I’m self employed with about $70,000.00 in credit card debt a large a large part of which came about from marketing expenses over a period of years.
I have been in contact with two companies, Impact Debt Relief and Freedom Debt Relief and have discussed their debt reduction programs with each.
Impact quoted a 10 percent fee (they later offered a reduction to 8 percent) and Freedom 15 percent (un-negotiable) that, as I understand it from Freedom’s explanation, accumulates from monthly I’d make into an account used first to cover their fee and then to begin one by one, starting with the smallest, paying off each of my accounts after they have been negotiated down to as low as 40 per cent of the original balance.
I also spoke to one of my credit card companies, BOA, who said they have a program where they will work with my other creditors to coordinate/manage and resolve my debt. After going through my finances with the gentleman from BoA, however, he said that currently I have a shortfall of approx. $1600.00 a month and would not qualify for that program.
While, due the cyclical nature of my business, I do anticipate and am already seeing an upswing that I think will resolve the shortfall, I don’t know any of these programs are viable.
Do you know anything about the legitimacy of either of the debt reduction companies I’ve mentioned or of programs like the one BoA mentioned or, if any or none of them is advisable for someone in my situation, are there any programs you know of that actually are?
As of October 27, 2010 it will be illegal for debt settlement companies to charge you any advance fee before actually settling your debts. In addition, by September 27, 2010 debt settlement companies will not be able to make unsupported claims to induce you into buying their services. These claims would include statements of debt reduction without giving you a good faith estimate of their actual performance.
It’s interesting to note that Freedom Debt Relief recently issued a press release supporting these changes, here, in which they said the CEO of Freedom Debt Relief, Andrew Houser, said, “..we believe there is more good in this rule than bad, and are looking forward to the positive changes it will bring to our industry.”
But based on your question both debt settlement companies appear to want to still charge you fees in advance for their services. If you decide that you do want to use their services I would suggest you wait until after September 27, 2010 or ask them for a performance based contract for services now.
The Bank of America program, if it included your other cards, was probably a standard debt management program. It does concern me that you are that negative each month on your cash flow. That indicates to me your current income is way below the minimum payments your creditors are expecting.
Enrolling in a debt settlement program may sound “wonderful” with creditors reducing your debt and all that but you need to know some things.
In a debt settlementt program:
- when you stop paying your creditors your credit is damaged;
- when you stop paying your creditors you will wind up in collections;
- the debt settlement company can’t make the collection calls stop;
- once you’ve defaulted on your debt you can be sued;
- the lawsuit will show on your credit report;
- following that you could have a judgment issued against you; and
- you may subsequently have your wages garnished.
In order to make the best decision possible for you based on reality and your specific situation you may want to contact Damon Day for an extended consultation and click here to find a local bankruptcy attorney to learn more about what bankruptcy would mean for you.
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