DIY or Use an Attny to help Negotiate Debt?

14 years ago

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

Comments (7)

Mo
14 years ago
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
setancre
14 years ago
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.
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Boy I know about the emotional burden. For years, I hid our mounting debt from my husband. I'd wake up at night worrying about credit cards. Yet I continued using them. At first it was only for Christmas gifts and vacations. Then I started charging gasoline and groceries. I was making payments all along, but falling deeper and deeper in debt. I consulted a lawyer but decided against his recommendation to file bankruptcy.The hardest part was being honest and admitting everything to myself, my husband, and the banks and credit card companies. I had to admit I was deeply in debt, badly over my head, and needed to stop spending and charging. I have been faithfully paying off all my credit cards for nearly three years and it will still take several more months to get rid of the last couple. My credit cards will be completely paid off in 2014, also a home equity loan and car loan. I'll post when all my debts are gone. By the way, I hate looking at this whole post. It just reminds me of how stupid I was about money in the past, and it reminds me not to share sensitive personal information on line. This post was edited by jannie on Sun, Feb 16, 14 at 12:06
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It sounds like 99% of your problem here is outlook - not the numbers. If you have the cash to go out to eat, then you have the cash to get out of debt. There are whole lot of "can't" in your post and that isn't going to get you out of this mess. First, you need a reality check. You can't buy a home. That would be the stupidest decision you ever made even if you could get someone to loan you the money. You are broke. You need to cut your expenses, not add more. You don't have money for going out to eat or going to movies. You wisely spent it on more important things (your husband and kids) so now you are going to have to sacrifice those luxuries to pay those bills. As for practical measures: 1) you need a written budget for spending and saving. Every dollar needs a purpose at the beginning of the month and you don't get to spend anything that isn't on that budget. (The budget should also include some money for a short term emergency account.) 2) You need to get your interest rates under control. If your husband has great credit, he can get a lower interest rate card and transfer the balance. You need to get very aggressive with this. Take charge of the charge cards! 3) If you own cars that are worth much (or that you owe a lot on) consider selling them and getting some cheap wheels. 4) Look at finding a cheaper place to rent. Maybe you can't do that for 6 months, but it would give you some light at the end of the tunnel. 5) Look at part time jobs. Even a couple hundred bucks a month would make a huge difference for you. 6) Eliminate all the extras you can and put that savings towards your debt. 7) Start "snowballing" your debt. Toss all the extra money you can find at a small balance with a high interest rate and pay the minimums on the rest. Once that one is paid off, move on to the next card and pay that minimum plus all the money you were paying to the old card. It builds like a snowball with every debt you pay off. Ultimately, you need to get fired up about changing your life. Half measures and small changes just aren't going to cut it. You had some drastic things happen to ring up this debt and you are going to have to take some drastic steps to get rid of it. It is doable though. A generation ago, nobody went out to eat or had cell phones or cable or whatever - and no credit cards. Somehow, they managed to survive their entire lives that way. I'm sure you can do it for a year or two until you can get your head back above water.
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Coyote_Gramma, you may have worked for a counseling service that required for consumers to pay a monthly fee. However, not all organizations required a monthly fee. Years ago, in the early 90's, I have used one of this CCCS organization that showed on my previous replies. I came to know this service through a tip from a creditor collector after she apologized that she couldn't lowered the rate nor the monthly payment anymore. 'Til this day, I wish she knew how wrong she was. By letting me be awared of CCCS, she literally saved my life. I didn't pay a dime for the CCCS service. Their services lasted for over 4 years until all creditors were paid in full. CCCS explained that their non-profit organization was funded by the government. Most companies that takes monthly fees from consumers are individual operated. As for negotiating the rates and payments with the creditors, I tried many times but were unabled to go as low as 0% interest. CCCS, due to who they were, was able to negotiate 12 out of 15 creditors down to 0% interest easily. 2 other creditors agreed to 7% and 8% interest. The only one that would not budged to lower the interest was Sears. However, they agreed to a much lower monthly payment. I doubt that the normal consumer could easily achieve this. This system is better than declaring bankruptcy or even bringing your credit to a lower level. In my case, after all payments were paid in full to the creditors, I closed all those accounts down except for 1. A few years later my credit score reached to normal and later to a higher score enough where I could purchased a car and a house with very low interest rates. I now have 2 credit cards opened and have been maintaining a low to 0 monthly balance for many years. Although, Macey may not need this service, I am posting my experience for those that are in high dept to know that there is hope and that a non-profit organization such as CCCS do exist. It does no harm to check them out.
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jakkom
14 years ago
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.
katclaws_mo
Original Author
14 years ago
Thank you all for your advice & replys. I will definitely check out the information you all gave me.
With sincere thanks, ~~ katclaws
mariend
14 years ago
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.
jakkom
14 years ago
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
idie2live
14 years ago
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

DIY or Use an Attny to help Negotiate Debt?

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Mo

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