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David Bach The Automatic Millionaire

David Bach, The Automatic Millionaire

Between Unruly Debt and Bankruptcy, a Settlement Solution

by David Bach

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Posted on Monday, March 10, 2008, 12:00AM

In the reader comments for my last column, some of you raised the issue of debt settlement. This differs from credit counseling and debt management plans (DMPs) in that debtors pay creditors a negotiated percentage, rather than the full amount, of their debts.

A Rock and a Hard Place

DMPs can get you lower interest rates and flexible payment schedules while you work out your debt problem. They'll also help you manage your finances to avoid trouble again. If you can find a way to pay your debts in full using a DMP, that's probably best for your credit profile.

But what if you simply can't? What if you have large medical bills, illness, unemployment, divorce, or other big and unforeseen financial problems?

You may find yourself caught between the rock of bankruptcy and the hard place of an unmanageable debt load -- with no real way out. You may have stopped making payments on all or part of your outstanding debts, or you may have reached the point where your debt has been sold off to a new creditor.

Dwindling Options

For many years, bankruptcy was the primary vehicle for those otherwise unable to cope with an impossible debt load. But now that's become harder, too, with new laws that took effect in late 2005.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was designed to limit "abusive" consumer bankruptcy filings. Among other provisions, it forces a more stringent means test to qualify for a Chapter 7 liquidation-of-debts bankruptcy.

The new law effectively lowers income thresholds and assigns higher values to personal assets you own. If your income exceeds state median income and you can pay as little as $100 a month after housing, car payments, past-due taxes, and child support, you may not qualify for Chapter 7. Those not qualifying for Chapter 7 can file Chapter 13, but Chapter 13 requires eventual repayment of all secured debts and as much unsecured debt as possible.

Settling for Less

The means test and other provisions of the law require more paperwork and attorney involvement, effectively raising the cost of the bankruptcy process for either "chapter." You must show that you've already been through credit counseling, and there are new limits for the number of times someone can file for bankruptcy in a given period.

In a nutshell, bankruptcy is still possible, but much more difficult and expensive for those in dire straits. That plus the fact that the designation "BK" leaves the biggest hit on your credit record make it clearly not a good place to go.

So what can you do if bankruptcy isn't an option, or not the route you've chosen to take? There's another way: Under the right circumstances, you may be able to negotiate a debt settlement for your unsecured debts like credit card or hospital bills. A debt settlement allows you to discharge debts for some percentage of the full amount.

How Debt Settlement Works

Like DMPs, debt settlement is typically handled through a company specializing in managing the settlement and dealing directly with the creditors. As with credit counseling, there are legitimate players -- and more than a few swindlers.

First, the debt settlement company will screen you to decide if you're a good candidate. According to David Leuthold, vice president of the Association of Settlement Companies (TASC), about 40 to 60 percent of those who approach a settlement company are considered eligible based on their debts and personal financial situation. "Eligible" usually means you have too much debt for any foreseeable income to handle, are unable to make minimum payments, and have indeed stopped making payments on the debt.

If you qualify, you'll enter into a contract with the debt settlement company. The contract will spell out the actual costs of the program (discussed below) and will include a series of standard disclosures. As always, when you sign anything, be sure to read it in its entirety. And if there's anything you don't understand, be sure to ask questions.

The company then negotiates a plan with each of your creditors to pay a percentage of the outstanding debt. That percentage varies by case. Most settlements are 50 to 80 cents on the dollar, but creditors may occasionally go lower. Your accounts with these creditors are effectively closed; you may be allowed to keep or obtain one credit card for emergencies or other purchases, like renting a car, that require a card. When the settlement company gets an agreement with a creditor, they (and you) get a settlement letter describing the terms of the settlement.

The Payment Process

Next, the debt settlement company works out a payment schedule that you'll adhere to, typically over a two- to three-year period based on the settlement sum. It's important to note that a reputable debt settlement company will never take your payment directly -- that wouldn't comply with TASC standards.

