Snowball vs. "Debt Relief"?

[cristina47454]

We've been snowballing, but we haven't been making much progress. DH had a significant pay cut last year. He's starting a new job, but it's full commission sales and we're going to have to stockpile any extra cash to hold us over during the winter, so basically, yeah. We're at a standstill. When we were snowballing, we were projected to be debt-free in 36 months. Now it's more like 43 months (we're throwing snowflakes at this point, not snowballs).

So, anyway. I keep hearing the commercial on the radio for "debt relief" if you owe more than $10k (we owe almost $60k!! Down from $72k when we were throwing good snowballs). I'm afraid to call for info, bcs when I called my BofA credit card for "information" about their debt repayment plan they ended up slashing my limit, putting me on the plan, and eventually closing my card even though I had been with them for almost 20 yrs and had never had a late payment!! And I DIDN"T WANT TO BE ON THE PLAN(Matter of fact, I was aggressively paying it down at the time). Don't get me started.

I've been dedicated to paying this consumer debt down by ourselves, but that commercial is really starting to sound tempting. What exactly does it do to your credit rating though? We are currently renting, but would like to buy a house when we get our feet under us. Realistically that means 4 yrs of debt repayment, 3 years to save up for a down payment. We're looking at 7 yrs no matter what.

[surrogate]

DO NOT DO THAT!

Lol sorry for the caps, but don't do that...its basically a scam. You pay them payments each month and when you have paid a certain amount THEN they call your creditors and work out a settlement. In the in between you just STOP paying your credit cards.

If you want my honest opinion, you need to talk to a bankruptcy atty. If you filed BK now it would be discharged in 6 mos. Then you can start over again, and in the same time frame you were initally looking at to buy a home you could still buy one. You can get a judgement deleted from your credit report pretty quick if you are persistant. I used to help people repair their credit reports, so I can honestly tell you it isn't hard to do.

Visit the credit and bankruptcy forums over at creditboards dot com. You have to register (free) to see them.

I think based on what you posted BK is a really good option

[MyTwoAs]

Debt relief agencies are often times scam organizations. You have to pay them monthly and they'll pile up YOUR money and then eventually get around to offering a settlement offer on your credit cards. However, they pile up your money until a) their fee is paid and b) you have a big enough balance in your account (minus their fees) to actually offer a settlement on the account(s). In the interim you aren't paying your credit cards so your credit is getting trashed as your accounts go 180+ days past due, get charged off, and eventually sold to a credit collections agency.

I heard a call on the Dave Ramsey show a few weeks ago from a gentleman who had been giving money to a debt relief organization for 10 months and had almost paid the entire service fee. During that 10 months not a single settlement was made.

You can work on settling your debt on your own if you don't have the ability to make your monthly payments but that will also negatively affect your credit. I believe that the amount that is written off will be taxed via a 1099 (I'm not 100% on this, though).

Here's a link to the FTC website - Knee Deep in Debt - in this article it talks about what to look out for in terms of credit counseling or debt management plans (if you decide to pursue that route) - http://www.ftc.gov/bcp/edu/pubs/cons...dit/cre19.shtm

More links of interest:

http://www.ftc.gov/bcp/edu/pubs/cons...ts/alt015.shtm
http://ctwatchdog.com/2010/07/29/ftc...s-a-good-start
http://www.msnbc.msn.com/id/38130515/

Also browse the creditboards.com forums - they are a great resource and they have a forum dedicated to debt relief/debt management plans - http://creditboards.com/forums/index.php?showforum=79

Good luck with your decision and your debt payoff.

Edited since I posted at the same time as surrogate - I wouldn't consider bankruptcy since you can meet your payment obligations and although you're looking at a few years before you are debt free, you definitely aren't bankrupt. Of the debt that is left, is it all credit card debt? How much of it is on an auto loan or in student loans?

[laohaire]

Why would she consider bankrupcy? She's able to make payments, it's just going slower than she had hoped to get rid of the debt.

Which I completely and utterly sympathize with. But I just don't see why bankrupcy is even a consideration here.

[cristina47454]

I've been doing some googling, and yes, most of them seem like scams. It's that "if it sounds too good to be true..." thing.

The only reason I've been thinking about it is that we Have some friends that recently went through it and they're trying to get us to drink the kool-aid. I'm going to check out those links, MyTwoAs. Thanks. I actually frequent creditboards, but didn't realize they had a debt relief board. I'll check it out.

I guess what's getting me wondering about this is, if I'm going to be 7 yrs away from a house, what's the best way to make good use of that seven years?

And FWIW, we ARE struggling financially, but I really believe this is temporary, so I don't want to do anything TOO drastic. YKWIM?

Oh, and yes, it's all consumer debt. We own our cars outright, already paid off student loans, and we are renting our home.