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Not doing debt settlement

Monday, Apr 20 in debt settlement | Comments (15)

Question: Jim has over $100,000 in credit card debt. He makes $70,000 a year and asks Dave what he thinks of debt negotiators. Nothing but bad things, as Dave explains.

Dave Ramsey's advice: The only time a credit card company takes less than what you owe is if they think they won't get paid. If you go to a debt settlement company, they have you pay them a monthly amount. Most is their fee, and a little goes into a savings account that they will use to settle with the creditors. But the collectors won't get paid for six months, and it will destroy your credit. They are scum and they rip you off.

Instead, I say get together with your family and figure out a plan to live on beans and rice and make big payments to the collectors. They can sue you and take a lien against your property, but they must sue you first and win and then take judgment. If you have no payments but the house, you have no excuse to not do this and clean up the mess you've made. List your debts smallest to largest and attack the little one, then knock them out one by one. That's the best plan for you.

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What if you have already committed to one of these companies? Our bank account is being drafted once a monthe and we have paid a fee up front. We havent paid on our credit card bills for the last 6 months.
# Posted by Paul Swearingen | 5/5/09 9:16 PM
I would like to know the answer to Paul's question too. We too have already committed to a debt settlement company and have gone more than 6 months without paying. We've settled with a couple credit cards and have 2 more to go. I regret our decision now but we are more than half way through, we can't back out now. My husband & I have started an aggressive plan (following Total Money Makeover) to pay the remaining amount off ASAP and we should have this done in 4-6 months versus a year as originally planned. However at that point, our credit will be (already is) in the hole. Any advice?
# Posted by Erika B | 5/10/09 8:14 PM
I also would like to here the response to Paul's question. My wife and I have also been dealing with a debt negotiator for the past year and a half. We have paid one card off and due to medical bills have not been able to deal with the other three accounts. Our negotiator has us making payments to these accounts and I can't see the difference between us paying the bill with a 3rd party vs/ us just paying the minimal amount our selve. My question is can we simply stop this program and begin dealing with the accounts/lawyers ourselves.
# Posted by Eric | 5/14/09 8:35 AM
I need to know too. My husband and I refinanced our house a couple of weeks ago so we would not loose it. Both of us being seld employed we still had to do a baloon until I can get out of college and get another job. We have around 15,000 in credit cards and was working on the debt snowball when we started running out of work. So now they are 2 months behind. Do we just continue not paying them right now and pay everything else. We have a mortgage, car payment my husband a child support payment and we are feeling kind of lost. I don't want my marriage to fail but it is really rocky right now. We need help.
# Posted by Tracy Smith | 5/17/09 3:15 PM
Please help, I own wells fargo $18.700 and the 3rd party has said that they will settle for 10.200 by the 28th of May. Do I do this and how well it hurt my credit. have be
# Posted by connie golden | 5/26/09 6:02 PM
Just write a Letter saying you're quitting the Debt Settlement program. They will stop the ACH withdrawls from your bank. That's what they did for me.
# Posted by Anthony | 6/17/09 9:12 PM
I went through a debt negotiater a while ago and I couldnt be more happy that I did. My credit was already going down because of the amount of debt and falling behind on payments but I saved $500 a month and over 15k off my balances. Now I have extra money every month and no debt. I dont need cards, if I want to buy something I pay cash. Dont be so stuck on your credit score people. Its a joke right now.
# Posted by Mike | 6/18/09 9:47 AM
How do you know which debt negotiators are legitimate and which aren't?
We have just taken Dave's class and read the book but are so overwhelmed
and just can't seem to get started. We had 3 times the debt of anyone in
the class and are as Dave says "a breath away from bankruptcy". So many
variables. Don't know what to do first.
# Posted by Monica | 7/2/09 3:39 PM
I will agree with your plan as you said we must list our debt from smaller to larger one and then start paying off starting from the smallest and this is the best option I think. Sit together with your family have a check on your financial strength list your debts that you owe and then start paying off one by one. Also you need to cut off your extra lucrative expenses and try to earn more then before by doing some extra part time job.
# Posted by Adamsmith | 7/25/09 2:05 AM
To Monica: We were in a similar situation several months ago--and still digging out. I presume you're behind and they're calling you daily? Many of the credit card companies or
collection agencies are willing to work with you on reasonable payment plans once they have an outline of your situation and are convinced they have no other choice. When negotiating the
repayment terms, do your best to make certain of two things: 1) the monthly payments fit well within your budget (as much as possible), 2) the payments are as low as you feel they
will accept. Hopefully this will serve to free up cash flow to begin Dave's "debt snowball." I feel like I made a mistake in committing too much of my cash flow. We're totally strapped
and making big sacrifices; wish I would have negotiated slightly smaller payments in order to chew up the first debt more quickly. Good luck.
# Posted by Brent | 8/2/09 9:48 PM
I lost my job 6 months ago. My mortgage to Wells Fargo and assocation fees, car payment, insurances, just regular billis more then my unemployment monies received. I have cut back on everything. The bank won't assist me because they say my income to debt. ratio is too high. I make 1/2 of what I was making before. What should I do. Every month I re-apply for a new modification. I forward a spreadsheet of my bills and a hardship letter, but it seemst falls on deaf ears. I don't get help soon, because nobody wants to assist a FHA loan, I will lose my condo.
# Posted by Jen | 8/28/09 11:37 AM
Mr Ramsey we have about $30,000 in credit card debt, a first and second mortgage and a combined income of Approx $135,000.. We have never been 30 days late on any of our debt. Recently Citi bank notified me that my interest rate increased from 16% to 29% percentage. They justified this because I have been one or two days late from the due date, a number of times this year. Since they would not lower my rate on my account so I closed the account and I have recently received a call from Citi collection to determine if I wanted to setup a 5 year payment plan at no interest with a payment of $211 per month $300 less than my minimum payment. Is this plan for real and will this have a negative effect on my credit.? I can make the payments, but it is getting more and more difficult, I haven't seen a salary increase in three years. Any input would be greatly appreciated.
# Posted by Charles Forzano | 9/22/09 12:40 PM
I'm just now finding Dave Ramsey and it already makes sense. However, I found a Debt Management program a year ago, and my debt is going down, but I don't feel like my finances are anywhere near where they should be. I work two jobs as a legal assistant and a bartender, but I still struggle every day. I would really like to understand what being in the DMP is doing to my credit...I thought it was helping but it sounds like I'm wrong. Its scary because my boyfriend who very well may be my future husband is in the same situation. Are we screwed?
# Posted by Carlee | 9/23/09 10:47 AM
I am currently into my 7 month of a debt settlement plan and am realizing that it was a mistake, I have several collectors calling me wanting me to settle, I too don't know how to get out of the plan. I have 35,00 dollars in debt and have sent them 2,700 dollars most of which has gone to theri fee. If I can get out of the plan what do I do next, I can only afford to send each credit card 75.00. I understand the debt snowball however if you don't even have the minimum to send what do you do? So confused!
# Posted by alison | 9/23/09 1:35 PM
Mr Ramsey is totally justified when he states "They are scum and they rip you off." But what I will say is that debt settlement can work, you just have to do it yourself, otherwise you'll get ripped off by one of the phony debt settlement companies.

The reason that I can say all this with confidence is that I settled my business credit card debt myself with great success. It saved me from bankruptcy. You should also know that I hired a debt settlement coach out of California. After being through it I can say that I would not want to go through the debt settlement process without assistance.
# Posted by Debt Elimination Don | 10/25/09 9:32 AM

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