There are some concerns you should be aware of if you hire a debt settlement company to help you settle credit card debts. These concerns are mostly related to debt settlement companies and their ability to settle debts with some creditors. But there are other key business practices used by the debt settlement industry that are noteworthy.
Before I get to what many will view as my being opposed to hiring a debt settlement company, I want to point out that I have offered professional debt negotiations for years. I am not opposed to hiring a debt settlement company. I do suggest you do it with eyes wide open though.
The below items are HUGE concerns because they could limit your ability to succeed with debt settlement. We may come back to this topic in later updates to this page, but for now, let’s focus on what these 5 things means to you when settling credit card bills with your banks. Without further adieu, here are the 5 things that you won’t typically hear from a settlement company, but should.
1. “Some of your creditors refuse to work with my debt settlement company.”
This is a problem with a couple of the larger credit card issuers right now. If a debt settlement company is not telling you that your bank refuses to work with them, it often means they have to wait for that particular account to charge off and go to an outside third party debt collection agency.
This could mean losing out on an opportunity to settle direct with your bank for less than may have been the case otherwise.
You could miss out on an opportunity to keep your account from being sold to a debt buyer who may not settle for as good a rate, or who has a higher likelihood of suing to collect.
2. “We have to wait for some accounts to charge off before trying to settle, even though this may cost you more.”
This can be partly due to number one above. But it can also have to do with how debt settlement is marketed to the masses. For more than a decade now, debt settlement is offered more as a form of debt consolidation. Companies want you to put money aside each month in order to save up and settle one account at a time, or as you save up enough to knock off a debt.
The soft sell, where settling is made to be an affordable monthly payment plan (but you are not actually making payments) means you can make settlement more presentable, and sound more affordable, to way more people. But if you are not telling someone that there are sometimes good deals before charge off, so try to get your hands on some cash quicker to take advantage of them, you may not get as many new customers.
I have had no problem explaining charge off to people, and why to try to avoid it if you can. Most people cannot settle all of their debt prior to this. I understand that. But I think you should know why it is important to try.
3. “You can negotiate and settle credit cards on your own and sometimes get a better deal than we can.”
Okay… I know that a company is there to both help people, and make enough to pay its bills and employees. Telling people that they don’t need to hire you is a good way to go out of business.
There are challenges to helping people save the most money in their settlements. And if circumstances suggest you tell your customer they are going to get a better deal if they do this one themselves (this actually happens), you are empowering someone to do something that you as a professional get paid to do. You essentially limit your utility or value to your customer. But I am a “teach a person to fish” kind of guy.
You can help people and still do well.
The problem here is that people can miss out on additional savings, or end up with an account in later stages of collection, when it can be avoided.
4. “If we weren’t charging you such high fees, you could actually be out of debt faster.”
Here we hit my biggest problem with the debt settlement industry. My company has charged the same fee for direct debt settlement services since 2004. It is 15% of savings. The fee is calculated when we know the end result. The better we do, the more we earn. But that is not how the vast majority of companies operate.
More than a decade ago there was a shift in how the industry at large charge for the professional debt negotiation. There was a shift to charging a percentage of your overall debt. That shift is a problem because you can get paid the same no matter the outcome. Save someone who has $40,000 of debt more than $20,000, and get paid the same amount if you only save them $10,000.
But there is more to it than that. The higher the fee, the longer it takes you to settle the next debt, followed by the next account, and the one after that.
5. “You’re a good fit for our settlement program, but there may be better options for you.”
You just do not hear a sales person working at a debt settlement company say “you should speak with an attorney first before committing to enroll with us to settle your debt.” Here again, you lose business that way. But you also end up with the wrong customers.
If someone can get rid of that 40k of debt I mentioned above, but for under 2k (and in 90 days), instead of 20k, they may want to know more about it. Most people are talking to a debt settlement company because they want to avoid filing bankruptcy. I get it. But I have long held there are more people in debt settlement programs that don’t belong than do.
Settling debt is a great alternative to filing chapter 13 bankruptcy, but not a chapter 7. Settling debt may not be a good idea for someone whose current finances and near-term goals mean consolidating credit cards would be better.
Here is a brief video where I touch on the 5 items listed above:
Debt settlement company fees for settling your debt, and the expectations the front-line sales people are trained to set you up with, prevent the sharing of key details you deserve to know. I can only come up with 3 reasons why folks will act outside of their own interests in this regard. If you can think of more, post them in the comment section below.
- They didn’t know any better.
- They know better, but don’t care because they have no grasp how simple it is to work out a settlement with many of the larger credit card issuers.
