Negotiating Away Credit Card Debt

Credit Settlement: Credit Report, Fees and Bankruptcy

Mark also alerted me to the fact that many companies that help people negotiate debt settlements charge high fees or collect a percentage of the amount they get your creditors to forgive. In other words, money that could be going toward your debts is going to them instead.

"Bad actors in the industry will collect fees up front, while paying nothing for months, destroying the client's credit under the guise of building leverage for the negotiation, " he warned.

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Debt settlement is "the road less traveled" and, as such, can be a bumpy ride. You may actually be better off declaring bankruptcy, a well-charted course governed by the courts. Keep in mind bankruptcies also remain on your credit report for seven years.

Whatever you do, don't make a move without expert help. Correction: expert NON-PROFIT help. For-profit credit counselors have been known to keep your money instead of forwarding it along to your creditors as they have promised. Non-profits like Consumer Credit Counseling Service look beyond your present debt to life changes you can make to break bad habits and avoid falling into the same cycle again and again.

Here's how Todd Mark describes the CCCS process: "A caring counselor will review your full monthly spending plan, evaluate the reasons for any debts, mortgage delinquencies or financial crisis, consider all options, and develop an action plan [increasing income, decreasing expenses, paying down debts, changing lifestyle or setting financial goals] that the client can execute on their own."

In the end, paying off debt is a lot like losing weight. There are no miracle cures. Just as you need to exercise more and eat less, you need to pay off more and spend less to build a healthy financial future.