Anyone have any experience with debt reduction firms?

[progressoid]

We have a friend who is in over her head with credit card and IRS debts after some medical problems and job loss. She's starting to get back on her feet but still has a big hill to climb. So she's thinking about one of those companies that will help reduce your payments, interest etc.

I don't know much about them so I took a quick look online. Kind of hard to sort the wheat from the chafe. I wonder if she'd be better off just trying to negotiate better terms on her own rather than paying someone to do it.

Any advice out there?

[marybourg]

1. Tell her to go ONLY

to a non-profit. Their website should end in .org. Sorry I don't have any current examples. Maybe someone else does?

[TBA]

2. She should see a Bankrupsey Lawyer

Most will consult for free. Even of she does not want to declare bankruptcy this type of lawyer will clarify her financial situation for her. And heshe would definitely be able to offer advice on debt reduction services.

[progressoid]

7. Thanks.

Similar comments below. I'll pass on the advice.

[PJMcK]

3. Generally, they're bad news

Your friend would be better off negotiating directly with her creditors. They will want to make any reasonable kind of deal that will keep the account alive. Even if it's only a small payment every week or month, the creditor would rather have an active account than a troubled one. If she explains her circumstances honestly and makes a straight-forward deal-- and lives up to it-- the creditor will most likely help her handle her obligations.

Debt reduction firms tend to charge rather large fees and attach themselves to the debtor. Avoid them at all costs!

Good luck to your friend!

[progressoid]

5. That's what I was thinking.

Thanks.

I found a site that has tips for doing it yourself. She said she's going to the library to do some research so maybe she'll find some helpful books there too.

[mahatmakanejeeves]

12. I just removed some street spam for a debt reduction outfit.

"Street spam" is the term for those corrugated plastic signs stuck in the ground at traffic intersections or on utility poles.

The fee was $250 for the first month and $89 per month thereafter.

Talk to the city or county first. See what they advise.

[Else You Are Mad]

4. If she finds a good firm...

It is better than going on their own because it is a full time job negotiating. These are usually non profits or attorneys. Maybe they would be best speaking to a bankruptcy attorney or, if they don't want to go that route, there are attorney that do debt modification. As an attorney, I have negotiated a few loan modifications before giving up doing such work because they are hours and hours worth of work with no guarantee.

If the person is not organized and does not the time to spend hours on the phone for half a year, they may want to hire people. The most important thing to look out for is any place that asks for a large payment upfront or if they tell them to give the monthly payments to the firm so they can pay it. That is a huge red flag that it is a scam. Finally, try to find a firm that is in state, that makes going after them if they mess up much easier.

[progressoid]

9. Yeah, I don't think she has to the time.

Family obligations take up a lot of her time. Plus she's been pretty beaten down by this. So I'll see if I can get her to see an attorney.

[Else You Are Mad]

13. No matter what your friend does

Please make sure she does not hand over any money until there is something in writing, and, since there are shady attorneys and firms, if the attorney says they will take her monthly payments and place them in escrow and will pay on her behalf, don't let her. That is the biggest scam out there, and she will find herself even further behind on the payments and out of the money paid.

[progressoid]

16. Thanks.

I'll call the attorneys I used for my brother's estate. I think they do this kind of thing too. They were good to me.

[Else You Are Mad]

21. I hope everything works out! nt

[Heddi]

6. Typically they're scams. Have her see an attorney

And most importantly, NEVER agree to pay *ANY* amount without a written "agreement to settle" beforehand.

We had some debt from an unknown city tax that we didn't know about, didn't get the letters from the city bc we moved out of state then a collection agency came to us with a $3100 bill. We negotiated it down to $1500 and they wanted a credit card to pay right then. I was very weary of this and demanded to have an agreement mailed that spelled out exactly what we owed and what they would accept in payment.

Interestingly enough, when we called the city about the tax, they were able to get it down from the $3100 and lower than the $1500 the collection agency wanted to around $900.

However, ours was a relatively small amount. If your friend is in arrears with the IRS and others, have her see an attorney. A consultation should be free or relatively inexpensive, and she will probably make more headway with them than a company with questionable morals

[progressoid]

10. Heddi!

Nice to hear from you. Even on this shitty day.

Will pass on the advice.

[Heddi]

14. Hello dear!

Hope you're doing fabulously even though it's the end of the world as we know it

[progressoid]

15. Yeah,

The added wine and Sertraline seems to help.

[Heddi]

18. Always a winning combination

I prefer wine and diazepam but not the best when one is trying to be productive on a PTO day

[Lochloosa]

8. Also try her bank or credit union. My credit union has financial advisers. And they are free.

[progressoid]

11. I suggested that too.

She implied that she tried and it didn't go well. But that might have been when she wasn't working full time. Maybe they'll be more helpful now that she has a stead income.

[Lochloosa]

17. If it was a bank it most likely didn't go well. Might consider a local CU.

Mine is great. Small community CU.

[bluecollar2]

22. second on the CU...n/t

[Runningdawg]

19. I was forced to file medical bankruptcy in 2000

I did everything possible to avoid that decision including consulting a debt reduction firm. After a few questions, I was immediately told to "take your dog to the pound and sell your car". The dog and I ended up living in that car. I hope not all companies are like that, but you should be prepared to hear similar suggestions.

[bluecollar2]

20. without getting into specifics

She should cover her ability to generate income first...

Priorities expenses.

Food, shelter, health and transportation first.

IRS next....work out a plan to repay directly with the IRS.

Credit card debt last...

Pay down smallest bill first and minimum on all else.

Once first is paid down next smallest etc...

Key is to read and understand the debt collections act in her State and be ready to fight back.

She should make it clear she is willing to pay back the debts but she will not be bullied while she is doing so.