- Some people just don’t want to pick up the phone and talk to a creditor, let alone a debt collector, and would rather a debt settlement company do all the heavy lifting.
We get it. Different strokes for different folks. The do-it-yourself-ers will take the information from this site and run with it. Some of the DIY-ers will see the value in working with a pro one-on-one in order to maximize savings, timing and to navigate things that inevitably change along their debt settlement journey. Some people will only ask a debt settlement company to step in when they are dealing with later stages of debt collection, or if they hit a road block with a tough account.
Debt settlements with your original creditor should be done by you when, and wherever, possible. Here are 3 reasons why:
- Money.
- Money.
- And money (the stuff you’re running short of, or you would not be on this site).
I Thought I Was Going to Save Money
A couple of the largest credit card banks in the nation flat out refuse to work with debt settlement companies, including me. They have held this position for a couple years now. If you want to settle debt with one of these credit cards before charge off in order to save the most, potentially save some damage to your credit report, and prevent the account from getting dropped into the collection pipeline – you have to settle it yourself!
Tip: Banks change their internal policies. Not every month, but credit card banks willing to work with a debt settlement company today, may decide to stop doing so right in the middle of your debt settlement program. It happens.
For people who just want a settlement company to do it for them, I understand. That’s why I keep the option open for you to have a negotiator handle some or all of your settlements. But even we will have to wait for some accounts to charge off.
Another one of the largest credit card banks does work with debt settlement companies to settle accounts. But this bank typically settles with professional negotiators at a rate that is 10% or 15% higher than what may otherwise be available.
If you want someone to negotiate your credit card bills with your original creditor before charge off, and work with someone in the network, you will need to have a blunt conversation with one of us about your creditors and their policies at this time.
If you have questions about anything covered on this page about hiring a debt settlement company, or about one you are already working with, post in the comments section below.
My Personal Experience with Michael Bovee
Greg N
I’m writing this on my own behalf. I had approx 10 accounts with NDR ( big debt settlement company ) before I found Michael Bovee and the CONSUMER RECOVERY NETWORK..Michael coached me, helped me and encouraged me to take a hands on approach. I was SCARED to death! It did not take long at all with his help to get comfortable, when I came to him with all my existing debt, he told me the first day (you can do all of these yourself and save a lot of money, the only one I may need to help you with is Midland Credit) that’s not a direct quote but pretty close, and that’s EXACTLY what we did!! Now, 5 month later, all the debts are settled and below I’ve listed my balance savings as well as my FEES I’ve saved had I remained with NDR…
NO ONE asked me to write this. And honestly the process was daunting at first, but then became pretty easy. All in all I would estimate I spent around 20 hours on the phone negotiating. I saved in FEES **see below $8466 ( which is $423 per hour ), and that is why I did it.
Was it hard ? Yes
Was it scary and frustrating at times ? Yes
But $423 per hour it was certainly worth it!!!!
So the point to this is IT CAN BE DONE!!
1. Discover Loan (Lawsuit) PIF $4836 to settle $6000 Balance.
2. Synchrony Bank ( ERC Collections ) $5100 Balance. Settled for $1800 Lump Sum. Saved $3300 on balance and 21% of $5100 Balance ( $1071 ) that National Debt Relief would have charged me. For a total savings of $4371.
3. Chase $13000 Balance. Settled for $5350. Saved $7650 on Balance and 21% of $13000 Balance ($2730) that National Debt Relief would have charged me. For a total savings of $10380.
4. Chase $2800 Balance. Settled for $1084. Saved $1716 on Balance and 21% of $2800 Balance ($588) that National Debt Relief would have charged me. For a total savings of $2304.
5. AMEX $2800 Balance. Settled for $2000. Saved $1000 on Balance and 21% of $2800 Balance ($588) that National Debt Relief would have charged me. For a total savings of $2304.
6. Barclays Balance $2900. Settled for $2100. Saved $800 on Balance and 21% of $2900 Balance ($609) that National Debt Relief would have charged me.
Michael Resolved one account for me. Capital One. (Midland Credit) Balance of $18000. We settled for $9000 and I paid 15% of SAVINGS $9000 ($900 total) where if I would have left this account at NDR would have cost me 21% of total balance $18000 which would have equaled $3780 in fees! So I saved $2880 in total FEES by letting Michael handle this account.
Total savings in FEES from doing myself and one account (Capital One/Midland) by finding the CONSUMER RECOVERY NETWORK and Michael Bovee. $8466!
It was HARD but it was well worth the effort.
