Legal

Ask a lawyer and get answers to your legal questions

Ask a Lawyer,
Get an Answer ASAP!

I would to understand how debt relief companies work

Customer Question
Hello,I would to understand how...
Hello,I would to understand how debt relief companies work.
Submitted: 2 months ago.Category: Legal
Show More
Show Less
Ask Your Own Legal Question
Answered in 25 minutes by:
5/31/2018
Lawyer: N.Brown ESQ, Lawyer replied 2 months ago
N.Brown ESQ
N.Brown ESQ, Lawyer
Category: Legal
Satisfied Customers: 189
Experience: Attorney
Verified

There are a few types of debt relief programs.

Credit Counseling: Here the company works with you to create a budget and they help you negotiate settlement agreements with your creditors. This will help you pay off your debt sooner but it will have a negative impact on your credit.

Consolidation: This isn't really a program. It's when a lender issues you a loan to cover all of your debt. The benefit usually is a reduced interest rate and one payment that is usually less than all of your combined debt payments. Either the company or you will pay off the debt with the loan amount and then you will just have to pay off the loan. As long as loan payments are made timely this has little impact on your credit, an will improve it over time because your debt to available credit ratio will improve. But you usually need very good credit to qualify for one of these loans.

Debt Relief: This program usually involves you contracting with a company where you make one payment to them and they agree to negotiate with your creditors to settle your debt for less than the total amount. They deposit your monthly payment into an account. They pay the settled amounts out of the funds in an account where your monthly payment to them is deposited.

They usually tell you to stop making all payments to any creditor that you put in the plan. Obviously this will have a very negative impact on your credit. After about 6 months to a year or more your creditors have likely charged off your accounts and or sold them to debt collectors who are more willing to settle for less than the original amount. The monthly payment that you make for the first 6 months to a year is front loaded with the companies fees and service charges and you wont start putting anything into your account for settlement until after that period unless you make additional payments above the monthly agreed upon amount.

Usually the program takes 2 to 4 years to pay off all the debts. The benefits are a lower payment and a lower total debt payoff amount even including the fees. Some of the companies also offer legal assistance if you are sued by one of your creditors. The downside is your credit score will be decimated during this time.

If you decide to go this route you are better off just doing it on your own. If you stop making payments, and bank the amount you were paying your creditors for a couple of months or more you can use that to negotiate settlement. If you wait long enough the accounts will go to collections and or debt collectors who because they buy the original debt for less than it was are always in a position to negotiate settlement for less than the original.

Ex. Visa CC balance of $1,500 gets sold to ABC Collection Agency for $750 dollars. Now you can negotiate with ABC, they will take anything over $750 they paid for the debts, because that's profit for them.

This method will still ruin your credit but you will save a couple thousand dollars that the company charges you in fees, but you loose out on the potential for legal assistance and or representation.

Please let me know if there is anything else you want to discuss. I would be happy to continue this conversation. If so just reply to this response. If you are satisfied with this response, please Accept the answer and provide a rating. Doing so costs you nothing extra. Experts are independent contractors and customer ratings are the only way we are compensated for the time reviewing and responding to questions as we are not employees of the site. You may also get a request for a telephone call, but that is from the site and not the experts. I hope your legal issue works out to your satisfaction.

Ask Your Own Legal Question
Lawyer: N.Brown ESQ, Lawyer replied 2 months ago

If you are satisfied with my responses to your questions, please accept the answer, and provide a rating (5 stars would be appreciated). It costs you nothing additionally to do so. The experts who answer your questions are independent contractors, and customer ratings are the only way we are compensated for our responses. Thanks, ***** ***** hope everything works out to your satisfaction.

Ask Your Own Legal Question
Lawyer: N.Brown ESQ, Lawyer replied 2 months ago

Please let me know if you have any further questions. If you are satisfied with my responses to your questions, please accept the answer, and provide a rating (5 stars would be appreciated). Thanks, ***** ***** hope everything works out to your satisfaction.

Ask Your Own Legal Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a lawyerLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask N.Brown ESQ Your Own Question
N.Brown ESQ
N.Brown ESQ
N.Brown ESQ, Lawyer
Category: Legal
Satisfied Customers: 189
189 Satisfied Customers
Experience: Attorney

N.Brown ESQ is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Not only did he answer my Michigan divorce question but was also able to help me out with it, too. I have since won my legal case on this matter and thank you so much for it.

LeeMichigan

< Previous | Next >

Meet the Experts:

Ely

Ely

Counselor at Law

24,658 satisfied customers

Private practice with focus on family, criminal, PI, consumer protection, and business consultation.

INFOLAWYER

INFOLAWYER

Attorney

22,843 satisfied customers

Licensed attorney helping individuals and businesses

JPEsq

JPEsq

Attorney

2,132 satisfied customers

Experience as general attorney, in house counsel, SSDI, Family Law attorney, and law professor

Law Educator, Esq.

Law Educator, Esq.

Attorney

44,266 satisfied customers

JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law

Ellen

Ellen

Lawyer, Consultant

8,238 satisfied customers

25 years of experience helping people like you.

Guillermo Senmartin

Guillermo Senmartin

Lawyer

301 satisfied customers

Principal Attorney at Guillermo J. Senmartin, P.A.

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

17,183 satisfied customers

Multiple jurisdictions, specialize in business/contract disputes, estate creation and administration.

