Isabel wrote to me through the GetOutOfDebt.org site and asked the following question. 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.
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“Dear Steve,
I have $120,000 in credit card debt. This is due to a 3 year court case and paying attorney bills by credit card. My credit rating is 670+ and I have no late payments despite my 72% debt to income ratio. I am considering debt consolidation, debt elimination or debt invalidation. I don’t want to hurt my credit rating but this seems inevitable regardless of the debt program I opt to do.
What program would be best for my situation to lower or eliminate my debt with little or no damage to my credit rating? Is debt invalidation legal?
Isabel”
The Answer:
Dear Isabel,
Seriously, the lottery. Any sort of debt consolidation, debt management, debt invalidation or debt settlement program can or will have a negative impact on your credit rating and score. But that’s not such a bad thing.
Programs to lower the amount of debt or interest rates you are paying are to help people that can’t pay their bills, not for people that just want to pay less.
If you have an extra $70,000 laying around then look into debt settlement.
If you can pay the minimum payments but sinking then try debt management.
With a score of 670, your credit has already taken a hit and it probably won’t improve until you start reducing your debt levels.
Not many people mention debt invalidation to me but I think debt invalidation can be best summed up by this quote, “Debt invalidation, also known as debt elimination, debt resolution, debt reconciliation and debt termination, is based upon a dishonest and unethical theory that banks are not legally permitted to extend credit, thus no money is owed and the debt is invalid.”
I’d have to place the debt invalidation approach into the same bucket with the people who believe that it is unconstitutional for the government to collect income tax. Technically both arguments might have some merit but I’ll leave it up to others to work those strategies out the IRS and courts.
