Debt Consolidation vs Debt Settlement

we used consolidated debt and we actualy made our last payment in febuary, it was a great feeling after 4 years. you can call and get more information before you committe and they will give you the terms and everything before you sign up. we had about 13000 of various debt and paid around 300 a month but they settled so that we didn't have any interest. You do pay them a fee each month but I think it was under 30 (much less than the interest was).

It never showed on our credit that we were paying through an agency and we just qualified for a new car loan so our credit must not be too bad anymore.

Good luck

I definitely would NOT trust most of the debt relief agencies you hear advertise 24/7. The way I understand it, they have you stop paying all of your unsecured debt and send the money to the agency. Then, over a period of 3-7 years, they slowly settle the debt with the "bank" you have built up with them. During this time your credit continues to tank. In my opinion, this greatly prolongs out the time your credit score suffers.

My strong suggestion is to speak to a bankruptcy attorney and get some real answers to your specific financial problems. I am a tax and bankruptcy attorney and, based on my experience, filing for BKY is often times the best route to go depending on your debt load. If you qualify for a Chapter 7, you would be able to discharge all or substaintially all of your unsecured debt in about 90 days (studnet loans, most taxes and child support is generally non-dischargable, along with some other types of debt). Your credit will take a hit, but most of my clients have reported credit scores in the high 600s and low to mid 700 with in year of filing, some even sooner. That is done with some effort on their part, but a good attorney will give you some direction as to how to rebuild your score. Keep in mind that a Chapter 7 does stay on your credit report for 10 years, however, it does not mean you will have a low FICO score for that period.

I do understand that there are some moral implications to a decision like this and that is something you and your husband will have to work through. I also anticipate some dissent on this site as well. Keep in mind that this is your personal decision. Again, based on my experiece, being released from a crushing debt load can be the best thing for a struggling family.

If you would like to talk to me about this, my contact information is below:

R. C.
Grannis & Hauge, P.A.
1260 Yankee Doodle Road
Eagan, MN 55121
###-###-####

If you don't contact me, call another attorney who is willing to give you some answers and some guidance, whether or not it is BKY.

GOOD LUCK!

P.S. Cancellation of debt is not taxable if done in a bankruptcy or when the taxpayer was insolvent, meaning your liabilities exceed your assets at the time of cancellation.

Well, I have had client's who have tried both of these, and they both definitely have their bad side. Many debt consolidators that you see on TV are nothing more than criminals - they simply cannot do what they promise. However, if you do decide that debt consolidation is the best route for you, call your county and ask if there is a program in your county that is a true non-profit. If not, both FamilyMeans and Lutheran Social Services are good non-profits that really help people (if you google either one, you will get their website). Debt settlement should only be done with the help of a good consumer law attorney (in my opinion). That way the credit report trade line can be addressed as well. The biggest downside to debt settlement is the fact that you will likely receive a 1099-C for the difference between the amount that you settle the debt for and the amount you actually owed, which you will have to treat as income on your taxes. Also, if you choose debt settlement, you need to make sure that the creditor you are working with currently owns the debt at issue (they may not have the power to actually settle the debt if they don't own it). Finally, you don't state if the debts you are referring to are in collections - usually debt settlement only works when you are dealing with debts that have been sent to collections (however, I am seeing more credit cards doing settlements with the economy being the way that it is).

Another option is bankruptcy. I realize that it should be a last resort, but I want to mention this because I see a pattern in clients that I wish they could have saved themselves the heartache of: first, they start spending their savings to keep up, then they start cashing out retirements and life insurance policies to keep up, then they contact a debt consolidator to try to keep their head above water, after that fails, they try the debt settlement route, and, after that doesn't work like they thought it would, they call a bankruptcy attorney. In the meantime, they have had countless hours of stress, lost their retirement/ira/life insurance policies due to cashing them out, spent all of their savings, faced garnishment, and created additional tax debt, all to avoid bankruptcy where they ended up anyways.

Good luck no matter what you decide :)

We used CareOne.com to consolidate all of our debt. There is a fee that they charge monthly, but its built into your payment. Many of our Credit Card companies drastically dropped our interest rates, but only one is interest free. However, I can already see the huge difference that its making. We are only a year into a 3 yr program. It must not have done too much damage to our credit, as we qualified for a house while doing it.

H.

Dear J.,

We've been in your shoes with college debt and credit card debt. Today we are debt free except for the mortgage on our home (and best part -- we got out of debt while I stayed home with the kids.) :)

Before you do either that you mentioned above please go to Dave Ramsey's website daveramsey.com he has a book called "Total Money Makeover" that will help you deal with debt. See if there is a Financial Peace University class you can take that is near you. It will change your life!

Praying all goes well!