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I would to understand how debt relief companies work

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Hello,I would to understand how...
Hello,I would to understand how debt relief companies work.
Submitted: 20 days ago.Category: Legal
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Answered in 25 minutes by:
5/31/2018
Lawyer: N.Brown ESQ, Lawyer replied 20 days ago
N.Brown ESQ
N.Brown ESQ, Lawyer
Category: Legal
Satisfied Customers: 136
Experience: Attorney
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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.

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Lawyer: N.Brown ESQ, Lawyer replied 18 days 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.

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Lawyer: N.Brown ESQ, Lawyer replied 16 days 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.

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