I am not going the debt settlement route because to date I am current enough and I have enrolled with a debt management program. I found your article helpful when combined with a ton of research I did while researching debt management.
“…if you [the debt settlement company] are not telling someone that there are sometimes good deals before charge off…” I found one of these “good deals” in the debt management process while I was doing some of the work myself. I was only late on 2/6 credit card bills with a previous A rating for on time payments. My peace of mind was suffering even though this would be a comparably small hit to my credit report, so I called one of my cards with an annual fee just tacked on to cancel the card only to save myself some additional debt on the annual fee. They refunded the annual fee to my card so I would keep the card open (for another month only, before the DMP took over) and the refund covered more than the minimum payment due, so I was current and my peace of mind was restored. The DMP agent now only has one single past due account to deal with, and it won’t even be 30 days past due when the DMP goes into effect. So, yes, I “saved” some money, but more importantly my peace of mind.
Discover
How long will it take you to pull together 50% of what Discover is suing for in order to try to settle with the law firm suing?
I’m not really sure.
My feedback depends on the answer. Here is a dedicated page to negotiating and settling with Discover.
Hopefully within a few weeks to a month. What should I do in the meantime?
If it were me I would look to work with an experienced debt collection defense attorney in order to defend against the suit and prevent a judgment while I am saving up to fund a settlement.
I started with a debt settlement company in May with 4 different creditors. Since then, they have only settled with one company. When I signed up, the account information pieces were setup for them to receive any calls and letters instead of me. They also told me not to make the monthly payments because they would not be able to settle then. I am getting nervous about how long it has taken to settle these accounts and do not know what to do next. They told me they begin the settlement process immediately and it should take between 3-6 months.
It sounds like you put all the money together you needed to in order to fund the settlements already. Is that where things are at?
Debt settlement companies will often wait until accounts are placed with outside collection agencies in order to negotiate. This could be because your creditors will not work with them, or because settlements can improve once your account charges off and gets placed for collection.
What accounts do you have left and what are the balances?
I have deposited a good amount for it, but they have only worked with one of the accounts. The remaining accounts are discover, capitalone, and chase.
If I assume you last paid your credit cards in May of last year, your accounts would be charge off right about now. If the debt settlement company you are working with is waiting for the charge off to negotiate with the collection agencies your accounts get placed with, that should start to happen now-ish.
If you have deposited 40 percent of the Chase balance, and as much as 50 percent for the others, and also have money to cover their fees in your special purpose account, I should think they will wrap all this up quickly (in the next 60 days or so).
What should you do if you end up getting sued by one of the credit card companies that were part of the debt settlement account?
My feedback will vary based on whether it is the original creditor or a debt buyer suing, where you are at in your program, and if your case is open or a judgment already in the record.
Also, post all accounts not yet settled. It is best to get a full picture of what you are up against, and if it looks like you will be putting out fires (lawsuits) beyond the current one.
The original creditor and the case is open. Fully settled and paid one of the 4 creditors. The other 3 have not been negotiated yet.
Who is the creditor suing?
Who are the 3 accounts with that are yet to be settled?
I believe they are suing me. The three remaining are discover, capitalone, and chase.
I still do not know who is suing you.
If you are currently able to fund settlement offers of around 40 to 50 percent with Discover and Capital One, I would start knocking those down if it were me. Chase would be the last on my priority list, and can be targeted for settlement at between 25 and 40 percent.
Settling the lawsuit is often the first priority, but there are efforts you can make to buy yourself time with that one if there are strategic reasons to delay that settlement.
Hi Michael great stuff i read almost every coments here and it give me motivation to handle this on my own do you have any suggestion based on my situation , i have 18k total debt but i would like to settle the 7 major credit cards i am having problems with which total about 15k macy, 2 boa, chase, discover, capital one and dell accounts (im not behind yet im planing to be next month iam changing my address to a po box i rented and delieting job number from the profiles) the other 3k are small credit cards that i would like to keep open and pay them off without settle to keep my credit active, it has come down to this because i realized i will never pay these off at 29% only making minimums and i have a mortgage and my income has decreased significally have a 6yr old and im sick of not being able to save money, my plan is to fall behing and save the minimuns i would ve pay them and when i have enough i would settle with them, yhe scary part is getting sue and brought to court, how long would it take for them to take me yo court, and i also read you said its a good idea to close the accounts on my own before i fall behind and they closed them on me, should i call them and tell them i am having hardship i know they dont care, what advise would you give me on how to aproched my situation, before hand thank you for your valuable time i will appriciated so much
Call me through the hot line if you have time tomorrow Ron.I can get more into the details and outline a plan of action for you. Call 800-939-8357, and option 2 will ring me. If not tomorrow , ring me most any weekday.
