Debt Settlement
Written by randall on February 16, 2010 – 3:13 pm
We have all seen the Debt Settlement commercials, settle your for debt for 50% on the dollar of what you owe. Have you considered hiring a debt settlement company to help you lower your debt? There’s a lot debt settlement companies don’t tell you or you wouldn’t sign up.
It is amazing that all of the Debt settlement companies we now see and hear of, with their 50 years of experience are just now on TV, on the radio and in the phone books, weren’t around until last year. We never heard of them or Debt settlement, with their names designed to comfort us and make us feel that we are able to repay our debt for 50 %.
In Debt settlement there is a fee involved that could be as high as 20% of the overall debt. Do the math on $100,000.00 in debt at 50%. Let’s give Debt settlement the benefit of the doubt and say the fee is 15% . We have a total of 1/2 of $100,000.00 is $50,000.00 plus the 15 %, which is $15,000.00. We now have a subtotal of $65,000.00. Most Debt settlement companies promise you a “trust account” of your own. Trust accounts come with management fees. Usually about $40.00 a month. If your program is 36 months or 48 month, add $1,440.00 or $1,920.00 to the total. So now we are fairly close to 70 to 72 cents on the dollar.
In Debt settlement,they don’t tell you that settling your debts is harmful to your credit and if reported to the Credit Bureaus, will make it harder, if not impossible to get a real estate loan in the future.
In Debt settlement, they don’t tell you that your monthly payments first are applied to you fees. Typically the first 12 to 15 months go to the “broker” you contacted and the company with the 50 years experience. The broker gets his fee out the first 3 payments you make and the 50 years of experience get theirs from payment 4 through potentially payment 15. And, it goes something like this:
- The broker fee is $8,272.14 paid out over the first 3 months. ($2,416.38 for 3 months)
- The 50 years of experience fee is $7,750.62 paid out over the next 12 months. ($645.89 for 12 months)
- At the end of 15 months you have approximately paid $43,000.00 into your fund. (The fee is $15,000.00 plus $1,500. in banking fees. Your total fees are $15,1500.00, leaving you with $28,000.00left to settle your accounts in the first 18 months.
In Debt settlement, the hook is…… your monthly payment is lower and you will become debt free should you complete the program.
- Programming note: Average and ratio says, in debt settlement you will not make it all the way through and most make it 18 months.
In Debt settlement, they don’t tell you the fee breakdown at all. On $100,000.00 of debt at revolving credit terms the payment is around $5,000.00 to $7,500.00 per month.
In Debt settlement, they do tell you is that with the 50 years of experience you can become debt free and the payment monthly will be $2,428.96 per month for 48 months.
Debt settlement isn’t always the best option of dealing with debt and it certainly isn’t the only one. There are other ways……..
Randy,
If debt settlement is not the best option, what do you suggest ? I agree the broker fee’s are excessive. How would you suggest we proceed to get out of big debt ?
Lets Discuss
Dave
I’m a client !
@ Dave, How you get out of any debt, big or small……
Is to begin by creating a Credit Financial Plan designed to address all creditor accounts through an audit and verification process scheduled throughout our contracted period of time at 30-day intervals. Every line item needs investigating first and foremost for the information needed for an audit validating the account as required by law under; The Federal Credit Reporting Act (FCRA1987 revised 2004) and The Fair and Accuracy Credit Transaction Act of (FACT2004)
Note: The creditors must provide all of the verifications on the information that the account belongs to you and that the specific derogatory reference is entitled to remain.
Any remaining accounts will need the same type of investigation, but towards the balances reflected, to include an audit of any additional fees and interest. These investigations are conducted to ensure that the accounts conform to the established guidelines and statues of the; Federal Fair Billing Act (FBCA1974 revised 2002).
Then after these events, which is the process of credit and debt remediation, can one decide if it is possible to pay your way out of debt and how long it will take.
There is no cookie cutter approach on how to address debt that has become unmanageable. An individualized plan must be based on what will be successful and what won’t. Going in you must be able to stay the course or face the surrender of any monies already invested if you are in any type of repayment plan.