$38,000 in debt; never late; strong income; want to get rid of debt completely.
Have you ever heard of Diamond Financial Group? What do you think about debt settlement companies? Is this a good way to get out of debt?
I have not looked at the Diamond Financial Group site before.
But here are my observations from looking at it today. Much of the site looked fine and they avoided any statements about the amount of debt to be reduced, etc.
I was a bit concerned about their page describing debt settlement. It seems like it omits a lot of critical information that is required in the TASC disclosure on their site. It appears the settlement page (source) makes some statements I find worrisome:
They say, “Unlike other debt relief options, with debt settlement, we negotiate a payment for less than the amount owed, to be considered as full satisfaction of that debt.”
But a Chapter 13 bankruptcy also does this and a Chapter 7 bankruptcy completely eliminates your debt.
They say, “By partnering with a reputable organization, you will experience immediate positive benefits and save money over the long term by settling debts for less than the full amount (which includes late charges, over limit fees, and interest charges).”
But unless you have the funds on hand to settle right away you are probably going to default on your debts, wind up in collection and risk being sued and having your wages garnished. Additionally the balances of the debts you enroll in the program will grow from late fees, penalties and increased interest rates.
They say, “This process allows you to handle your debts over a much shorter timeframe putting you back on track to taking control of your finances.”
But a Chapter 7 bankruptcy can take a few months to fully eliminate your debt and I would question if they have proposed a plan to fully eliminate your debt that takes less than three or four months.
They say, “Therefore, debt settlement is one of the fastest debt resolution options available.”
See my answer above for this one.
Now if I show you the disclaimer they offer through the TASC link on their site you will find it differs greatly from the sales messages on their debt settlement page.
Here is the TASC disclosure. – Source
Most creditors and collectors negotiate with Debt Settlement Service Providers. Diamond Financial Group cannot force the negotiations and cannot force creditors to accept a settlement. Diamond Financial Group does not make regular monthly payments to your creditors. Your creditors may continue collection efforts on delinquent accounts while you are enrolled in a Debt Settlement Program. Such collection efforts can include phone calls and letters to you, charging off the account, sending accounts to collection agencies or attorneys, lawsuits and even garnishments of your wages if a judgment has been obtained. Diamond Financial Group makes no claim that it will be able to stop these collections activities. These activities may continue while Diamond Financial Group is making its best efforts to negotiate your debt.
The debt settlement page on their site also makes no mention of the potential tax consequences you have in settling your debt as opposed to discharging it with bankruptcy.
Above you will see the side-by-side comparison chart they have on their website. – Source
But the comparison chart seems lacking. It marks a ‘no’ for seeing your accounts online for Chapter 7 bankruptcy but you don’t need to. Once they are included in your filing that’s it. And as I mentioned before there is no mention of tax consequences and a comparison of those with bankruptcy, for which there are no taxes due for forgiven debt.
I also could find no mention on their site about fees. It’s really important for you to know that soon debt settlement companies will not be able to charge you fees before your debts are actually settled and as of September 27, 2010, debt settlement companies must offer you “good faith estimates” on their performance. See this guide for details.
My vote is if they are going to charge you in advance of settling debts or can’t provide their good faith estimates on their performance, keep looking.
it seems like it would also be prudent to talk to a local bankruptcy attorney before you do anything so you can understand what bankruptcy would mean for you.
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.