped consumers since 1994. What have you been doing since 1994 Practical? What makes you so qualified that Zeeshan should weigh your comments? Your comments are wrong, so whatever your official qualification (if you have any) it is not worth what you paid for it.

      Practical, can you please direct me to your website where you assist consumers who are struggling to find direction in this tough economy free of charge or expectations?

      Based on your comment here, I am already cringing at what might be found on your site.

      • Practical

        #1 – I don’t have a website, I don’t work in the industry, and I’m just an “Observer” who has been through the same situation as Zeeshan.

        #2 – Wow, sorry you’ll have to wait 9 years minimum to get a mortgage. That’s not a lot of time at all!

        #3 – Thanks GetOutofDebt.org police

        #4 – I’ve been through it so it makes me more qualified than you. From what I see he’s an expert in taking pictures of eyes but also spent some time building a company that may or may not have even existed based on the website http://myvestafoundation.org/

        I don’t even really care what Zeeshan does with his finances. In my PERSONAL opinion, declaring bankruptcy on a whim like that is a stupid idea.

      • Observer

        Practical,

        You did not preface your original comment as someone who has been through what Zeeshan is experiencing. Your original comment made assertions that are false on their face while challenging the authority and experience of others who are well established as an authority and as having a plethora of experience. In other words, taking shots at Steve.

        So, as a now self admitted non authority to Zeeshan’s issues you come back and clarify your initial comment and any subsequent comments as opinion based on personal experience. There is nothing wrong with that. It is what I believe part of Steve’s goal for this site is about.

        Having said all that, you come back to continue to propagate and defend a proven falsity you asserted in your original post, by stating:
        “#2 – Wow, sorry you’ll have to wait 9 years minimum to get a mortgage. That’s not a lot of time at all!”
        The underwriting standard used by FHA/Fannie/Freddie when applying for a mortgage after having filed chapter 7 is 2 years from the date of discharge. Please verify this fact directly with FHA/Fannie or Freddie. You can also look to any local bank branch who provides government or quasi government lending options for home purchases for verification.

        Your coming back to post in furtherance of a falsity is a character often found in one exhibiting behavior of a pathological nature.

        You also come back to comment, “#4 – I’ve been through it so it makes me more qualified than you”. You do not know me nor any of what I have/have not been through. This now causes you to appear as egotistical, self righteous and a tad obnoxious.

        You go on to comment, “From what I see he’s an expert in taking pictures of eyes but also spent some time building a company that may or may not have even existed based on the website http://myvestafoundation.org/“. This comment of yours is beyond disingenuous! I cannot fathom the purpose for commenting in this way unless it is due to an axe to grind which causes one to question your sincere purpose to comment or even be on this site. Of course myvesta existed. For many years! There is ample public record to substantiate this, but you either are too lazy to do the research or have an agenda to your posting.

    • http://GetOutOfDebt.org Steve Rhode

      Practical,Actually, I am serious.It takes about two years to rebuild credit after bankruptcy. You can read this guide, How to Rebuild Your Credit After Bankruptcy.A Chapter 13 bankruptcy is reported for seven years, the same amount of time that a defaulted debt can be reported. A Chapter 7 bankruptcy can be reported for ten years but there is no limitation on how long a lawsuit can be filed.Creditors sue students all the time. As one collection manager explained to me at a major credit card company, “They might not have anything now, but they will.” The judgment will sit and earn interest. Besides, this is not about the individual evaluation of cases, this is about dropping another defaulted debtor into the giant hopper. Let’s take a second look at Zeeshan’s situation. He’s a student who needs to focus on making the most of his education. If he’s taking out student loans, one of the most terminal and unforgiving of debts, he needs to maximize the benefit of those student loans by focusing on his education. The last thing he needs is to be under constant stress and worry from collectors, lawyers, and lawsuits. With debt, stress leads to depression, depression leads to the inability to focus or take action, and all of that leads to a potentially long-term negative situation regarding his studies.My overwhelming concern with Zeehan’s situation was that he was unable to pay rent, food, gas and his bills. He was just barely getting by, if at all. He also said that the reduction in payments would be from $520 to $370 a month. A savings of $150. That’s not enough money to call it a safe margin. By his own admission he’s already underwater so that would probably leave him $25 positive each month. In my opinion this situation is not about if debt settlement or credit counseling would be right, it’s about what solution addresses his ability to focus on his schooling, the debt is not dischargeable, and put him in a safer financial position that would allow him to save money to protect himself.As far as me being an expert, I’ll leave that up to Zeeshan to decide. If you want, you can read more about me here.Steve

      • Anonymous

        spoken like a true professional… :)

      • Practical

        I agree, it is up to him to decide. My point was that you made a very clear decision for him which may or may not be the best decision.

