DIY or Use an Attny to help Negotiate Debt?

katclaws_moAugust 31, 2009

I keep hearing how people are sometimes able to work things out with their lenders & the credit card companies on their own. We are starting to bleed out. Mortgage is upside down--house is worth less that what we owe. We want to sell, but we would need money to bring to the closing to pay off the lender. Like so many others we are house rich-money poor. Credit card debt is sky high--please no lectures on how we got there--we are there.

My DH talked with some "debt counselor" & they are saying that their attorneys have more clout with better success than trying on your own. Here's the catch that really sounds like a scam for me. They get paid $3,000.00 if they succeed, if not they "only" take $900.00. Even with my math/finances illiteracy this sounds like a scam.

AM I THE IDIOT or is HE not thinking straight?

If I actually had a spare $3,000.00 sitting around wouldn't I pay off some debt/mortgage? My DH travels so much & works so hard--long hours--weekends & evenings--he's thinking maybe using these attny's might actually be the best way to go since he has so little time to make these contacts himself. I am pretty much useless in the finances department, but I would do anything to help him.

Could this really be something on the up & up????

TIA

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Mo

Sounds like a company you should be avoiding. See the Federal Trade Commission link below. Also, near the end of the page is a link to information about choosing a credit counselor.

Here is a link that might be useful: www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm

    Bookmark   August 31, 2009 at 11:50PM
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setancre

Definitely check out the forums at myfico.com. There are tons of experts and people who are going through the same exact situation as you who will help with warnings, tips, sample letters to creditors, etc.

There are a lot of debt consolidation scams and more cropping up every minute. I would not trust a credit counselor or financial advisor who wasn't registered with the state or SEC. More than likely this debt "counselor" your DH talked to will take your $900 and walk away. They get paid $900 even if they spend 0 minutes on your case. You would have no idea, and all they have to say is "Sorry, we weren't able to convince your creditors to budge, thanks for the $900."

If anything I would do a search for a nearby Certified Financial Planner at http://www.cfp.com. Nearly every one of them will do a free sit-down interview with you to discuss your needs and give you an estimate of what they would charge to help you (and how they would help you). They take an oath, have an ethical standards board and take exams and continuing education so you can be more certain that they will not scam you out of your money.

    Bookmark   September 1, 2009 at 10:57AM
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jkom51

I'm a big believer in using CFPs when advisable, but I do think you'd be better off with a credit counselor. I agree this company sounds like a scam. You definitely need an unbiased opinion whether or not bankruptcy will help you (and whether you're even eligible; many are not now that the bankruptcy laws are tougher), but I think going to a registered credit counselor instead of a CFP might be more practical in this case.

Whatever you decide, don't put it off. Do some research to make sure you are talking to a person who can truly offer you good professional advice, and do it NOW.

Good luck to you going forward. I know how difficult these kinds of situations are, we filed for bankruptcy ourselves back in '93 but the laws were very different then.

    Bookmark   September 1, 2009 at 1:27PM
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katclaws_mo

Thank you all for your advice & replys. I will definitely check out the information you all gave me.
With sincere thanks, ~~ katclaws

    Bookmark   September 1, 2009 at 4:28PM
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mariend

Go to a lawyer specializing in this debit/bankrupcty/chap 13 etc.
DO NOT go to any debt councelour. My son did this and is still suffering. They did nothing and only after he went to the attorney general of his state did they return his money and now are not allowed to advertise in the state.

    Bookmark   September 1, 2009 at 4:54PM
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jkom51

mariend, your son may not have done his homework thoroughly in researching his options. There are in fact certified credit counselors who work at low or no-cost to consumers to help restructure debt. They are not allowed to do any legal work such as bankruptcy, for which one does need a lawyer.

katclaws, there's a useful FAQ on this website that you might find helpful:

Here is a link that might be useful: National Foundation for Credit Counseling: links to consumer info

    Bookmark   September 2, 2009 at 10:33PM
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idie2live

Kat, I have experience with debt /credit counselor. About 15 years ago I was swimming in debt. I went on the internet, researched and picked a company to try. (Angels must watch over fools).
This company negotiated with my creditors to lower my payments and reduce my interest rates. It took me 3 years of structured payments to get rid of those bills. The debt/credit counselor company charged me $3.00 per bill per month that I was on the program.
I had a good experience and I don't regret using them. I cannot remember their name, but it shows there are reputable companies out there.
BTW when I checked my credit score lately (it was really good), those payments are shown as coming from a credit counselor agency.
Good Luck

    Bookmark   September 3, 2009 at 6:56PM
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