I have paperwork drawn up with Thomassen Law Group to settle/negotiate my $41k debts. I haven’t signed them yet and am taking a couple days to research. I have 2 credit cards with USAA – one at $18k and one at $23k. I keep paying the minimum payment on both every month which is $650 (combined). I’ve took a large pay cut recently when we moved from Minneapolis to Rapid City, South Dakota. We’re talking $68k/year to $39k/year!! The $650 minimum payments every month are wearing me out. I hardly have but a $200 at the end of every month and no emergency savings. At the rate I’m going, I won’t pay these down for another 30 years. It seems there’s no end in sight. I’m not delinquent on either credit card, however. Thomassen has offered a $625/month payment for 36 months to negotiate and settle these cards. The law firm wouldn’t get paid until they settle the debt. Even though it means 3 years of tightening my belt, I’m tempted to go with Thomassen. I’m just nervous about my credit score taking a hit and the possibility of not being able to borrow again for years to come. What would you do?
I would probably save up the money on my own without hiring a debt settlement company until I had about 30 percent of the first debt and then look at negotiating with USAA on my own, or then connect with a professional to negotiate for me (if I did not feel confident with the DIY approach).
Will BoA, Chase, CitiCard work with a debt settlement company before charge off?
Or should I negotiate this on my own?
BofA and Citibank may, and Chase still complicates that a bit. Are you already working with a debt settlement company?
I do not always recommend working with a pro to settle debts, but your situation (shared in your posts on other pages) suggest it might be a good idea, but I would advise against using the typical debt settlement company. I would suggest you work with someone who includes you in the process.
Hello, I am settling a debt with a law office from a landlord in which they got a judgement against me. I’m paying about 50% and they said they can’t do a PFD, but that they will notify the client to vacate the judgement as soon as the payment clears their trust account. I got a fax with that information, account numbers and that the payment will be full satisfaction on the law offices letterhead signed by a member of the firm. Is this good?
David – What you describe sounds good. It is a bit odd to have them agree to vacate the judgment. Great job negotiating that!
Michael – Thanks, your site really helped me determine what to ask for and how to deal with them. About how long should it take them to vacate the judgement? What is my recourse if they don’t do it?
60-ish days would be a realistic expectation. Because you are dealing with the courts, and legal issues, I highly recommend running your situation, and the details of what you have negotiated, by an experienced consumer law attorney. Even if you have to pay them a little for the consult, getting a judgment vacated is a big win, and worth it.
I have recently lost my job and I currently have $56,000 in credit card debt. I joined Freedom Debt Relief in December 2013 but I keep wondering if I am doing the right thing. Discover is one of my creditors that I turned over to them and they have sent me a letter saying they will not work with settlement companies and that they will turn my account over to a attorney. This Discover card has $15,000 on it and their “settlement” offer for me directly is to pay $5000.00 a month for 3 months. I can’t even pay the $300.00 minimum payment right now.
My questions to you are:
1. When in a settlement program, like I currently am, can a creditor still send you to court to try and collect the amount owed? I definitely can’t do this, it just about makes me sick to even thinking about it. When I asked Freedom Debt they said No.
2. When paying my cards directly I was paying roughly $1100.00 / mos. Now I am paying Freedom Debt Relief $870 / mos. Is there a better way of negotiating debt settlement with creditors that I don’t know about because when I call I think I can actually hear them laugh when I ask to be put on a payment plan with minimal interest? My thought was to take the $870/mos. and pay my creditors directly on a fixed payment plan but not with 20% or higher interest. Obviously I’m not negotiating correctly because $5,000/mos. to Discover is ridiculous and I’ll never get out of debt if they continue to charge high interest rates and late fees.
3. I closed all my accounts myself in hopes of saving my credit a little. I also continue to pay at least $25.00/mos. to my cards to show I am trying to do something (that is very minimal compared to my actual monthly amount due). Will this help my credit any and will this keep them from sending my account to collections or taking me to court if it shows I am trying?
I have only made a 1 month payment to Freedom Debt Relief and will be making a second one in a few days but I am still not 100% I am doing the right thing. At this point it is so hard to know what to do so any help you can give me to help guide me in the right direction will be greatly appreciated.
Thank you for your time!
Lynn – Great questions. I will answer them in order, with some additional comments.
1. Yes, a creditor can sue you in court to collect even though you are enrolled in a debt settlement program. Debt settlement companies like Freedom Debt Relief know this, and should not say otherwise.
