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Using A Debt Settlement Firm Can Cause You To Be Blindsided By Debt Collectors.
Debt settlement firms call for a minimum of $10,000 in credit card debt. Of that $10,000 you have to give them $1500-2000 in upfront fees for them to settle your debt. To save money for a lump sum settlement and their fees, they tell you to stop making credit card payments and to give that money to them for their fees and for an eventual lump sum settlement.
So then what happens if they cannot settle your credit card debt? What happens to what you have paid them? What happens to the credit card account that is not being paid and to your credit rating? If they tell you they can get a 50 percent settlement on $10,000, how long will it take you to save $5000 plus $2000 for their fees?
Saving $500 a month for 14 months will yield $7000. At that rate of savings it will take more than a year to effect the lump-sum settlement with $5000 after $2000 in fees is taken. After six months the banks write off bad credit card debts, and within the year they sell those bad debts in bulk purchases.
What that could mean for you is a junk debt buyer has purchased your account for 10 cents on the dollar before it has been settled. Now, the bank has no incentive to remove their bad-debt listing from your credit report, a mark that will be on your report for seven years.
The junk debt buyer will make an effort to collect the debt, and you need to be ready for that, according to the Credit Card Debt Survival Guide. On the other hand, if you are unaware and waiting for the debt settlement firm to finish what they started, you could be vulnerable to a debt collection attorney.
So, your settlement fee is gone. Your debt is not settled. Your credit is bruised. And, you are fighting debt collectors. If you are lucky you still have $5000, but only if the settlement firm put it in a third-party escrow account.
Matt Highlander researched and wrote part of Credit Card Debt Survival Guide. Learn about debt settlement and legal nonpayment strategies for eliminating credit card debt.
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