Ask Get Out of Debt Guy: Questions About Debt Settlement

Ask-the-Get-Out-of-Debt-GuyHere at ReadyForZero, we’re all about taking a holistic view of your finances. While we want to focus on helping you get out of debt, there are many ways that you can optimize your finances to both get out of debt and build wealth. One of the most important aspects of this is to educate yourself – which is why we cover so many topics on our blog and our resource centers.

But now we’re going to take a step further to make sure that we address everything you need to know in order to optimize for the best financial future possible. How are we going to do this? With the help of our good friend, Steve Rhode! Steve is a well-known debt expert who answers questions on his own website and is now offering help specifically to ReadyForZero users. Read on for today’s topic and answer from Steve!

Today’s question is from someone who is deep in debt and considering getting help. She called a debt settlement company who bullied her instead of helping her and now she wants answers. Question: Is going with a debt settlement company the best option if you can’t make your payments?

Steve’s Answer

When you reach out to companies that are offering you debt relief they are not trying to provide you with an overall assessment of your financial situation. They are trying to qualify you to sell you their service.The only real way to evaluate your situation is to educate yourself about the major options for getting out of debt. Once you do that you can then make a good educated decision about what path might be right for you.

My get out of debt calculator, which I’ve linked to below, will provide you with the pros and cons for each option. But in the sales pitch you’ve received so far from the debt settlement company there are some serious consequences to consider. In a program like that your debts will go unpaid, you will be in collections, you may be sued, and your wages could be garnished. It will negatively impact your credit score and your delinquent payments will be reported on your consumer credit report for seven years. I see the company said they would send cease and desist letters but what they appear to have failed to tell you is those letters only apply to third party debt collectors and not the original creditors.

On one hand the debt settlement company is selling you using the typical fear of bankruptcy many have. The debt settlement company says they can get you out of debt in three years but you face all the negative consequences I just laid out. And it’s unclear how much they are going to charge you for that.

But compare that to bankruptcy. With a chapter 7 bankruptcy your debt will be eliminated in about 90 days. You can start rebuilding your credit right away. The bankruptcy will cost about $1,750, depending on where you live. By the end of the time it would take you to complete the debt settlement program you will have rebuilt your credit. The bankruptcy stops all collection calls, prevents you from being sued, and prevents any judgment or garnishment.

To find out what solution is going to be the most appropriate for you, I’d suggest you first read How to Get Out of Debt. The Honest and Unvarnished Truth and The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. They will give you a great overview of what we need to deal with to get you moving in the right direction. Then use the free How to Get Out of Debt Calculator to review your options. If you do this you’ll be way ahead of most people in finding the most appropriate solution for your situation.

The opinions stated in these posts are solely the opinions of Steve Rhode, not of ReadyForZero. Are you interested in asking your own question for Steve? Send me an email directly at shannon@readyforzero.com and use the subject line, “My Money Question”. If you’re more into social media than email, write your question on our Facebook wall or send us a tweet – don’t forget to include the hashtag, #mymoneyquestion!

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  • doug

    Consider a debt consolidation loan. You can pull all of your debt together into one account, preferably one featuring a fixed, low interest rate. You can use the proceeds from the loan to pay back your other creditors and then make monthly payments back to the loan consolidator.

  • Rozer Layer

    If you are thinking about selling your structured settlement, there are several things you should consider before dealing with a buyer. Look for a real legitimate buyer to ensure that you do not land in trouble in the future. Protect the buyer who intends to make use of your payments. This will help you save yourself from losing money.