2. The 1100 monthly you were paying on all of the credit card debts is about as low as you could expect. Even in the best qualifying hardship plan, your monthly payments would still be around 1k. Most account holders are not going to qualify for the lowest repayment plans many banks offer, and some lenders offer no extra-ordinary hardship payment plans.
My experience is that it will be impossible for you to get all of your credit card lenders to agree to reduced monthly payments that would combine for a monthly amount of what you are currently putting in an escrow account for the debt settlement company to use in later negotiations.
As far as what would be better at this point for your credit – when did you stop paying on the credit cards, when you enrolled with Freedom Debt Relief at the end of the year, or before that?
It is not that you are negotiating incorrectly. You are trying to achieve something in your negotiation with Discover Card that is not realistic with their current trends. They do sometimes offer a 60% of the balance with payments spread out over 60 months. How long have you had the Discover account? Were there recent large transactions to the card (12 months before payments stopped)?
3. Closing accounts yourself can sometimes help save a point or three on a credit score when enrolling in a credit counseling companies repayment plan,but does not help when working with a debt settlement company. Paying $25 a month is the equivalent of setting those dollar bills on fire at this point. As soon as the required minimum payment is missed, sending less than that minimum payment without an agreement from your lenders, is a waste. That money is likely not enough to meet late fees per account. The payments you are making will not help your credit, or keep your account from being dropped into the lenders debt collection pipeline, which includes debt collection agencies and the risk of being sued for collection.
All of the above may make it sound like debt settlement is not a good option for you, but it may be the right path. I think you need to understand the process and the implications better for sure. You are only a month in with your debt settlement company. If you were not late with credit card bills prior to that, all options are probably still on the table for you. You know that a credit counseling company could get your payments down to the average I posted above(I do not recommend you try doing that on your own). And you should also consider how bankruptcy would stack up next to debt settlement and credit counseling if you qualify for chapter 7. Questions:
Do own a home with equity in excess of your states exemptions for bankruptcy?
Do you earn more than the median income for your family size in order to qualify for chapter 7?If so, by how much?
Do you have a steady income, and feel secure in your job?
Do you get a tax refund, if so how much, and is that amount ear marked for something else (like property tax etc)?
Do you have other debts beside credit cards? If so, what are those debts, and what are the balances (rounded).
Who are your credit cards with besides Discover? What are the balances (rounded)?
If you can answer those questions I will have a good amount of feedback that should help you change directions for reasons that you hold as important, or that could help you better embrace the debt settlement path you are already on.
I have been with Discover for over 20 years and yes I did have a large purchase within six months of entering into the Debt Settlement Program. I stopped paying the full monthly amount due when I entered into the Debt Settlement Program, so I am 1 – 2 months past due at this point.
I do own a home and was planning on putting it up for sale and moving into a apartment or rent a smaller home that will have a lower monthly payment versus what my mortgage in now. I have no equity in my home at this time. I do have a steady income and my job is pretty secure. I usually get a small tax refund or we break even. If we do get a refund it will go to pay off smaller credit cards. Between my husband and I we make decent money but are upside in credit debt. Yes we have other debt with our cars, home, utilities, phones, etc. My other debt is roughly $5,500.00 / mos. on top of the 1,100.00 / mos. credit card debt. My other cards are with Discover, Chase and American Express. Total credit card debt is 55,000.00.
Thank you!
Lynn – If Discover is still offering the 60% plan, you may/may not be offered that. Roughly what percentage of the 15k balance was the result of your card usage the last year?
What state do you live in, and how many dependents do you claim? I can help you compare the dollar benefits of bankruptcy vs settling debts, if you qualify for chapter 7.
You are not too far down the path to get your listed creditors to agree to a credit counseling payment plan. Those plans go as long as 60 month. You can learn more about the benefits and drawbacks of credit counseling here. I would encourage you to determine if a credit counseling program better fits your needs and credit concerns before you are 90 days late, and certainly before you are close to, or more than 180 days late. You can talk to a certified counselor and get a monthly payment plan quote (one that your creditors agree to – therefore no collections or risk of being sued) at 888-317-8770. The monthly payment is going to be close to what I already estimated. If you cannot swing the payment you are quoted, or are otherwise told you cannot qualify for a DMP proposal to be sent through, it will boil down to bankruptcy and debt settlement.
When were you looking at downsizing/moving?
