Are credit card debt solution companies legit? ?
Saturday, November 14th, 2009 at
10:54 pm
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Tagged with: credit card debt • Credit Debt • Credit Solution • Debt Solution • Law School • Middle Class Family • Money • Reduce Debt • Solution Companies • Tad • Undergrad
Filed under: credit card debt
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Greetings,
Many, many of these are NOT legit. I used to work for a bankruptcy law firm and we saw plenty of clients who tried to "help themselves" by going to one of these firms and wound up getting ripped off and further in debt.
The worst of them do the following: Tell you that you must pay them $xxx per month and they will "reduce your debt" and then serve as a debt management company distributing your payment to creditors. What they ACTUALLY do is never even contact a single creditor, make off with the first 3 or 4 months worth of payments you’ve made to them and disappear into thin air. Our state’s attorney general has been chasing after a gaggle of these companies for years, but they come and go like mist in the night and it is extremely difficult to nab the bad actors behind them.
The very very best of them (and there are VERY few of these) might manage to reduce your INTEREST RATE that you are paying to around 10%. Then they will collect the money from you and distribute it to creditors, adding monthly fee on top of that.
There is NO – repeat – NO credit card company (regardless of what anyone else might say) that will "reduce" the total principal owed as part of a payment plan. At BEST they will reduce the INTEREST RATE you are paying (which can make a difference). You don’t need a "credit card solution company" to negotiate this for you — if your credit card company is willing to do this at all, you can just as easily negotiate it yourself.
Also … all these credit card solutions that urge you to "consolidate" your debts — the main point to remember is: You can’t borrow your way out of debt.
Either you can pay the debts you owe or you can’t. If you can’t, bankruptcy may be the solution (note: student loans cannot be discharged in bankruptcy).
Good Luck!