“Dear Steve,
I owe $26,000 in unsecured credit card debt, plus $6,000 in medical bills from 2008 and 2009. 6 months ago, I turned the $26,000 over to Freedom Debt. Of course, they are taking their fee out first, they have negotiated and settled one $1,700 account for about half.
The last payment goes out to that creditor November 5. Regarding the others, it is apparent they are not going to negotiate until there is money in my account to negotiate with. I just received a call from an attorney requesting I phone them regarding a debt. Freedom Debt says “Do not call your creditors, that will compromise the negotiating.”
My friend, also with Freedom Debt, has been summoned to court over a $17,000 debt to Chase, and they offered $10,000 settlement payable immediately, or a $17,000 settlement, payable in ridiculous terms.
Do you think it is prudent for me to contact my creditors and begin my own negotiations or at least start paying them back for the last 6 months? I do not have any money to send them full settlements, nor even half of the balance. Would creditors listen to little old me in my request to have interest reduced, eliminated, and accept me catching up my past 6 month balances over the next 3 months? Thank you for your help so much!
Karen”
Dear Karen,
This is unfortunately a common situation. Here is the problem.
You have made arrangements and paid high fees with Freedom Debt to make an effort in settling your debts. In the meantime I assume you are sending your money to Freedom Debt instead of to your creditors. By doing that you are clearly in default on your creditor agreements and the creditors can avail themselves of all remedies under the law, including suing you. The fact you are working with a debt settlement company and sending your money there is not a defense.
All this time, your credit report is getting worse and worse. The accounts are showing up as delinquent and the settlements still leave a residual amount of debt that will show as a bad debt for the next seven years.
I don’t know if the person that called you was an attorney or a collector posing as an attorney. And the reason Freedom Debt probably does not want you to call is so you don’t make a promise you can’t pay or will pay them instead of sending payments to Freedom Debt.
All I can tell you for certain is that if you are in default the creditor has the right to sue you at any time, no matter who you are working with, the exception is a bankruptcy attorney. It is up to you if you want to call this person back, it is your debt and your responsibility.
If ever there was a slippery slope, I think this is it. You pay a debt settlement company for services, you don’t have the lump-sum money to settle, and before you can save years of money to settle you get sued and lose. In the meantime your credit is shot and gets worse, collections continues and life does not improve.
My opinion is that bankruptcy is a much better approach than monthly payment debt settlement programs. Bankruptcy blocks and stops all law suits, it gives you legal protection, it is much cheaper than debt settlement, and it let’s you start your life over now.
Karen, I think you owe it to yourself to find a local bankruptcy attorney you like, make an appointment, and go in and discuss what advantages bankruptcy might offer you. Only then, with that legal advice, will you be able to make informed and educated decisions about which path is right for you.
Please update me on your progress by
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