Generally this is true. The credit card companies actually pay credit counseling agencies to help assist debtors because a debtor who is a client of a credit counseling agency will end up repaying everything he/she owes over time. However, debt settlement companies reduce the amount the credit card companies ultimately collect so it’s a different type of relationship. Not necessarily bad but certainly the credit card companies prefer people use a credit counseling agency over a debt settlement company.
Sure you can try. Just like doing taxes takes lots of knowledge and time requiring people to hire tax preparers so does debt settlement. You can do it on your own but be ready for a steep learning curve, lots of paperwork, phone calls, and likely frustration. The established debt settlement companies already have a process for their negotiations, they have the right contacts in the banks already established, and they negotiate millions in debt every month so they may be able to leverage that into a bigger debt reduction than you can do on your own.
Their fees vary but they are no longer allowed to charge upfront fees as they are paid on performance as mandated by the government. Now they charge based on a percentage of the money they save you. So if you owe a credit card company $23,000 and the debt settlement company negotiates a reduction with the credit card company for you to say $10,000, then you will owe them between 15-30% of the savings (in this case the savings was $13,000). Each company has a different fee structure.
No. Non-profit credit counseling agencies charge low fees as regulated by the IRS but they still are not free. Most of them charge a monthly fee that is minimal to provide you with their debt relief services. This fee is part of the consolidated monthly payments you will make to them.
Yes, anybody can sue anybody for a default. Generally credit card companies rarely sue to collect if a person is working with a professional debt relief company. If you do nothing and ignore their requests to repay them without help from a professional debt relief firm, you may increase your chances of a lawsuit. We do not give legal advice and so you should consult a lawyer for more information.
It simply means that you are not asked to provide an asset to put up as collateral against the debt. A credit card is basically a short term loan but unlike an auto or home loan, they cannot take anything from you if you do not pay.
No, your home is not used as collateral for a credit card. In fact credit cards are unsecured debts meaning that the credit card companies cannot take anything from you if you do not pay. They can however sue you and certainly damage your credit score.
Yes it can. Time and proper spending/bill payments will heal your credit score over time. You can also employ the services of a credit repair company who may be able to speed up the process however like with debt relief, make sure you are using a reputable firm.
Yes it may depending on the type of debt relief program you enter into. Generally speaking a credit counseling program will hurt your credit score much less significantly than a debt settlement program since in debt settlement you actually stop paying your bills and go into default for a period of time.
There actually is no Obama or Federal government credit card debt relief program. There was a federally regulated program to help people underwater in their mortgages after the 2008 financial crisis. That was done in conjunction with the banks who held many underwater mortgage loans.
Unfortunately there has been some deceptive advertising making people think that there is an Obama sponsored credit card debt relief program but there is not.
No. these are secured debts and by taking the loan against them you have promised the asset as collateral should you have a problem repaying the loan.
No. Student loans cannot be negotiated but there is modest assistance available for people seeking to consolidate multiple student loans. There are special student loan consolidation companies that do this.
Yes, with debt settlement there is. You should speak with your tax advisor about debt settlement if you are considering it as the IRS may deem any savings from the reduction you get on your debt (the settlement) as income you owe taxes on.
These companies understand that your finances are tight and so their fees are either really low or are based purely on their performance. In the case of debt settlement, you typically pay only if they are successful at reducing your debt amount owed.
Many credit counseling agencies to have non-profit status from the IRS. That means they are closely monitored, their fees are regulated, and they do not have to pay taxes on their profits.
However, that does not mean their services are totally free, there is still a modest fee. Debt settlement companies are never granted non-profit status only credit counseling agencies.
Nothing. The type of solution the credit counseling agencies provide is often referred to as debt management.
Nothing. These are 2 names commonly used for the same type of service.
There are many out there so be careful as many are less than desirable. We can suggest one to you by going to our sister site, debtcompanyresearch.com or you can look on the BBB.org website (something we do as part of our research).
Like debt settlement your credit score can be affected although much less so than with debt settlement because you do end up repaying everything you owe unlike with debt settlement. Typically credit counseling is a longer process than debt settlement.
Because debt settlement is a negotiation process to reduce your debt, an adversarial relationship develops since your creditor want to be repaid the full amount owed. Lawsuits are very rare but always possible and can typically be avoided by a reputable and respected debt settlement company. Also you will damage your credit score during the debt settlement process.
There are 2 common types.
Debt settlement companies and credit counseling agencies. Debt settlement is a negotiation process that attempts to reduce your overall balances so you pay less than you owe.
Credit counseling is a more moderate process that attempts to combine your bills into a single monthly payment with lower interest rates and fees than you may be currently paying.
Yes, that may be a good option depending on your situation especially if you do not have a home with equity in it that you can refinance.
Pretty much any debt that you will not be adding to. For instance, credit card bills, personal loans, and past medical bills.
You can either get a large loan (typically done with a mortgage refinance) to pay off all your small debts leaving you with one large monthly payment or you can use a professional debt relief service to consolidate your debts.
It’s the process of combining multiple bills into one monthly payment.