Instead, money can be saved in your own bank account, or more typically with a third party payment processor or "money transmitter" firm, usually one of two firms specializing in this activity. The account, like an escrow account, is set up in your name, usually with regular automatic drafts from your checking account to fund it.

The debt settlement company gets information from the payment processor, and should give you online access to your debt settlement account with monthly statements. When sufficient funds are accumulated, creditors are then paid, and letters are exchanged confirming discharge from your debts. (Be sure to keep a file of all of your records.)

A Rating Hit

Your credit record will then be updated. In some cases, the company may be able to negotiate a more favorable wording for your credit record, like "paid" or "settled." According to Leuthold, however, companies "usually can't dictate what creditors will report."

A settlement certainly won't help your credit rating, but it isn't as bad as bankruptcy. Your rating will suffer during the settlement period because payments don't go to the creditor until the lump-sum settlement has been accumulated. Once the settlement is handled and documented correctly, the creditors can't approach you for more.

Take Precautions

There are many advantages of debt settlement. First, it can help you avoid bankruptcy, which will allow you to rebuild your credit sooner. It also reduces your liability and provides peace of mind by doing away with further harassment by creditors.

For many, it's the only solution. But be aware of the following when considering debt settlement:

• Cost: Debt settlement is a service, and you pay for it.

There are two fee models: a flat, upfront 15 percent of the outstanding balance, or 25 percent of the reduced amount. Some experts recommend the latter because it rewards a better and faster settlement. You also need to understand how creditor fees and interest will accumulate during the settlement period.

• Tax liability: The IRS generally considers discharged debt to be income. You'll get a 1099 for the discharge amount, and will owe taxes on it.

• No guarantees: It's all up to the creditors, and "no deal" is a possible outcome.

Also note that debt settlements don't work for secured debts -- mortgages, car loans, etc. -- where repossession, not settlement, is the remedy. (That said, in his March 4, 2008, speech, Fed chairman Ben Bernanke called on bankers to take a new look at settlement for mortgages.)

Finding Reputable Debt Settlement Firms

If you're already working with a satisfactory credit counseling agency, they may be able to handle a debt settlement for you, or refer you to a settlement company. If you know someone with a positive debt settlement experience, a personal recommendation is always good to follow.

If not, log on to TASC's website. In existence now for two and a half years, this trade organization has the dual mission of standardizing debt settlement procedures among its 115 member companies and working a legislative agenda with government authorities. "Our companies have a strict code of ethics and disclosure," says Leuthold.

If you go down the debt settlement path, I strongly recommend working with a TASC member company. And my usual advice applies here as well: Always check out a company with the Better Business Bureau before you hire them.

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45 Comments

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  • Yahoo! Finance User - Monday, March 17, 2008, 4:48PM ET  Report Abuse

    • Overall: 5/5

    Look Debt Settlement companies are a real option if you are truley struggling between continuing to plunge into debt or thinking about bankruptcy. I worked with one company and I had a 30000$ debt I mangaged to settle all debts for less than half exactly 14,200$. The reasons why banks are willing to do this is A. They already made a killing off you purely on interest. B. Because if you go 6 months past due they sell your debt to the colection agencies at 10cents on the dollar roughly 10percent of your total debt. So instead of the lenders losing 90% they much rather settle for 50% of the total debt. Sure your credit score may take a hit but its better than bankruptcy and it looks better than a 3rd party intervention(such as consolidation or credit couseling. This shows the lenders that you coudn't pay your own bills and someone had to step in and pay them). Plus to those people who hold thier credit score so dear . IF YOUR OVER 10 GS IN DEBT TRUST ME YOUR NOT GETTING THE LOAN ANYWAYS. Wake up and free up your cash.

