Credit card debt relief – federal bailout money available? Or are the adds just deceptive?
Sunday, January 17th, 2010 at
9:40 pm
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Apparently a lot of experts answering here did not read up on this, for example the NY Times article referenced below. Credit card issuers are willing to settle debts at greatly reduced amounts.
Right, there are no government funds available for this (yet). But, the creditors are going further to allow for settlements than ever before, as more debts are becoming delinquent. Aside from this, regulations require them to reduce a debt to zero if it’s more than 6 months delinquent (credit score already tanking).
The consolidation / settlement companies have been around for a while. I used one over 10 years ago to eliminate my finance charges and have a static sum to pay on. Now, these companies can get your total debt reduced by half or more (see article, I’m not making it up).
How debt consolidators work: they have lawyers call the banks and negotiate on your behalf, telling them you’re unemployed or whatever the case may be, and that the bank will never see that principal paid off. But, they will offer some percentage of it that you can pay off, without further interest rates, etc.
The banks will then close your accounts and collect only from the consumer debt agency.
All of this is terrible for your credit rating, but not as terrible as bankruptcy. The bank finishing your account will knock a lot of points off your credit score, but once paid off, you may get new credit in the future. It’s not the end of the world. It did take me a few years after paying it off to increase my credit score to the 700s.
If you can’t pay the debt you have now, enrolling in a debt consolidation agency might be the only way out.