So your credit cards are maxed out and you're up to your neck in debt, and you're looking for someone or something to come and tell you what to do. The prevalence of heavy debt has caused more debt-settlement firms to pop up in the US than ever before, and people turning to these services are coming out even more in the red than when they went in. To read about what the deal is with these often shady enterprises just read more
Some debt-settlement firms have been known to work like this: debt-ridden clients send them monthly payments, the firm holds the payments as a bargaining tool when they try to negotiate a payout with lenders, and the money just sits in the hands of the firm instead of being used toward the client's bills. If the lending banks aren't agreeable to negotiation and won't settle for a lump-sum payout, the already maxed out client is burdened with late fees and higher interest rates since their credit card payment money was going to the debt-settlement firm instead of towards their actual debt. Not to mention the exorbitant fees that debt-settlement firms charge for their negotiation services (fees can run as high as 30% of a client's debt balance).
While the debt-settlement industry defends itself and says that there are far more satisfied customers than not, seven states feel much differently and have banned the services because of their exploitive behavior. An alternative is credit-counseling which works differently than debt-settlement firms — they build monthly payment plans and strive to get consumers lower interest rates. Also, credit-counseling agencies have a higher success rate than the alternative.
If you've developed massive debt and have nowhere to turn, be sure to choose who you let handle your debt wisely. Debt is an emotional thing so be sure to weigh your options carefully without choosing the first company you see in the phone book, or the one who promises you miracles.
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Kookaﾕ
good call! i think debt counselling is best. at least you keep paying your bills... and somebody is there to help you get everything back on track! and you learn some great skills for not getting into debt ...again!
1I used a service like this before they exploded onto the market. I made sure mine was a non-profit organization. It was recommended to me by a friend and was called CCCA, but I can't remember exactly what it stood for (consumer credit counselors of america maybe?). They did negotiate with my creditors for lower interest rates BEFORE I gave them any money. Then I paid them one amount and they spread it to the different accounts based on amounts that we had set together. When one card got paid off, I had them apply the extra money to the next lowest balance and so on. It took me about 4 years to get it all taken care of, but my credit rate is back to being good again and I know much more about managing my money. So I had a good experience, but I would definitely do a bit of research on the different companies if I were going through the same process now.
2I used a service to help me I think it was the same one as GigglyGirl - CCCA. I definitely had a great experience, the payments weren't ridiculous and the fee that was added every month I believe was less than $15 in my case which wasn't so bad. In the end I finish paying off over 10K of my debt that I wouldn't have been able to do otherwise.
3I tried to google that.. CCCA, but nada. I really do want to use one of these companies to help me, but I had a really bad experience with one. I cried my eyes out after talking to her on the phone. She basically tried to scare me into signing up with them... like it's us or you'll be in debt forever! I didn't sign up with them, of course, but I am willing to try another organization. I definitely think going with a non-profit org will help, like GigglyGirl says.
4Sorry, it looks like they might have been pushed out of business by the big guys. This was their website and there is a note on there that they've given their accounts to another company. It's a shame because they really made a difference in my life, that's for sure!
http://www.cccamerica.org/
5Aww, that stinks. Especially since the company they gave their accounts so was the one that I had a bad experience with. Sad.
6Oops, I meant to not so*
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