  • Yahoo! Finance User - Monday, March 17, 2008, 11:24AM ET  Report Abuse

    • Overall: 4/5

    One doesn't need to find an agency to do debt settlement on unsecured debt. In fact, the settlement agencies charge fairly large fees and negotiate settlements in their best interest not necessarily yours. You can do it yourself with a little bit of patience and time. I've helped a couple of my friends do it. All you need to do is obtain your credit report and start sending letters to lenders that you actually owe a debt to. You will want to offer them a percentage of whats owed typically based on how long it has been since you last made a payment, and if it's a collection agency or the actual lender. Make them low-ball offers such as 10, 20 or 30% of the amount owed. The lender will almost always come back with a counter-offer and a phone number to call them at. Call them and try to negotiate a lower amount than their offer. Don't pay anything over 60% of what is owed after subtracting any collection fees and/or late fees they may have assessed. If they will not negotiate refuse to agree to anything, wait a couple of months and try again. In almost all cases once you get an agreeable amount you can negotiate the information that they will place on your credit file. You can demand that as part of the agreement they say that the amount was paid as agreed or paid. Get everything in writing before sending them the money. Once you do this, you can prove that there was an agreement if it continues to show up on your credit report. Another couple of things to remember. You DO owe the money because you borrowed it but it is an unsecured debt. Actual costs of collecting unsecured debt through the courts is often very high and usually (except for very large amounts) not worth the costs. You often have the upper hand in negotiating because it's already on your credit report anyway and that's what they use initially to negotiate accounts in collections. Collection agencies are often happy to take what they can get.

  • Yahoo! Finance User - Monday, March 17, 2008, 11:01AM ET  Report Abuse

    • Overall: 5/5

    It seems to me that a lot of people leaving comments seem to have no factual information nor idea of what they speak. To begin with, Credit Counseling (which is completely different from DEBT SETTLEMENT) are the ones who are sponsored by the Credit Card Companies! The debt settlement companies do NOT receive compensation from the creditors, so do have to charge a fee. However, even in doing so, they typically are offering a monthly payment reduction of which is what most people are need. In addition, fees are charged on your initial debt, so they CAN BE your best advocated in getting you the best settlements possible. Plus if its a company worth its weight, then you will be included in that process! So you know with whom and what you are settling for each debt. Granted your credit WILL take a hit while working your way through the process, but it is still better than doing a bankruptcy which goes on your credit report for 7 to 10 years (and public record for life), while any good debt settlement company will have you free of your debt in 36 months or less. After that, you can always rebuild your credit rating. Beside if you're already in so much debt, what is your credit doing for you to begin with?!? Is having a "good credit rating" helping to lower your payments? Probably not because your debt to income ration is too high. With regard to getting scammed, well that can happen in any industry...Caveat Emptor...buyer beware! So its up to the consumer to make sure that they are working with a reputable company! Do your own research and back ground check with the BBB, NetCheck and make sure that it is an ACCREDITED MEMBER OF TASC! When checking with BBB, make sure that its actually listed as a debt settlement company and not just some mortgage company or attorney trying to do settlement without having the expertise, experience and established relationships with the creditors to negotiate down your debts for you! Debt settlement isn't for everyone, but it is a much better solution that bankruptcy!

  • Yahoo! Finance User - Sunday, March 16, 2008, 8:53PM ET  Report Abuse

    • Overall: 1/5

    This is horse manure! Debt intermediaries are funded by lendors, and the most notorious are the credit card companies! What the beleaugered creditor is defacto doing is giving the agents of the credit card companies a material say in their personal credit debacle at a time when they are least able to think in their best interest. The best option is to truly manage as best you can, or suffer the pain and embarassment of bankruptcy. The intermediary will look to "suck you dry" for the benefit of its financial sponsors, who most often include credit card companies. This is extremely poor advise to the consumer.

