Hi all. New here, with a lot of debt. I am thinking of using debt settlement companies to negotiate with my creditors. They claim that they can reduce the debt by 50%. Has anyone had any experience with this type of approach??
Stay away from them. While in some cases they might be able to negotiate settlements for you, you can do the same thing for yourself without their help and you wont have to pay their fees. Also the way most are set up, you send them money to hold in escrow, then when you have enought in the fund, they start offering settlements to your creditors. Until that point the collection action against you will continue by your creditors.
The settlement company can do nothing to stop it, even if they tell you they can. Also keep in mind that you are responsible for the taxes due on the amount that go unpaid. They creditors call that amount the “forgiveness”.. The most important thing to understand about settlement companies is that while you are sending them money to offer as settlements, if you decide to stop using their program, and there is money sitting in the escrow account that has not been used, you wont get it back. Most companies are set up that way. I was a collector for long time, I have dealt with many of these companies. They are not a good solution.
The only one I’m familiar with is Consumer Credit Counseling. I don’t know if they are nation wide, but I know people who have had first hand experince, with great success and minimal fees. Not sure about reducing debt by 50%, but they negotiate with your creditors for lower or no interest/fees and a repayment plan to meet your budget.
Consumer Credit Counseling and Profina (the two I have used past) – they did not do this.
Profina did not actually cut any deals except making Bank of America drop the interest from 30% to 0% (that was good enough for me!!). They took a monthly amount by direct withdrawal and sent it to creditors. When a creditor continued to hassle me, the Profina lady got on the phone with me and talked to the creditor and reamed them out. It was great!!! They also split our accounts properly at divorce. They took $15 a month “donation” – but I think that was because Washington State Law limits it to that. I think you could probably do what they do on your own, but they did make it easier.
CCC – They did the same. I did not finish with them because the IRS sent prison notices on us during this time and I freaked and my mom paid the bills and I paid her back. But I delivered cash to them each month in person and they paid the creditors. No escrow, no huge fees.
I am aware that there are other agencies out there that are as you describe. I also believe that you can do all this stuff for yourself without the fees – it is like paying a maid service to clean your house. But they are not all terrible.
They are no help to you if you are still spending more than you earn, if you don’t have a budget, if you owe student loans, back taxes, utility bills, medical debts. CCC showed up on my credit report and didn’t look good. Profina did not.