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Ask Dave

You Can Settle Better

One debt settlement company is causing Renee some headaches. As it turns out, she can do the job better than them.

QUESTION: Renee has $29,000 in credit card debt. She enrolled in a debt settlement program, which told her they can bring that total down to $14,000. She is paying them $430 a month and has paid a total of $3,000. Her husband brings home $50,000 and they have 4 kids. Dave explains to her that she can do much better than this company is in settling the debt.

ANSWER: One of the top areas of financial things that are complained about to the Federal Trade Commission as being a scam is debt settlement companies. They are hugely unethical. There are legit ones, but as a group, they are bad. All their fees come up front. You’ll pay them thousands in fees before they do anything. They’ve told you not to pay your bills and that totally destroys your credit. The credit card companies will settle with someone who is months late because they think they won’t get paid.

The problem has been that they collect their fees up front, and then go along like that, and they won’t return your calls. They don’t put forth the effort that you will in settling your debt. You’ve paid $3,000 and that would go a long way in settling your $29,000 in debt. Get out of the program and do this yourself.

Pile up as much cash as you can to attack your first credit card before you call them and settle. They usually settle with something that old for 25 cents to 50 cents on the dollar. Get an offer from a debt settlement agency in writing and don’t give them electronic access to your checking account. If you get sued, don’t ignore a lawsuit. Your odds of being sued if you are talking to them and working with them is very low.