  • Yahoo! Finance User - Saturday, March 15, 2008, 6:40PM ET  Report Abuse

    • Overall: 3/5

    A friend of mine recently settled credit card debts of $75K for 50 cents on the dollar. Guess what? The bank turned around and sold the accounts to scum bill collectors and now the guy is being hounded every day. This will likely go on for the next 15 years. Why settle with a bank when they'll only turn around and sell the account to a collector? My advice: don't fall from the settlement scam. Keep you money, move it into exempt assets, and then file bankruptcy. Trying to do the right thing doesn't pay.

  • Yahoo! Finance User - Saturday, March 15, 2008, 6:05PM ET  Report Abuse

    • Overall: 1/5

    i blame this on ......Credit Card Companies , Businesses who laid off there employees , Gasoline Companies , and the Lazy President we've now ,Bush , he hasnt helped this economy , and no I'm not a democrat , I was a Republican , I don't believe anything Companies / business and lazy president says .....They only tell you , what you want to hear .....THEY aren't worried about you .. YOu're to defend for yourself " it's all man to thereselves " ......ALL POLICTIANS will lie to you no matter who they're ......Look at the gas prices , food prices , jobs , housing . The money you will recieve in May , you will have to pay taxes on it , nothing free ....drive to and from work , stop by the store after work , if needed , conserve on your gasoline .......BUDGET YOURSELF .........

  • Yahoo! Finance User - Saturday, March 15, 2008, 3:43PM ET  Report Abuse

    • Overall: 1/5

    What's the FICO for Ken Lewis of Bank of America and Chuck Prince, ex-Citicorp? Moreover, what the Fed's and the US Congress' score: not so great according to Gold (the only constant in a world of colored paper).

  • Yahoo! Finance User - Saturday, March 15, 2008, 12:17PM ET  Report Abuse

    • Overall: 1/5

    You are clueless. "Settling" on a debt will whack your credit score just as bad as a bankruptcy. I know, I've been there. 2 years after "settling", my score was so low I had no credit. Mounting medical bills and a lawsuit allowing my ex to get back part of my share of our marital assets forced me into bankruptcy. I asked that my debts be "relisted" afterwards, which in effect, gives you a clean slate so that ONLY the bankruptcy shows, none of the details. This can't happen with a settlement. 2 years later and my score is over 600 and heading on up. I have a home, a car and two credit cards that I use for business. The old debts I settled on are still showing on my reports and holding down my score. Had I not done that I would be much better off now. Credit scores do not work the way news pundits claim. The best way to figure out what to do is to use a credit score calculator and run the various scenarios through it. Be aware that not all the credit bureaus are on the up and up. Experian has massive mistakes on my credit report and refuses to correct them despite repeated requests and mailed proof that they are in error. They are more than 100 points off of the other two bureaus. That should be illegal. Credit is all a scam, I use cash whenever possible now.

  • Yahoo! Finance User - Friday, March 14, 2008, 8:53PM ET  Report Abuse

    • Overall: 1/5

    Mr. Bach, don't you feel embarassed that most of these people commenting know far more than you about the topics you write about?

  • Yahoo! Finance User - Friday, March 14, 2008, 10:04AM ET  Report Abuse

    • Overall: 1/5

    If you can't afford your subprime loan payments: 1. Bank seizes collateral property 2. Bank sells property at auction 3. Bank applies sale value to total debtor owes 4. Debtor now has remainder of loan period to pay back remaining amount that was borrowed, but not recovered by auction If debtor was able to qualify for original loan surely they would have no problem paying the reduced amount. Just the fact that the payments wouldn't include fire insurance nor property tax might be enough to help them meet their contractual obligation. The bank depositors get all their money back. The failed house flippers get to keep their credit ratings. The housing market is free to set price based upon supply and demand. Unfortunately the Bushtard has signed legislation removing taxation on the canceled debts. This was exactly opposite of what should have happened. Joe Blow now has every incentive to walk away from his $400k loan on his $200k house, then purchase the nicer $205k house across the street using his spouse’s, uncles, mother’s, sister’s clean credit. Congress and the Bushtard should have placed a 105% tax on canceled debt, with the proceeds from the tax going to pay FDIC insurance claims of failed banks.