< Previous | Next >

Related Legal Questions
My husband and I are considering entering a debt relief
My husband and I are considering entering a debt relief program to relieve years old date. I'm concerned about receiving 1099's for the forgiven debt. I know our liabilities must be over our assets. I… read more
Ray
Ray
Lawyer
Doctoral Degree
33,811 satisfied customers
I just had a car repossessed by a finance company this
I just had a car repossessed by a finance company this morning. I never added them as a lien holder to my title but they got a tow company to take my car anyway. I'm working with a debt consolidation … read more
Legal Eagle
Legal Eagle
Attorney
Doctoral Degree
14,185 satisfied customers
I have a credit card debt and received a summons. I live in
I have a credit card debt and received a summons. I live in Randolph Co North Carolina. I have been working with National Debt Relief. They are working to negotiate some terms and a payment plan. I re… read more
LegalKnowledge
LegalKnowledge
Juris Doctor
31,020 satisfied customers
I am trying to reduce my credit card bills because I can*t
I am trying to reduce my credit card bills because I can*t afford them. … read more
LegalGems
LegalGems
Juris Doctorate
12,822 satisfied customers
Looking for help with an unsecured debt left over from my
Looking for help with an unsecured debt left over from my divorce and wondering what I should be doing about it. … read more
Legal Eagle
Legal Eagle
Attorney
Doctoral Degree
14,185 satisfied customers
I live in Herkimer County and am enrolled in a debt
I live in Herkimer County and am enrolled in a debt management company because my debt became overwhelming after I lost my job on 12.31.2015. I was fortunate to find another job 2 months later but at … read more
socrateaser
socrateaser
1,031 satisfied customers
Can a debt consolidation company charge me for credit they
Can a debt consolidation company charge me for credit they did not help me with? I signed up for Freedom Debt Relief (FDR) to help pay off 4 credit cards. They helped me set up a pay plan for 1/4 cred… read more
socrateaser
socrateaser
1,031 satisfied customers
Tina, You helped me last recently with a question regarding
Tina, You helped me last recently with a question regarding the legitimacy of a student loan consolidation company. I have been told by several companies that they can consolidate my federal student l… read more
Tina
Tina
Doctoral Degree
83 satisfied customers
can an individual use a debt relief company to reduce credit
can an individual use a debt relief company to reduce credit card principle and interest rates thru negotiations witht the creditor? Company being considered is Freedom Debt Relief… read more
Ellen
Ellen
Lawyer, Consultant
Doctoral Degree
8,238 satisfied customers
I have 2 credit cards in my name but the balances belong to
I have 2 credit cards in my name but the balances belong to my husband. He wants them in his name but the credit card company said it has to be court ordered. How do I go about that?… read more
Ely
Ely
Counselor at Law
Juris Doctor
24,658 satisfied customers
My house is going to be foreclosed on in a couple of weeks.
My house is going to be foreclosed on in a couple of weeks. The purchase price was $162,900; I borrowed $154,900 and made an $8,000 downpayment. The house was purchased in 2004. According to the Mortg… read more
Barrister
Barrister
Attorney/Landlord/Realtor
Doctoral Degree
38,294 satisfied customers
I am in the process of a home modification. I also am looking
I am in the process of a home modification. I also am looking at debt relief. I have been working with Comsumer Law Grp PA and American Credit Counselors. CLG has a BBB credit rating of F and ACC has … read more
MShore Law
MShore Law
Doctoral Degree
1,233 satisfied customers
Could you hepl me On debt relief how dose it work Is it up
Could you hepl me? On debt relief how dose it work Is it up to par can it help me with my creit card debt… read more
MShore Law
MShore Law
Doctoral Degree
1,233 satisfied customers
Hi this is James Farley again im looking to find a way to
Hi this is James Farley again i'm looking to find a way to get myself out of credit card debt about $12000.00 and i'm now looking at Debt Settlement the company is New Era Debt Solutions can you give … read more
Richard - Bizlaw
Richard - Bizlaw
Juris Doctor
3,773 satisfied customers
A year ago my husband and I sought the help of a Debt Relief
A year ago my husband and I sought the help of a Debt Relief company to help us settle our debt as we were trying not to file bankruptcy. They let us know that they had "settled" on of our debts with … read more
Ely
Ely
Counselor at Law
Juris Doctor
24,658 satisfied customers
Hello- I was issued a severence check from my company with
Hello- I was issued a severence check from my company with a pay date of 10/23/2009. I deposited the check (hold placed until 10/31/2009 because of the amount. I have learned that the company filed ba… read more
LADYLAWYER
LADYLAWYER
Owner of my own law firm
Juris Doctor
6,438 satisfied customers
We are considering a Legal Debt Relief Company to reduce our
We are considering a Legal Debt Relief Company to reduce our credit card debt, which is $24000.00. Although many of these companies are insured, and claim to be able to reduce the amount owed by about… read more
MShore Law
MShore Law
Doctoral Degree
1,233 satisfied customers
I was just served with a summons and I owe 18,0000 to Discover
I was just served with a summons and I owe 18,0000 to Discover Card, I have been working with a debt relief company for the past year, what do I do know? We have been working at paying the debt compan… read more
Ellen
Ellen
Lawyer, Consultant
Doctoral Degree
8,238 satisfied customers

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

Show MoreShow Less

Ask Your Question

x