I would just take issue with one thing printed here about the “five things…” I tried to negotiate with every one of my creditors/credit cards before dealing with a debt relief (lawyer based) firm. Not one of the credit cards would negotiate with me at all. I’m happy with my results. $75 a month is not a lot to get out of debt when you consider my interest rates had skyrocketed to 28 and 30 percent, with $35 late fees.
Rik – Thanks for commenting. I am glad you got the help you needed, and depending on the amount of debt involved, I am with you, 75 dollars a month is very affordable!
I am all for people hiring a company to negotiate and settle debt for them. Most people prefer to, even after watching a video, or reading an article like the one above. This site is mostly for the person who wants to do some or all of it on their own. But like you shared, that is not for everyone, even if they would prefer to go the DIY route.
I see Freedom Debt Relief is advertising here. Are they good to work with if one chooses to go that route?
Kathy – Freedom Debt Relief has settled a lot of consumer debt. Perhaps more than any other settlement company by now. If you want someone to negotiate and settle for you, and are aware of what the fees can mean to your over all success, hiring them, over any other settlement company, will come down to choice. Have you talked with any other settlement companies in order to make a comparison? If not, I would. If you have made some comparisons, with what other companies? What stood out to you?
Hi Michael,
I want to thank you for all the great information you give those of us who are having these types of issues. I was hoping you might be able to answer a few questions for me. I am a disabled veteran who tried for almost 8 years to get my student loans from college to be discharged using the total and permanent disability status. I will not bore you with the details, except to say that I’d tried EVERY POSSIBLE THING I knew in order to get the paperwork necessary to the right people, but to no avail. I finally wrote to the Department of Education’s Ombudisman, t implore them for help, which they finally gave me! Now all nine of my loans are in a discharge status. I was told by Nelnet that the loans would be removed from my credit report, as you can imagine the havoc it has done! In addition, as I am constantly in and out of the hospital and have amassed a large number of medical bills. I have tried my best to keep up with the bills, but have been unable to do so. I have, however gotten the medical bill balances to just under $5000.00 (There are several, that are less than $300.00, a few that are less than $100, and two that are over $2000.00, all with collection agencies such as Southern Credit Recovery.) I just pulled my credit report, and I noticed something strange: there are nine accounts in total. All three agencies have pulled some of the student loan balances from some of the individual accounts off of my report, some accounts they have zeroed out, but left on the report, and some have been left in a deliquent status and still appear on the record. ALL OF MY STUDENT LOAN ACCOUNTS have been forgiven. Do I have the right to demand that they ALLL be zeroed out with the account history wiped out as well, especially since the time it took to get the accounts dismissed was not my fault? If not, is there anything I can do to make it look better on my report? I’ve waited so LONG to get this cleared up, and as you know, student loan default does not allow you to be able to do ANYTHING in terms of credit. I also would like to ask about the medical bills. I recently was given some money from my mother’s estate that will allow me to pay off the remaining balances I owe on the medical bills. Is there anything I can say to the creditors to get them to remove the items once I’ve paid them? If not, what is the best I can hope for in terms of my credit report. I’m sorry for the long post, but I really need some answers. Thank you so much again for trying to help people like me.
Yvette – Great job with your student loans! I know it took all of your patience and persistence to get that done.
With the credit reporting, if the balances are no longer owed (have been forgiven), you can use any documentation of that to get the credit reporting agencies to show zero balance due. But getting the legitimate negatives like late pays etc. removed is a different story. You should not have high expectations for that, as the loans legitimately were late.
When was the date of last payment on the loans? What do your credit reports show as the month and year the negatives are schedule to fall off?
With the medical bills, people have mixed results with getting the collection reporting removed when they pay the debt in full and are still able to work directly with the medical billing company or service provider. How old are the medical bills?
