OK guys, I need your help on this one.

I have a coworker who is considering "hiring" a debt settlement firm to eliminate her credit card balance (north of 30k). The pitch is basically this.... the firm will 'negotiate' with Visa to lower it down to, say, 25% of that amount. they of course charge a fee for their services. she will not make payments on her accounts whilst the firm is negotiating.

Well, I smell a rat.

Clearly, her credit rating will be damaged. My question is...is this a scam? how does the scam work?

My guess is she will end up paying these idiots a 10% fee and end up in the exact same place as before. It seems like the people who cannot afford to lose anything are the ones who get suckered into these things. help me help her see the light of this stupidity.

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Jennifer
90 350sdl

You are pretty much right on target. Without writing a disertation - what the company is doing is nothing that she could not do herself.

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I agree with you, I don't see how she can get away with not making payments while they are "negotiating" a settlement amount. All that will do is make her account more deliquent, further ruining her credit.

Start here:

http://www.google.com/search?hl=en&lr=&q=credit+counseling+scam

Links to a google search for: credit counseling scam

Hi Jen - Glad you're still around........

No such thing as a free lunch. Your friend would be far better off if she "bit the bullet" and reduced her spending drastically and paid the thing off. Even though some of these companies that offer to reduce your debt try to look like non-profits, they're in it for the money. Unfortunately, there are an awful lot of people who have let their spending habits got out of control and now unscrupulous operators are taking further advantage of them.

Good luck to your friend.

Wes

Glad to hear she will still be paying back her loan.

I buddy of mine had over 30 grand in credit card debt in the 90's. He took the low-way out and simply declared bankruptcy. I always thought he should've paid his debt instead of we taxpayers.

But now he's 42 and is still renting instead of owning a home. What goes around comes around.....

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2016 Hyundai Santa Fe Sport (wife's).

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She can do the same on her own, if she takes the credit counseling route her credit will be screwed.

She can cut her deal with the creditor and the account will be brought back to current; which is usually about 3 months after that her score will increase dramatically. If she takes the 3 year counseling route it will be a significant amount of time before her credit improves because the report will indicate that she was in counseling and less than the actual balance was paid.

Big time garbage smell. Two people I know did this and it was the biggest racket in the world. They don't promise to pay anything off, basically what they do is just keep the wolves at bay. Tell her to cut up the cards and work with the credit card companies herself- writing everything down and how much she will pay them each month.

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"It's normal for these things to empty your wallet and break your heart in the process."
2012 SLK 350
1987 420 SEL

Forget the credit settling company.

Tell them to contact Visa and make arrangements. Visa wants there money back so if you offer them something they will probably be willing to play lets make a deal.

In such a situation since the interest rates on those cards is so high, is there any way this person can pay that loan back in one shot? IE sell a car or boat, if they own a home maybe take out an equity line of credit to pay it, personal loan from a bank, ect?

I know with my Visa if you don't pay they bump you up to like a 20% or 25% interest rates. If I were in such a situation I'd be looking for a way to roll that loan into one with a sane rate.

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1999 SL500
1969 280SE
2023 Ram 1500
2007 Tiara 3200

That's all changed now- you can't simply file for bankruptsy anymore.

__________________
"It's normal for these things to empty your wallet and break your heart in the process."
2012 SLK 350
1987 420 SEL