Debt Reduction Programs

In Debt Relief on March 23, 2009 at 7:47 pm

Times are tough and Money is tight. Our financial obligations weigh heavy on our minds. Thought I would pass this bit of information along.

Caveat: I have only looked at one program. My opinion does not mean there are not any good programs. Therefore if you have had a good experience, please let me and the world know.

I just had a consultation with a prospective client who is considering hiring a Debt Reduction Company. Based on reading the text, I am not sure this is a very wise move. In order for the plan to “work” the client stops paying their listed creditors and redirects monthly payments into the company account. The plan could take a couple of years. This is scary for a number of reasons: 1) You stopped making payments to your creditors, result they begin collection actions, including using the court system; 2) You are redirecting money into another account that you have NO control over; 3) the program does not protect you from lawsuits to collect on the debts; and 4) if you miss your monthly payment (hardships do not matter) or payments on a negotiated plan, you may be Kicked Out, with no recourse.

So you enroll for say $300 and make monthly contributions of $500.  After four months, you have not paid a creditor and you have contributed $2,300 to an account that is supposed to help you but you cannot control.  Many creditors file a law after missing three monthly payments.  So you are being sued and still contributing $500 a month to some plan, plus you need an attorney to help with the lawsuits.  After a year, you have invested $6,300 plus any expenses to fight lawsuits.  Does this sound like a good idea?

I do not believe I would ever recommend this to anyone. For $1500 to $3500 you can utilize Bankruptcy.

Jeff Jackson, Bankruptcy Attorney, Central Ohio

I provide Debt Relief. I help people file for relief under the Bankruptcy Code.

  1. […] v. Debt Reduction Programs In a previous post I noted that a Debt Reduction Program I had reviewed for a client appeared to not be an avenue in which many peopled in a credit crisis […]

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