Thank you for getting back to me so quickly! As for the loans, throughout the process I had been advised (believe it or not) by Nelnet, to continue using my forebearances and other extensions to not make any loan payments while this was all being worked out. I followed their advice initally, but that didn’t work out because one set of loans actually defaulted while I was waiting, even though they assured me this wouldn’t happen! Then last year, I want to say in (Jan 2012), I was advised to start a repayment program with them that would allow me to make a small payment and allow me some more time to keep the second set of loans of out default, since the first set had already been declared in that status. I agreed to make the payments, as I was panicked to think of the other set defaulting, so consecutive payments. It was just about that time that Nelnet notified me that they were moving my loans back into a temp permanent disability, because I’d met all the preliminary criteria for a permanent discharge. I think in all 3 or four payments were made. Of course, I’m not getting any of the money I paid back, because as they said, “the loans WERE in default, even though we realize it was our mistake that it took so long to discharge them.” Nice. Anyway, I don’t care. I just do not want these loans or anything to do with them to continue to wreck havoc on me and y family’s life. I went through so much to get this done; I just want to be able to move on, but maybe that’s not to be. If not, I’m hoping you can tell me what my best case senario is to put them in the best light going forward. Finally, as far as the medical bills, they are different dates, some ranging from 2 years ago to some as recent as 30 days. I ‘ve paid over $65,000 since 2001, and so many come in from month to month, but recently some of the smaller ones have fallen through the cracks because my husband was laid off 7 months ago. We had about $10,000 of savings at the time, and thought it would be sustain us for a while, but we had no idea how fast that money would be chewed up! As a result, there are a few bills that are scheduled to come off the reports by Nov 2013, but several smaller ones just made it onto the report and will stay on until 2017/18. They are mostly under $250.00 and now I have the money to pay them. Is there anything I can do to get them off the reports quickly? maybe send the payment to the original creditor? I have done that at least once, and when the third party collector called, I told him it was already paid. he had me fax the reciept to him, and he dropped it after that. Does this work with most 3rd party collectors if the original creditor takes and processes the payment? And if so, do you have the right to demand it be removed from the report? I really can’t thank you enough. It’s always nice to be reminded there are good people who really do have good intentions in this world. 🙂
Oh, one last thing. The student loan dates for removal were listed as 07/2018 for one set, and 05/2014 for the other. The issue though, is that since I wasn’t able to get any credit except for HIGH rate lenders (all of which show a great payment history,) most of my credit record is student loans and hospital bills. Wouldn’t that lower my credit rating even more with basically no real credit history? I swear, it feels like being between a rock and a hard place, with no end in sight. 🙁
Yvette – I am going to suggest we talk about some different strategies in a phone consult. The reason for this suggestion is that you have several things going on, and I want to be able to ask you some questions about your situation, and your credit goals, without the comment back and forth that will be lengthy. We can bring the conversation back to the site after that.
If you are up to it, just send an email to the same address that you get these comment notifications from (those all come directly to me).
Great read and watch; I work in collections so all of this makes a lot of sense to me. I’m glad to see a debt settlement company that is willing to be honest, unlike some of your competitors (looking at you Freedom Debt Relief) I’m really pleased that you work towards educating consumers with actually giving real solutions to their debt, and not just filling your pockets. But curiously, what options does a consumer have after finding out that their creditor won’t work with debt settlement companies? As an example, there was a woman who had paid around $4,000 into her escrow fund, only to find out via third party collections that her creditor will not work with them. Does the company just get to keep that money?
Brandon – Thanks for adding your voice to the discussion. Here are some ways that I see companies like Freedom Debt Relief, and others, handle the scenario you outlined:
If she has additional credit cards to resolve, the debt settlement company will move on to another account and look to negotiate a payoff in order to collect their fee from that. This is often going to be with little “strategic” planning for identifying which credit card to settle next in order to limit risks. It is more about settling where the company can in order to generate fees.
In your scenario the collection agency is an assignee of the original bank who has a policy of not working with Freedom Debt Relief, or other debt settlement companies. The company may just wait for the assignment contract to end with the collection agency. Once the original creditor places the account with another assignee, or sells the debt off to a purchaser, they may look to settle the account at that point.
Whether or not the debt settlement company just keeps the money will depend on the company she is working with. If she is working with FDR, they went to a no upfront fee model when they were required to after the FTC passed the amended Telemarketing Sales Rules in 2010. As far as I know FDR does not deviate from that. She would therefore be able to pull her 4k from her escrow account at anytime.
Unfortunately there are still debt settlement companies working with an upfront fee scheme using some questionable tactics to enroll people and take fees before settling debts (face to face meetings, attorney sponsored, outright noncompliance). In some of these instances she may indeed lose out on some, or all of the 4k.
I would really like to see more perspective shared throughout the site in the comments. Please feel free to add to the discussion from your collection experience on any pages you read.
Do you work collections from an issuer, or from and assignee angle?
The link to the next part of the guide is broken.
Marie – The link was not live due to the next post in the section having not been published. I have the next part of the debt settlement section up now. It is linked above. I will put the rest of the settling in first stage collection up early next week, then get second stage collection up the week after that, followed by third and critical stage collections the week after that.
I have been detoured from the publishing part of the debt and credit guides until just recently.
Hello I had a bunch of credit card debt back around or just before 04 that I still keep getting notices and calls on ?? These debt are allmost 10 years old now ??? Why are they still being a problem on my credit rateing ?? They were done by a wife at the time that used my name without my knowledge and I flat refused to pay them after the divorce ??
