“Dear Steve,
I read your on line free book about eliminating credit card debt like a pro-I wish I read it earlier–i contacted a debt management company in 5/09 and began paying 800+/mo and quit paying my creditors at their direction after being current up to that point.
I am becoming disillusioned with the program as they will not begin working on debt until 4 payments are made and at that time they said that they will only work on the smaller debts first.
I’ve begun to talk to creditors the past couple of weeks to get a feel of what they will accept–I was told not to talk to them by the debt settlement company. My discussions to date have indicated that they are not willing to eliminate any percentage of debt, they offer arrangements with monthly payments that I cannot afford with no set term or terms of only 12 months with no reduction in the balance beyond what I pay and automatic deduction from my checking account.
Some have indicated that they are no longer dealing with debt settlement companies. I owe approximately 60,000 (as of 5/09 when I requested closure of the accounts along with hardship circumstances in letters to each creditor) and have determined approximately 900 available for debt payment (if I discontinue payments to the debt settlement company) using your worksheets/calculations. % debt of debt paid over 36 months and 60 months would be 53%-59% and 87-99%, respectively to the creditors owed as of 5/09.
I have no savings at this point as all have been consumed paying minimum amounts. I am working. I do not have any credit cards open and am determined to eliminate this debt and concede to ruining my credit rating. However, interest rates have been jacked to the max and balances continue to grow.
How do I get my proposals to people who can make the decisions? Do you have such contacts that you will share as stated in your book? Should such proposals be be submitted in writing? Should I contact an attorney to submit the proposals? I have gone through the different emotions described in your book and at this point feel as if I have no trusting source to turn. I know I have asked more than one question but need answers. Thank you–you provide hope during difficult times.
John”
Dear John,
I’m glad my free downloadable book “Eliminate Your Debt Like a Pro” was able to help you see things a bit clearer.
I’m so proud of you for picking up the phone and calling your creditors and having that conversation with them that they may not engage in debt settlement or may no longer participate with debt settlement companies.
It is only a matter of time before Chase, Bank of America, Citibank or Capital One is named in a lawsuit against a debt settlement company. At that point, I would suspect that some of the major creditors will stop playing with the debt settlement companies and these plans will be quashed.
The reason the debt settlement company withheld payment to your creditors is so you will be 90 to 120 days delinquent on your debts. This can lead to you being sued for non-payment, and what will your defense be? “I had the money but elected to send it to a debt settlement company instead.”
The fact that you can only afford $900 a month on $60,000 worth of debt tells me that while creditors may give you hardship terms right now to lower the payment and get you started in debt repayment, there is no guarantee they will continue those terms. If they don’t, six months or a year from now, you’ll find that you’ve delayed addressing your financial situation and only thrown money away in a course of action that did not resolve the debt.
If I put you first then the safest approach for you is to enter bankruptcy at this point to get the legal protection from being sued from the now missed payments. I doubt you’ve got cash on-hand to get yourself caught back up.
You’ll probably wind up in a Chapter 13 bankruptcy plan where the payment will be based on what you can afford, not what the credit counseling or debt settlement company want.
You should be able to start saving at that point a work on building your very important emergency fund or savings account to protect you against unexpected financial emergencies that otherwise would have wound up on the credit cards.
If you want to honor your promises to your creditors in paying back your debt, there is nothing to prevent you from repaying creditors from debt that has been forgiven in bankruptcy.
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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