  • Yahoo! Finance User - Friday, March 14, 2008, 7:24AM ET  Report Abuse

    • Overall: 4/5

    I was in debit with credit cards and collectors on my back all the time, paying them very high payments and only $5.00 going to the principal. I kept paying after being late many times, with a credit score of 480, after selling my home, paying off a few things and paying some to creditors, my credit score increased. I have no cable TV, and use my friends computer for the Internet. I do not have a cell Phone any longer, I went to a Land Line, and watch my electric bill, I line dry my cloths. My credit score came up to 550 and a Bank gave me a loan to pay off all the Credit Cards and after 2 years my credit score went from 480 to 615 and going up slowly. ADVICE.... DO NOT stop paying the credit cards, late payments hurt you very bad!!! They do not want to here any sad stories, just tell them this is all you can do and to take what you can give at this time and you NEVER tell them how long you will pay a lower payment, or promise to pay them any amount at any time. They record every thing and will use it against you full force. Do not let them call you at work, send a letter with proof of delivery with a signature, yes it cost money but worth it. If they call you at work YOU call a layer and tell the layer you told them to stop in writing. BUT they can call you until they sign the receipt, so after that date you have a case against them. If they call you at home and leave a message, no matter how bad you do not want to call them, call them! You must talk to them, even when you are scared as I was. Stick to your plan and keep paying any thing! GOOD LUCK!

  • Yahoo! Finance User - Thursday, March 13, 2008, 5:10PM ET  Report Abuse

    • Overall: 2/5

    To anyone considering hiring a debt settlement firm, think again. What they do tell you is to pay their fee and start making your monthly "affordable" payment. What they don't tell you is that you will have lawsuits brought against you if you are not able to pay the reduced offer the credit card company is willing to settle for. You may only have $1,000 saved and an offer comes in to settle your account for $3,000. Unless you can come up with that money the credit card company is going to take action against you and your debt settlement firm will only be able to give you general advice. Instead, call your creditors and try and work something out. They may accept lower payments while you pay down your higher, more overdue debts.

  • Yahoo! Finance User - Thursday, March 13, 2008, 6:26AM ET  Report Abuse

    • Overall: 3/5

    the very first comment by "academyof financial literacy" is on the money!!! this article is only half the story. the new bankruptcy law only affects %2.5 to %3 of people who would not qualify now for bankruptcy but would prior to the change. this fallacy that bankruptcies have been dramatically reduced is laughable. also, as financial academy pointed out - your credit rating under a "repayment negotiation" will most likely drag on for years and reduce your credit score for a longer period of time !!!! i know, because i was considering it 5 years ago when i lost my job. i had a good credit rating from 780 - 820 for many years and then WHAM - lost job and went downhill financially. the problem then was that i had high debt but i was comfortably making payments and never late for 12 years. it took a long time to find another job and i wasn't making nearly as much as i used to - i couldn't believe i would face the prospect of BK !! BUT it happened. my credit score only really sucked for about a year and then i gradually built it up to about 690 now which is average according to the charts. NOW compare this to a "negotiated repayment plan" and i would still be under the gun making payments to a 'SERVICE" AND CREDITORS with STILL no end in sight - 5 years later - and my credit would still suck in the 400 range. do research before you go for one of these "plans" cuz a service will definitely make money off of you.

