“Dear Steve,
I am in over my head and I really don’t have a clue if I can ever get out of debt. I have six credit cards, most of which i have closed.
I currently am making minimum payments on my credit cards (6) and the loan I took out from Bank of America. Totally I owe 30,000 with varying rates from 17 to 21. I can make the minimum payments but things are starting to get tighter and I am concerned that if they raise my apr I will not be able to make the payments. Last month I got 7 letters from Bank of america cancelling my account (did me a favor) changing me from fixed rate to variable rate and then back again. They also sent me a letter saying if I was having prob lems they had a list of dmp that they could put me in touch with.
Are debt management programs for real because when I mentioned it to the guy at Capital one he gave me the impression that I would be taken to court if I tried to do this. Would they really take you to court even though your working with a debt management program.
Thanks
Kim”
Dear Kim,
Debt Management Programs (DMPs) are for real and legal but they have no power of law behind them, give you no consumer protection, they are not binding on the creditor and give you no rights. They are a voluntary program put in place by the creditors in an attempt to recover money from you. And they are not very effective. See, The Truth About The Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy.
The largest problem with a DMP in your situation is in a DMP your monthly payment is just about the same as the minimum payment not in a DMP. So if it won’t reduce your total monthly payments significantly then how would it benefit you? It doesn’t really matter than some of the interest rates would be reduced if the payment is not manageable or sustainable over a five year period.
If you were working with a Debt Management Program it is highly unlikely that Capital One would take you to court as long as you are making either the contractual minimum payment required by Capital One or agreed to by Capital One with the DMP provider.
If you want to try to get some interest relief and lower your over all payment the first step would be to explore the peer-to-peer lending network, LendingCLub. You may be eligible for a lower rate debt consolidation loan for up to $25,000 of your debt from LendingClub.com.
Outside of that, the only way to get your interest rates to 0% and repay what you can reasonably afford is in a Chapter 13 bankruptcy plan.
Unfortunately you are right where the creditors want you, heavily in debt, stuck on their cards, and with few options.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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