Re: diff between debt relief and bankruptcy
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Posted by mk_378
(128.173.37.190) on June 29, 2004 at 13:03:39:
In Reply to: diff between debt relief and bankruptcy posted by almagg on June 29, 2004 at 00:03:09:
Third parties seeking a profit promote different schemes to consumers with debt problems. The ones I've seen can be classified into these general types: "Debt Counseling" or CCCS type programs. These are slightly legitimate though they are definitely not working in the debtor's best interest. The agency attempts to negotiate with original creditors for a lower APR and relief of penalty fees. There are no guarantees that this negotiation will be successful. It works better in a situation like yours where you are already behind on payments, but not charged off. Of course the debtor could attempt such negotiation himself. Crooked CCCS programs (that's most of them) will pay creditors late or not at all, leading to worse credit and continued collection efforts. In a CCCS program, the debtor will still have to pay off the full debt, plus some interest to the creditors, plus fees to the agency, and he will have terrible credit during the process and possibly after. The credit counseling system was developed by creditors as a way to talk debtors out of filing bankruptcy. Think of it as a "soft" collection agency that pretends to be on the debtor's side. "Debt Settlement." This is a scam. The agency advises debtors to not pay creditors at all, instead give the debt settlement company money to be saved up and used to settle the debts later. Creditors will often sue if they discover a debtor is involved in this scheme, because they know he has some money but is refusing to pay. The agency will not help defend these lawsuits. Generally they will just take the money and run. If they do settle the debts, they take a fee based on the amount "saved". This encourages them to settle debts that needn't have been paid at all, such as to garbage collection agencies. The debtor will have abysmal credit during and after the process, as well as constant phone calls from collectors, and lawsuits and judgements. It is not necessary to ever get involved with these companies. A debtor can do the procedure themself at a much lower cost. "Debt Termination." The agency sells a package of dubious legal advice based on theories that common banking industry practices are illegal or unconstitutional. This package often costs thousands of dollars, but it is worthless. The theories will be laughed out of any court in the country. Creditors will sue instantly, knowing that they will get a slam-dunk win, and if the debtor had enough money to buy into this scheme, he probably has some more to pay judgements. "Credit Repair." For a fee, a company helps clients attempt to remove negative items from credit reports by filing disputes. If the reports are not true, it's perfectly legitimate, though in any case the consumer could have done it himself for free. If the items are true, it still often does work with old out of SOL debts that have been passed through collection agencies. But attempting it on a recent debt where the creditor has proof of the debt will invite a lawsuit. Abuses by credit repair operations have led to them being regulated by a specific federal law. Bankruptcy. This is the totally legitimate way to be rid of debts without paying them. Of course it has the price of years of bad credit, though often not so bad as going into default, getting sued, and having judgements. The debtor also has to prove to the court that he really is bankrupt and unable to pay. The cost in court and lawyer fees is much less than the other options and the debt is guaranteed to be forgiven.
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