  • Yahoo! Finance User - Wednesday, March 12, 2008, 8:54PM ET  Report Abuse

    • Overall: 2/5

    Aain this article is half correct. The new bankruptcy laws have not slowed bankruptcy. 2007 over 800,000 filed and 2008 is on course to hit 900,000 back to the 1 million before the new law. The part about credit scoring is totally wrong. Debt Settlement can do as much and in many cases more harm than bankruptcy. Bankruptcy is quick and clean. Debt Settlement drags on for years and your credit is dragged down as far if not worse. This article is not giving facts based on the FCRA or FATCA, Federal Acts. Debt Settle is not recommended in my books nor by most financial adivsors who know their stuff. The IRS has the right to treat the charged off amount as income if they choose and it is not the same as a short-sale of a home. Homes are secured debt and debt settlements are unsecured debt. The people posting are giving bad info also. David is a very average financial advisor and this article is poorly written with many holes and missing facts about the real truth. Bankruptcy is growing faster than Debt Settlement and it is not that hard to file for bankruptcy as this article states. Read the new laws David!!, very below average article, state facts and truth and back them up with government statistics. If you need my help I can.

  • Yahoo! Finance User - Wednesday, March 12, 2008, 7:20PM ET  Report Abuse

    • Overall: 2/5

    Sort of interesting article but stops short of exploring possible solutions of borrowing against ones 410k or tapping iras. Yeah, we all know the arguments but any lifeboat is better than treading water.Also bankruptcy is not really all that hard or as expensive as one is lead to believe.A little harder but is still a good solution for some.As for cooperation from creditors, well good luck with that. Sharks can smell blood in the water for miles.

  • Yahoo! Finance User - Wednesday, March 12, 2008, 4:46PM ET  Report Abuse

    • Overall: 4/5

    The article was well written and very informative. Whether DMC's are a viable way to go is another matter. The author is only informing, not particularly recommending anything. Let the buyer beware is always the case.

  • Yahoo! Finance User - Wednesday, March 12, 2008, 4:46PM ET  Report Abuse

    • Overall: 2/5

    Here's a simpler solution: DON'T GET INTO DEBT. Last year I saved over 20K, this year I get to spend 70% of it, and then I'll save again and spend 70% again and so on and on....you know, like it was before Credit Cards.

  • Yahoo! Finance User - Wednesday, March 12, 2008, 1:49PM ET  Report Abuse

    • Overall: 5/5

    You can also settle your own debts without hiring a debt settlement company. There is a Do-It-Yourself Debt Settlement Kit at http://www.diydebtsettlementkit.com that shows you how. Other sites with DIY Debt Settlement kits include zipdebt.com and debtsnap.com. Either way you go, it's worth the time to check into DIY information kits as well as debt settlement companies (in fact, I would suggest getting a kit before contacting any debt settlement companies because a kit will teach you a lot about the debt settlement process and that way you can be more involved with your debt settlement program if you decide to hire a debt settlement company).

  • Yahoo! Finance User - Wednesday, March 12, 2008, 12:27PM ET  Report Abuse

    • Overall: 2/5

    These debt restructuring companies are a scam, They guarantee nothing and charge you extra money to do it. Look what happens when you are a bank. The Fed basically bails you out. If you're a little guy - Well shame on you according to Paulson. What hypocrite's. If you can BK7, or walk away do it. This is a chance of a lifetime.!

  • Yahoo! Finance User - Wednesday, March 12, 2008, 7:46AM ET  Report Abuse

    • Overall: 4/5

    debt management companies are scams. you don't even know if the dmp is making your payment on time. you have strangers taking your money in your bank account. debt settlement companies are scams also. they charge you a huge fee first before you can save to settle the credit cards. never give any of these companies electronic access to your checking accounts. they can go in there anytime if they want to. pay the credit cards on your own. you know that the creditors will get there money. listen to dave ramsey. he's the man who knows his financial stuff.