Unpaid debts have a SOL (statute of limitations) for how long you can legitimately be sued in your state. Unpaid debts have an SOL for how long they can stay on your credit report of 7.5 years from the date of last payment. Once these timelines expire it does not mean the debts go away. They are still out there and can be collectable, just not through the courts, and cannot impair your credit (if they do you can dispute them as passed the SOL).
Are the accounts showing on your credit reports today?
Have a charge off on a cap one visa that is seven years old..It started at about the three thousand dollar range and kept growing with fees and penalties to 7700 dollars today. I am going to call to settle this debt as it is the only thing keeping me from a mortgage to buy a house.
. My question is, what should I expect to settle this for I was thinking about offering them 10% of the present balance. Is that too optimistic?
Thanks
David
David – Do you know who is holding the debt today? Are you certain that the last payment made was 7 years ago? Depending on when the account was last paid, it could be ready to age off of your credit report soon, which would likely mean you would not need to settle it in order to achieve your goal.
If you do go though with settlement, your 10% target is going to be way too optimistic if CapOne still owns the debt. If it was sold of to a debt purchaser and is passed the SOL, you can get a better settlement than with Capital One, but probably not 10%.
If your account has been charged off and sent to a debt collecting agency what is the likelihood that you will be able to open up an account with your original lender, IF you are able to clear the debt with the collecting agency? I hope you are able to respond, and thanks for this website, it has a lot of good information. Especially in these times when everyone’s having it bad with their creditors. Thanks! Please respond!
Kisha – The odds of opening up another account with the bank that charged off your credit card debt in the past are high. What type of account are you looking to open, another credit card, or a checking or savings account? Who is the bank?
American Express is about the only lender I know for certain maintains a list of prior defaulted account holders. Getting another AMEX credit card when you have a balance outstanding on a prior credit card from them is not likely.
It can make a difference whether you pay a collection agency who is just working for your original lender as a collector, or paying on a collection account after your original lender sold off the account. Getting a debt settlement with a collection agency and paying less than the balance owed can bring the same result you are looking for as paying the collection account in full. The difference of course being the savings.
Are you working with a debt settlement company?
Thanks for your response! I’m just now getting the chance to reply to you…Well the bank was Capital One, and yes they have sold off the account. I read about a ‘pay for delete’ option over the internet, and tried to call Capital One to see if that option was possible, but received quite an unfavorable response- they just referred me to the collecting agency and didn’t seem interested in hearing me out.
I have negotiated with the collecting agency and will be paying in full because I’ve read that a ‘pay in full’ is better on your credit report than a ‘settlement’. I asked you that first question because, of course, my credit score has taken a hard blow from this and I would like to go about improving it bit by bit by getting back a credit card. I wish this would be possible, because I can say that I’ve definitely matured since that first poor management of that account…Would you recommend that I still try to get one from them?
I read about some banks giving you a conditional credit card where you have to put down a security deposit of some sort in order to have one…I was thinking of trying to get one of those too…I’m still trying to see what’s the best option for now.
I appreciate you responding to my question. Thank you so much and keep up the good work!
Kisha – Pay for delete is just not common (and I mean to the point of nonexistent unless a utility bill a couple months old). For Capital One to have your account out to a collection company normally means they charged it off. Paying the collection off in full, or for less than full at this point, is not a major credit report improver. Getting the account to show a zero balance owed, which both paying in full or settling for less accomplishes, is the goal.
Rebuilding your credit is not difficult when you approach it with a plan, and understanding it takes time. The tools available through https://www.credit.com will help you reach your goal. They have offers for secured cards like you mention in your comment, as well as unsecured cards that you are more likely to qualify for. I would suggest you resolve your outstanding collection accounts and wait a couple of months before opening new accounts.
I am still curious if you were working with a debt settlement company? This post is dedicated to that topic, so that is why I am asking.
Hey again!
No I’m not working with a debt settling company at the moment. Thank God I don’t need to…I think I can cover my debt with my wages right now. Thanks a lot for your replies. All the best!
Make sure that coll agency or the original creditor actually does some-thing for you on your credit report ?? I paid some of these types off several years ago n they made no corrections on my credit report and I had to go through the hassel of proveing it myself to the credit reporting places and that in itself was a real pain n took awhile to see any improvement !!!
Credit reporting should be updated with the fact that you no longer have a balance owed by creditors and collectors once you settle or pay off a debt. There is not much more that can be done by them. But accurate reporting, a little time, and smart planning – all will help to improve credit reports and scores after a financial setback.