        You just said that it’s about the right decision for him. I believe that Bankruptcy should be a last resort. Especially for someone who plans to buy a home in the next ten years. If he was already established and had a home, some states allow you to protect your home from bankruptcy and there are other means of asset protection where he could do that. In his situation he’ll be screwed when he’s just starting out. But hey, with today’s home prices maybe he won’t be buying anything until he’s 35 anyway.

        As for paying expenses, if he defaults he’ll be able to pay for his expenses and if he’s smart he’ll start saving to make settlements… on his own. Ideally he’ll make those settlements on the condition that they are marked on his credit report as ‘Paid’ instead of ‘Settled’.

        I can’t believe that I’ve even spent this much time replying to this thread. I’m done with this conversation.

        Good luck Zeeshan.

      • http://GetOutOfDebt.org Steve Rhode

        Why should bankruptcy ever be the last resort? You make it should as if bankruptcy is not an equal or valid option with other debt relief solutions.

        What other solution provides you with legal protection from creditors, can eliminate your debt quickly, stops or prevents lawsuits, and does not result in any tax liability from discharged debts.

        Your statements about buying a home in the next ten years are completely unfounded. In fact, let’s say he went the debt settlement route as you describe. His defaulted debts will appear on his credit report for seven years. He will probably be sued by one or more of his creditors. He will then have to start saving for a down payment on his new house. It may take him 3 to 5 years to fully resolve his situation on his current limited funds. After than it will take around another 2 years to rebuild his credit and the cost of settling the debt will be around $4,000 when you add in all costs and fees.

        With bankruptcy his debts can be discharged in three months for about $1,500. He will be able to start saving for his new house and emergency fund almost immediately. He will be able to rebuild his credit by year two instead of year five to seven.

        Please factually explain how settling in his situation would be better in case I’m missing something in your position.

        Steve

      • Practical

        Unless it’s at a 90% APR he will not be able to get a home loan for over ten years. I don’t care what the underwriting guidelines are. The subprime days are over.

        He is ‘judgment-proof’. “The effect of being judgment-proof is that creditors may not bother to sue you because they will not be able to “satisfy” their judgments against you.” Even if by some small chance he does get served a claim, he can still settle before or during the small claims process.

        Bankruptcy hurts your credit score more than settlement. If you declare bankruptcy you’ll get slapped down to the 400s. With settlement, you can be more strategic about it. Balance transfer everything to one account and if you can’t keep up on the payments default that one and you only have one account on your report that is not good. FICO is based on number of accounts and their histories. If you have many accounts in good standing and one bad seed it won’t affect your score that much. And if you have only one account that is marked as ‘settled’, it won’t do nearly as much damage to your report as a bankruptcy would. Additionally, he can establish a whole bunch of additional accounts that are 100% secured to game FICO.

        This is all besides the point. He only has 20k of debt! Who gives a crap if he’s stressed out at school. I mean REALLY!? School is the easiest time he’s going to have for the rest of his life. Give me a break LOL!

        Why would he ruin his credit history for the next decade over 20k, especially when he claims to want to make good on his financial obligations?

      • Observer

        Practical,

        At the rate Zeeshan will be able to save and fund settlements, his accounts will have been charged off by the original creditors and he will be negotiating with third parties who have absolutely no control or input for how an original creditor reports to credit reporting agencies. That damage will have already been done.

        Zeeshan will therefore not be in any position to affect trade line credit reporting whatsoever.

    • http://www.debtgotoguy.com DebtGoToGuy.com

      Just to clarify, and not to promote BK or Debt Settlement, what was said above about a bankruptcy disqualifying you from getting a mortgage for 10-15 years is not true. A chapter 7 will disqualify you for 24 months AFTER discharge. A chapter 13 will DQ you for 24-48 months after discharge. Ask any mortgage lender about current underwriting guidelines to verify. During this time, while you are disqualified due to the BK filing, your debt is eliminated, greatly improving your debt-to-income and debt-to-credit-limit ratios. You can also rebuild a good payment history by wisely using secured credit cards so that you will have a good credit score again by the time your disqualification period ends. My girlfriend filed a chapter 7 in April 2008 and her credit score was back up over 700 with all three bureaus within one year. If you want to understand “how credit works” in order to choose your best option to get out of debt, then here’s a free video that makes it easy to learn: http://www.debtgotoguy.com/credit-help/how-credit-works/

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