Debt Settlement Blog

Analyzing data for credit card debt can be a way someone who owes a lot of money could feel better about themselves. Recent reports indicate that credit card debt continues to break records each year with more people have more consumers having more secured and unsecured debt than ever before.

If you have a credit card statistics, you will be able to feel better about yourself as you go about the frightening task of cleaning up that debt. On the other hand, considering solutions for credit card debt like debt consolidation loans, debt settlement and bankruptcy can be a daunting task to say the least.

The term, debt management can be confusing.  In most cases debt management refers to consumer credit counseling.  Credit counseling can improve your finances, but most people who get involved do not realize that consumer credit counseling takes years to complete, it damages your credit scores and that borrowers who join CCC have to completely pay back their outstanding debt.  Debt settlement options hurts your credit scores initially, but you only pay off a portion of the outstanding debt and in most cases your credit scores rebound quicker than CCC.  Debt consolidation loans usually help your credit immediately because you are never late on your monthly credit card payments and eliminating numerous revolving credit accounts into one fixed rate payment will raise your credit scores.  The only problem when consolidating credit card debt usually requires a large unsecured loan or a second mortgage.  In this type of financial market, banks are not offering either option unless you have a significant amount of home equity. 

According to Federal Chairman Chief Ben Bernanke, the Banks are essentially overwhelmed with the demand by homeowners to modify their mortgages. As the Federal Government actively pursues immediate relief, banks look for ways to reach homeowners with a message to work together to solve the foreclsoure crisis.

The Mortgage Modification Legal Network addresses the demand for bank relief with the largest network of attorneys and affiliates of Debt Settlement Nationwide.  In many cases, due to the sheer volume of the demand, the homeowner’s lack of awareness of the bank’s mindset, and the homeowner’s reluctance to speak directly to the banks, a third-party relationship is ideal for getting the job of providing home loan modifications that are done in a timely and efficient manner.  There are pitfalls however; many loan modification “mom and pop shops” are overly aggressive in counseling the homeowner to the detriment of the bank’s fragile eco-system.  “There are many companies out there that will take a homeowner’s money, counsel them to miss payments and then not complete the modification until the homeowner is severely delinquent,” says Paul J. Simino, President/CEO of onesimpleloan.com. “This gives the third-party relationship a black-eye and hurts all of us robbing the opportunity to help the homeowner and the economy.”  “We offer the homeowners and the banks a highly transparent and efficient system and we simply never counsel the homeowner to miss payments or go against the most basic code of lending practices. Because we have the largest affiliate network in the Country we are able to turnaround the modifications in record time compared to what homeowners are typically quoted and we are able to show the homeowner and the banks the status of their modification on a daily if not hourly basis,” says Ryan Boyajian, President of the Mortgage Modification Legal Network.

The Mortgage Modification Legal Network is also known for their grassroots efforts in providing in-neighborhood seminars and meetings and community outreach. The Spanish-speaking community considers Mortgage Modification Legal Network as their number one resource. “From the beginning we have taken a very active role with the Spanish-speaking community,” says Gerry Fernandez with MMLN. “We know this market, and provide the level of competency and trust they deserve. We also provide our services in other languages including Japanese, Korean, Vietnamese, Farsi and Mandarin.”

The Bush administration’s approach to today’s meltdown is to direct all its energies and largess to mortgage lending institutions. There is, as yet, no program to help distressed homeowners renegotiate the terms of their home mortgages with loan modifications or loan work-out plans. The president is opposed to further stimulus programs, even though private-sector investment in the United States has all but ceased.

It’s becoming increasingly clear, however, that while saving the banks may limit further calamities, it doesn’t really save anybody else. Even with government-guaranteed lines of credit, financial institutions are refusing to lend money.  Credit card debt continues to mount for Americans nationwide and affordability for housing has become a growing fear for many families in all types of neighborhoods. With the banks effectively on strike, an economic recovery, if there is to be one, must begin with the government injecting funds to those parts of the economy that need it most: infrastructure development, state and local governments, an alternative-energy sector. These are all programs to which Bush is firmly opposed.