  • Yahoo! Finance User - Tuesday, March 11, 2008, 7:40PM ET  Report Abuse

    • Overall: 5/5

    After reading the one star posts, it is obvious that most of them did not bother reading the entire article if any of it at all. DB never stated it was the only solution, just that in his opinion, it was one of the better options. Nor did he say that it would leave you with a nice, shiny, new credit record. One of the posters complained about the wording that creditors used in debt settlement. Hello... DB clearly stated DS companies cannot dictate what wording the creditors will use to close the account. My guess is that a lot of these one star posters are people who got into credit trouble and found out that debt settlement doesn't give them a clean slate. Guess what? None of the options available for debt management will do that. The only thing that will do that for you is time (after the debt has been settled by whatever means). If you are in credit or debt trouble, you would probably be wise to seek some sort of financial advice as to what you can do to resolve the problem with the least damage to your credit report. If you can, by all means, try to negotiate with your creditor yourself first but ALWAYS be polite! You do not want tick off the guy you owe money to! I already know from experience that medical providers can be very flexible in making payment arrangements. If you get hit with a big medical bill that you know you are going to have trouble with, call the provider immediately (you might have to talk to more than one person). Do not wait until they take action and give your account to a collection agency. Calmly and politely explain your circumstances, your willingness to pay and then negotiate the smallest monthly payment you can arrange with them. They may not be happy with that, but I have had yet to have one turn me down. After that, make sure you pay at least what you agreed on and whenever possible, pay a little extra (they like seeing that). I see one of the other posters caught on to the the Primerica promotional. I have no real experience or knowledge of them and they may be perfectly reputable. HOWEVER, I would strongly advise researching them first. What little research I did revealed that they are a subsidiary of Citigroup (BIG credit card company) and they are an MLM company (multi-level marketing or network marketing, such as Amway). I got to admit I am somewhat confused as to why the IRS would consider written down debt as income. I suppose in some cases, such as where the debt was the result of reckless spending or maybe if you still have material goods that you bought on credit, it makes sense. But if you have debt from sudden unexpected medical bills or job loss (other than firing for your own negligence), then I do not see how that could be considered income. DB started by saying that the IRS only 'generally' considers discharged debt as income, but the went on to say that you 'will' owe taxes on it. He probably should have spent a little more time clarifying that.

  • Yahoo! Finance User - Tuesday, March 11, 2008, 7:13PM ET  Report Abuse

    • Overall: 1/5

    David is a putz, now he is writing debt settlement articles since his "Great American Home Owner Challenge" with Wells Fargo bombed. Why are we still giving this guy our attention????

  • Yahoo! Finance User - Tuesday, March 11, 2008, 5:52PM ET  Report Abuse

    • Overall: 4/5

    I think David is trying to make a good sugeation here. I have been thru a debt managent program and it worked great. I was still able to buy a home contrary to what another commentor stated above. It just takes time and patience if you want to pay yourself out of debt. Best thing, start now, tear up the cards and get on with life.

  • Yahoo! Finance User - Tuesday, March 11, 2008, 5:05PM ET  Report Abuse

    • Overall: 2/5

    Lenders treat participation in any of these programs as a bankruptcy. David states that a debt management plan is the best option for your credit profile, however lenders view credit counseling, debt management plans, and debt settlements in the same light as a bankruptcy filing. Several years ago my wife entered into a debt management plan and followed it faithfully, wiping out 30K in credit card debt in five years, and never making a late payment the whole time. Her credit score rose to almost 700 (same as mine) yet because she had entered into one of these programs, mortgage lenders treated us as if she had declared bankruptcy! Negotiating directly with your credit card company, for a lower rate or more favorable payment schedule, might feel like beating your head against a brick wall, but the end result will be the same without the financial stigma of participating in one of these programs.

  • Yahoo! Finance User - Tuesday, March 11, 2008, 4:52PM ET  Report Abuse

    • Overall: 2/5

    Primerica!!................. BBAHHAHAHA!!!!!!!!!!!!!!!!!!!!!!!!!!!!..............

