is Debt Settlement a BAD idea?

Deal Score0

My wife got in way over her head and is refusing to pay the full balance on her cards and trying to “settle” with these companies ie pay one lump sum of 500 dollars to settle a 1500 credit card bill
she was advised by a lawyer friend of hers to stop paying her cards, let them default, and the companies will likely accept settlement offers vs try to go to court for the full balance.

Sure we’ll save money but this wil RUIN our fico score for years
plus it seems kinda dishonest to run up credit card debt and flamboozle
the system to pay only 1/3 of the debt, just not how i was raised

  1. Reply
    November 10, 2011 at 8:36 am

    you can find it in tools on this website

  2. Reply
    November 10, 2011 at 8:52 am

    BAD IDEA. You are PAYING a company to do the same thing that you can do. Letting credit cards charge off is the WORST thing you can do to your credit. Yeah, your settlement offer will be lower but your balance by that time would have grown so much that wou might as well had paid the balence months earlier. Listen, I’ve worked as a debt collector before and we don’t look at the debt settlement companies calling to negotiate a debt any different than a person calling in themselves. I purposly used to high-ball a debt settlement company. Most times with a charged off card the LOWEST settlement you will get is maybe 50 percent…if that. Most cards I worked with I didn’t offer anything below 70%..I’ve heard of soooo many scams from Debt Settlement companies as well. Noy a good should read up on it.

  3. Reply
    November 10, 2011 at 9:17 am

    Bad things stay on your credit report for a little over 7 years from last activity (from when it became delinquent or last payment). Bankruptcy can remain for 10 years.

    If you are in a community property state, all property (and debt) from co-mingled funds is shared equally.

    Nothing other than bankruptcy obligates any creditor to accept less than you owe. So debt “settlement” is a game of chicken. If they take you to court before the statute of limitations expires, that can extend the time they have to collect, typically adding 10 years with more teeth (bank account or wage garnishment, liens, etc.) beyond the time it shows on your credit report. And sometimes a court judgment can be renewed for another 10 years.

    While IRA accounts and pension funds may be protected from creditors, money paid out from them is not. So any distributions are up for grabs.

    So debt settlement is not really a good idea unless your credit is already trashed. Because attempting debt settlement will trash your credit, and is not guaranteed to be effective (you could still be sued).

  4. Reply
    kate g
    November 10, 2011 at 9:37 am

    It will say “settled for lesser amt” on the credit report but that won’t reflect in your score. It is already delinquent and will continue to report as a “negative” credit item for 7 years so you may as well take the deal and pay less since you are damned it you do or damned if you don’t, credit already took the hit by not making a payment.

  5. Reply
    November 10, 2011 at 9:49 am

    Debt settlement is a legitimate way to get out of debt, BUT it is supposed to be for people experiencing a hardship like unemployment, a long illness, etc. Debt settlement is NOT meant for people who just don’t want to pay. You are, in part, right, it is not “kinda” dishonest, it is plain dishonest.

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