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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308881  
Subject: Re: Getting out of credit card debt Date: 4/30/2014 4:20 AM
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NoIDAtAll,

aj485 wrote, If you are going to settle debts, I would strongly recommend that you DO NOT use a company that advertises itself as having being a 'debt settlement' company, but rather, settle the debt with each individual creditor yourself, after fully researching and understanding what debt settlement will do to your credit report and your ability to get credit in the future. Debt settlement companies often advertise that they can settle your debts for 'pennies on the dollar'...

To which you replied, Yep, tried that - The only thing a debt settlement company managed to do for me was PO my creditors. The vast majority of the creditors were in no way reluctant to advise me that they had no qualms about filing for a judgement, rather than dealing with a debt settlement company - Generally, their feeling seemed to be, "If you're paying a debt settlement company to negotiate for you, you can afford to pay more toward what you owe us." It wasn't until I retained an attorney to file a Chapter 13 Bankruptcy that they started offering deep cuts, Chase in particular, but I didn't/don't think that I could settle with them and not the other creditors, w/o prejudicing my bankruptcy filing, and some still weren't willing to negotiate nearly as much as Chase was - Some were operating under a bankruptcy filing of their own - Though I don't know for a fact, I suspect that the terms of their corporate bankruptcy may have placed limits on their negotiations.

Right. Debt settlement is probably a viable option in dead-beat collection states like Texas and Florida where wage garnishment is not possible and even a not insignificant amount in assets can be shielded from seizure.

Even there however, a debt settlement strategy can backfire. If the creditor opts to file for a judgment - extending the effect of the collection on your credit report - the judgment can usually be renewed indefinitely in the hopes of eventually collecting from your estate. Also until the account is paid or you file bankruptcy, collection agencies can attempt to collect even after the statute of limitations expires - that just limits their ability to sue.

In (most) states that do not exempt wages from garnishment, a creditor is likely to file for a judgment asap if you stiff them on any significant sum in the hopes of being first-in-line with your employer. What's more, if the garnishment takes 25% of your net (federal limit), you're likely to no longer be able to pay a debt settlement company's fees - something that will breach the contract and often let them walk away with some or all of your cash.

And if this still sounds like a good idea, bear in mind that it doesn't take any time to stiff your creditors - it truly is something you can do yourself.

- Joel
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