  • Yahoo! Finance User - Tuesday, March 11, 2008, 4:06PM ET  Report Abuse

    • Overall: 1/5

    Debt settlement companies make no guarantees that they can actually make a deal with your creditors. They take their whole fee out of your account that you are building before you start building up any money toward a settlement and since it is harder to declare chapter 7 bankruptcy, creditors are less inclined to take a settlement. If you get served by one of your creditors because you haven't made any payments (which with most debt settlement companies you don't) the debt settlement company will send a letter to your creditor requesting that you don't get sued but that's as much legal help as they actually give. If you want to try to settle your debts, you are better off just doing it yourself and not paying whatever the percentage fee. You have as much bargaining power with your creditors as these "settlement" companies do. Again, your creditors are NOT required to work with these companies and CAN sue you even if you are working with one of these companies and these companies DO NOT provide any legal help other than a letter requesting that the creditor stop proceedings and accept a settlement sometime in the next couple of years which probably won't work. Take it from someone who was lucky enough to be able to declare chapter 7 after trying to go the debt settlement route. These companies get their money whether they end up helping your or not and will not refund any fees if you end up still having to declare bankruptcy or get sued. They also like to change their names often to avoid getting a bad reputation.

  • Yahoo! Finance User - Tuesday, March 11, 2008, 3:44PM ET  Report Abuse

    • Overall: 1/5

    What a bone head all this "expert advice" from the same guy that advised a year ago to buy any house at any cost. Don't worry you can refi. out at a lower rate, treat your home like an ATM machine. Now he's an expert on B.K. and debt for the fools that took his advice on real estate. How pathetic.

  • Yahoo! Finance User - Tuesday, March 11, 2008, 3:24PM ET  Report Abuse

    • Overall: 5/5

    As the founder of a debt-settlement company doing business for 15 years, there's one thing I can say with absolute certainty: every single one of the tens and thousands of settlements Provanta has arranged for thousands of consumer clients with financial hardships (usually caused by serious illness or unemployment) have been 100% mutually voluntary. This point is too often forgotten or overlooked. With settlements ranging from 0 to 100 cents on the dollar, about 40 cents being the longtime overall average, compared to recovery of maybe 5-10 cents on the dollar average from the collection/recovery industry (0 cents recovery from the BK industry) it's not difficult to understand why the collection industry has such great disdain for us, even though behind the scenes, we're some of their best friends. Provanta Corp. http://www.provanta.com

  • Yahoo! Finance User - Tuesday, March 11, 2008, 2:36PM ET  Report Abuse

    • Overall: 5/5

    This article is the closest yet any articles on the internet have come to explaining Debt Settlement. (www.tascsite.org - click on Members) Anyone with $20,000 or more in credit card debt should ALL do debt settlement. Your "credit score" is improved in the long run and Debt Settlement actually works. Credit Counseling and Debt consolidation programs don't work, nobody finishes them and they are "non for Profit" scams. Credit Repair and Debt settlement are the only options that work. Sleazy lawyers in the debt industry are only there to make money and Bankruptcy is a "Death Penalty" to your finances. Bankruptcy is the one question asked on all employment applications, right next to "have you ever committed a felony." Intelligent people will actually TALK to a financial advisor and get the Facts themselves. Credit Cards are a SCAM - there are no safe credit cards. Debt Settlement works Very well and its putting DEBT COLLECTORS out of work - that's why there are negatives on the internet - its Debt Collectors. Debt Collectors and Debt Buyers are Garbage - they will trash anything out there that Truly gives people Hope and a True Chance to get out of debt - for good and Safely. Debt Settlement is Safe, Private and professional. Call and get a Free Review of your debt situation - my company made me feel so much better when I called and I was VERY skeptical. I worried for nothing as now I have paid off all $70,000 and my credit is better then it ever has been. Debt Settlement Takes Courage and Intelligence - its not for everyone - but it IS a solution and a reputable industry. http://www.tascsite.org/membersoftasc.php

  • Yahoo! Finance User - Tuesday, March 11, 2008, 2:05PM ET  Report Abuse

    • Overall: 1/5

    You would think that people who ended up in a bind due to the "Automatic" buy a house at all cost advice would stop listening to this joker.

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