There are hoards of new startup companies out there (and some older ones) such as Ameridebt who can help you get out of debt. These companies offer to reduce your repayments and what they will do is take a single payment from you each month and distribute it to creditors and sometimes pay them pennies on the dollar.
        Sounds great! so I can reduce my debt by having a company take one payent from me and reduce the ammount I owe! Wow, no more creditor calls and I dont even have to send out multiple payments each month, this will really help....

    STOP RIGHT THERE!

What they don't tell you is that when you do this you are creating a repayment plan, they are legally settling with your creditors for less than the toal owed. The federal government has a plan like this also, its called chapter 13 bankruptcy!

Some of these newer companies are also of the fly by night company, you pay your payments and their fees and whoosh they close for business and take your money with them on a very nice vacation to the bahamas paid for by you!

You are still in the same situation plus some mug just took some of the money you could have repaid some debt with.
Some companies even claim they can repair your credit rating! Make bad marks dissappear etc. Some companies can do that, thats right, but what they are doing is illegal! You might not want to be party to illegal activity.

Some of the methods they use are things like, making you a whole new "credit identity" getting you an EID (Employers Identification Number) to use instead of your social security number. Doesn't that sound great! How does 5 yrs in Federal prison and upto a $250,000 fine for conspiracy sound? Or 30 yrs and $1,000,000 fine (per count)  for some of the more serious practices they can get you into, such as wire fraud, mail fraud, misrepresentation of your tax ID and various others. Giving false or misleading information in credit applications over the phone or by mail and if you use a false or misrepresented ID while doing this will get you 2 federal counts! So beware!


For those who don't know, a social security number is an individual's tax number.


The legal players out there CAN NOT do anything you can't do yourself.


So where do you start?

Pull your credit report ( http://www.annualcreditreport.com ) look through everything on it, if you see errors in there, contact the bureau of the report you are looking at and notify them of any discrepancies you find, in turn they will contact the creditor if it is not just something incorrect in their records, the creditor will have a certain ammount of time to respond to their requests for verifications or they could end up being taken completely off your credit report by the bureau.

Look at how you live, are you really saving every penny you can to pay off your debts? Save a few extreme cases out there EVERYBODY wastes money day in day out. You just dont think of it. Saving money is HARD WORK. Sacrifices need to be made, routines changed, but if you are serious about becoming debt free then you will do this. If you are not serious, then go bankrupt, and pay out the rear end for everything for the next ten years or so. Oh ya and then feel sorry for yourself.

The only thing that can fix your credit at the end of the day is you.

If you really have to, you can ask creditors for a settlement ammount, settling debt for less than you owe, but this will end up on your credit report. Some lending institutions will consider this as good as a chapter 13 bankruptcy and you will be treated accordingly. There are slight differences in that some companies will treat you just a little step better than a Chapter 13.

Debt consolidation can also be a useful tool if you have a lot of creditors or you have high interest rates going on, you can consolidate all debts into one payment and pay a smaller interest rate, but again, look to make sure you are paying to total debt off or just a portion of it.

The only other thing to remember in the end is that credit and debt are 2 different things.
Credit is good for you, Debt is bad. And yes I really mean that. Good credit will get you benefits in life such as cheaper car insurance ect.
You only get debt from credit if you use it and hold a balance!

Getting a credit card and buying small things on it then paying it all off before the bill cycle comes due is smart use of credit.
Wasting all of your money then going shopping on the credit card is BAD!

And thats about all I have on that topic for now. Let me know what you think, anyone agree or disagree with this article let me know


DAN


P.S. here is some more information from the Federal Trade Commission.

http://www.ftc.gov/bcp/conline/pubs/credit/repair.shtm

Last edited by AliasXR (2007-07-06 22:38:23)

AliasXR  that was a great post.   I totally agree with you.  You really have to be carefull there are so many people,  companies that just can't wait to take advantage of you.   It  also seems that even when you try to improve your credit that becomes a negative against you as well.  Correct me if Im wrong , but when you pay down a card and then cancel that card, that will have a negative effect on your credit rating.

Last edited by Nick4033 (2007-07-07 00:29:01)

It can have a negative effect, it could be positive, it depends on your specific situation. If the card you cancel is say 5 years old and was well maintained, and say you have another card that is say 6 months old and also paid up on, you lose out, this is because you are canceling an ESTABLISHED history of GOOD REVOLVING CREDIT and the only one left, while it may be paid up, it only represents 6 months of good revolving credit on your account.

Remember, when you apply for a loan etc, your credit report is usually put through some piece of software each individual bank etc has. This adds a whole lot more variables. Generally speaking an established, good track record means more to your credit than new credit.


Dan

I had a friend who fell into that trap. He was giving his paycheck to these people and they were not paying his bills on time, which got him even more late charges.

The only ones who can really fix anything is you. For hints or tips you can look around this board and also check out the FTC website at http://www.ftc.gov

They are all about consumer trade and spending.


Thanks

DAN

You are so right, AliasXR. Let's face it, the only ones that get us into a problem are ourselves. We either indulge in one thing or another, or don't save anything. SO we have to get ourselves out of the problem.

Nice thread!

Thanks for sharing your suggestions.


Good Bye

alexander

I would never sign up with a company that is collecting your money and making your paymnets for you..  VERY DANGEROUS. But there are some companies that for a small can help you get back on track, but the fees should be very limited and shouldnt make you go bancrupt.

Be careful of having companiesnegotiate rates for you as well, creditors do not like this and its a good way to get your card cancelled. You can negotiiate directly with your vendors, may take a bit of practice but it is doable.

The first question you have to answer is have you done all you can to get control of your situation.? 

Do you have a full budget and know exactly where every dollar you own is going.? If not that is step one. 
Once you have this you can then determine the best techinues and route to attack your debt.

Good Luck,

Does anyone happen to know if this is a scheme that's only possible in the US?

I know of several people who've declared bankruptcy in Canada, but I've never heard of a similar "business" here.

I have not heard about these fly by night Debt Management Companies.  My roommate is with a long standing Debt management company, whom she uses to help pay off her creditors.  She did have to pay a fee up front and then pays one check, and the company distributes it for her.  If she has one  late one time, she loses all protection and all the money she has paid to date.