Is debt settlement a good idea, possibly too good to be true?
Let’s take a look at what happened to divorced fulltime working New York mother of four Judy Orlando when she signed on for debt settlement to help her get $30,000 in credit card debt under control.
Offers to Resolve Debt Problems
Judy had received a notice from Nationwide Asset Services, a Phoenix-based company. Nationwide said it would be able to get Judy out of debt in 18 to 24 months. They also promised that her credit would actually be better than it was before she got into debt.
Judy paid the debt settlement company’s $1,300 initial fee and then began paying $350 a month, as Nationwide requested per the agreement. She followed all other instructions, too: change her phone number, stop paying creditors, and cut off all contact with creditors.
Pays out $10,000 But Credited for Only $3000!
After paying Nationwide more than $10,000, Judy reduced her credit card balances by less than $3,000 and paid Nationwide nearly $7,000 in fees. Nationwide never told herher that her interest rates and penalties would continue to rise.
A Bad Situation Made Worse
In the end, Judy’s creditors sued her and then they placed liens on her home.. Ultimately Judy filed for bankruptcy protection and only then was able to resolve her debt problems.
Nationwide Debt Company Sued
Meantime, the state’s attorney general sued Nationwide for false advertising and fraudulent business practices. According to the lawsuit filed by Attorney General Andrew Cuomo, just one third of one percent of those who signed on and paid Nationwide actually got the agreed-upon 25 to 40 percent debt reduction.
Debt Settlement a Bad Idea?
Stories like these are commonplace. The debt settlement company asks you to withhold payment to creditors. You do this, because you do not know any better and you trust that they will do what they say they are going to do.
You go ahead and pay the settlement company a large sum. Meantime, interest rates and penalties are skyrocketing on your credit card bills. And creditors are now beginning to call you and harass you. Their job is to collect money from you, and they are not very nice about it.
Debt settlement companies cannot legally guarantee that they will be able to negotiate a reduced debt for you. Even if they do negotiate a reduced debt, your credit still takes a significant hit, because you did not pay on your bills for all that time and also because your report will say that your debt was charged off, rather than paid in full.
You Can Negotiate Reduced Debt With Creditors on Your Own
Not all debt settlement companies are rip-offs, but why pay someone something that you can potentially do for yourself? Many creditors are increasingly willing to negotiate with individual debtors.
Bankruptcy Provides Protection and Fresh Start
You may want to consider is filing for bankruptcy protection if you cannot seem to get out from under your debt burden. By law, bankruptcy puts an immediate stop to creditor harassment, efforts to collect and debts you owe, repossession, and foreclosure actions.
If you qualify for a Chapter 7 bankruptcy, you may be able to eliminate all of your unsecured debt. Alternatively, Chapter 13 will allow you to reorganize your debt into a reasonable, affordable repayment plan paid over the course of three to five years’ time. In a Chapter 13 you do not need to pay 100% of your debts.
Contact an Experienced Debt-Relief Attorney in New Jersey
The law firm of John Hargrave and Associates, in Barrington, New Jersey, can help you make an informed decision about debt consolidation, bankruptcy, or another bankruptcy alternative. To schedule a free initial consultation with an experienced debt-relief attorney, please call (856)-759-6022 or (866)-662-3191. You may also contact us online to schedule your appointment.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
Located in Barrington, New Jersey John Hargrave & Associates have helped people towards a fresh financial future through bankruptcy for over thirty years. We serve South Jersey, Burlington County, Camden County, and Gloucester County along with Camden, Cherry Hill, Pennsauken, Maple Shade, Lindenwold, Cinnaminson, Collingswood, Haddonfield, Bellmawr, Gloucester City, Marlton, Pine Hill, Audubon, NJ and also Philadelphia, PA. Contact us today to learn more about your options under the current bankruptcy laws. We’re here to help.