In a sense, Bush’s inactivity is even less excusable than Hoover’s. Unlike Hoover, Bush could learn from the successes of New Deal and World War II-era programs to revive the economy. Keynes’s general theory of how to defeat depressions wasn’t around when Hoover was president, but it’s been with us now for seventy two years. What’s more, virtually every reputable conservative economist, from Martin Feldstein on down, now supports a government stimulus program. But Bush, drawing on no known body of economic thought, remains opposed. And with each passing day, the economic hole out of which we will have to climb grows deeper.   Read the complete article at Real Clear Politics.

Joseph Pickett says he was struggling with about $21,000 in credit card debt last year when an unsolicited e-mail ad dangled the prospect of eliminating the financial burden.  After replying to the message, Pickett, a 24-year-old night manager for a Northern California hotel, says he charged nearly $3,000 to Financial Solutions, a company that told him to stop paying the credit card bills and demand formal proof of the debt.  The advice came from a firm that a federal indictment in Florida alleges was part of a scheme involving income tax conspiracy, tax evasion and wire fraud, a USA TODAY review shows.

Today, Pickett says the debt has grown to roughly $25,000, and the credit card firms have written off the total, further damaging his credit report. Financial Solutions had told him that outcome was unlikely, he says.  “If the indictment is true, obviously, I’ve been victimized — they lied to me,” Pickett says. Amid signs of a steep recession, an Internet-based industry of self-described debt-counseling firms is offering consumers ways to eliminate or reduce credit card bills and repair credit records. But prosecutors, government officials and consumer advocates say some of the programs seem too good to be true — and are.  “Usually, the first form of advice some of these companies offer is to stop paying your debt, which is, quite frankly, the absolutely worst thing you can do,” says Stephen Cox, spokesman for the Council of Better Business Bureaus, calling such a recommendation “one of the red flags.”

Although there are no definitive national statistics on debt-related scams, reports from federal and state agencies indicate the problem seems to be rising.  The Council of Better Business Bureaus logged 892 complaints across North America about all types of credit and debt-counseling issues from January to June. That puts the category on track to top the 1,704 reported during 2007.   American consumers filed 3,092 complaints about debt management or credit counseling in 2007, Federal Trade Commission records show.   Read complete article

Unfortunately, sometimes the best form of negotiation is when fear is created from a consumer not paying their bill.  Yes there are shady debt negotiating companies, but there are also good reputable debt settlement companies as well.  I wonder if it would have been better for Joseph Pickett if he paid his credit cards late every month and let interest on top of interest compound.  Well late payments and no payments affect their credit scores nearly the same….What about bankruptcy?  Would that have been good for your credit?  Consumer Counseling?  No that reports late every month as well.  This is a great written article, but I wonder if Joseph has informed the writer about his other options?

Dear Credit Guy, I owe $20,000 on my credit cards. I’ve had some companies tell me they could reduce this amount by as much 60%. Can you tell me a good company to deal with? — Ed

Dear Ed, Paying a percentage of what you owe rather than the full amount is called a debt settlement. There are many different companies offering debt settlement services today. When you settle a debt or credit card for less than you  owed, your credit scores will likely be reduced significantly. If you are already more than ninety days late in making payments on your credit cards — which I hope you’re not — then going the debt settlement route will probably not cause your credit score to get much worse.

However, if you are current on your credit cards now, settling your debt will make your credit history much, much worse. The reason is because in most cases, creditors are only willing to settle a debt for less than the amount owed, when they believe collecting part of the debt is better than collecting nothing at all. When you are current with payments, the creditor has no reason to believe they will not be able to collect the full amount, and they are very unlikely to consider settling your account.

Debt settlement companies generally collect a monthly amount from you that you can afford to pay in addition to an initial enrollment fee. Rather than dispersing your payments to your creditors, they hold on to the payments for at least three to six months, depending on your circumstances. Next, they try and negotiate with your creditors on your behalf to settle the account. Keep in mind, you are making monthly payments to the settlement company, but nothing is being paid to your creditors, and you will still be receiving the collection calls from the people you owe.   Making no payments to your creditors is reported to the credit bureaus, and your credit score will tumble quickly. Once the creditor has agreed to a settlement amount and your account is settled, that will also be reported to the credit bureaus. Although the account will be marked paid, it will be not be marked paid-as-agreed, which is how you want any account that has a negative listing to be resolved.  See article written by Todd Ossenfort,