** A little backstory to flesh out the characters and allow you to understand our situation. Feel free to skip ahead to the actual question. **
Long story short, my wife and I both had great (750+) credit scores for the last 10-15 years. We never used to use credit cards. But 3 years ago she had to take a new job with a $7k/year pay-cut at the same time we started paying $600/mo in day care... so we started putting stuff on cards because we had to. Between all sorts of living expenses, multiple expensive car repairs, a huge tax bill, etc, we've accumulated about $14,000 in credit card debt across 7 cards.
All but one account are current and in good standing. But the one "bad" account is a Chase card with about $5,000 on it, where the monthly payments just plain got to be too much and we fell behind several months. We're trying to make it right and want to consolidate the debt from all (or at least most) of the cards... both to lower our monthly payments and to pay off the accounts that have become unsustainable. Just paying the minimum payments adds up to about $350 to $400/mo across all the different cards.
** START OF ACTUAL QUESTION **
So I've contacted a few debt consolidators and loan companies. And yesterday I got a call saying I was denied a consolidation loan (poor income-to-debt ratio, and my credit score has dropped to 560 due to my delinquent Chase account and one collection I had years ago, but DID pay, on a medical bill -- sidebar: F**k Aetna) but was referred to this other company for their "Debt Rehabilitation Program".
They stressed several times that it was Debt Rehabilitation and NOT Debt Consolidation -- it's not a loan, and they would NOT be paying the creditors. Instead, I would pay them $268/mo for 23 months and then be done. Debt disappeared. Credit score going back up to the 700s. Saving lots of money per month, becoming debt free in two years, and villagers rejoicing.
How would my debt disappear? Well I am to stop paying ALL of my credit card bills. Not only the bad Chase account, but all of my cards in good standing as well. Just stop paying any of them. Then they will all send my accounts to collections (the whole spiel about debt collectors buying bad accounts for pennies on the dollar after being written off by the original creditors)... and then THIS debt rehab company would basically work to prove that the debt collectors have no legal right to collect that debt.
They would demand that the collectors produce documentation proving they can legally collect that debt -- which theoretically they can't? -- at which point the debt collectors give up and move on. Once they can't produce the necessary proof/documentation, and this company I have hired has basically stopped them from collecting the debt they bought for pennies, then the collectors cannot legally report that to the credit agencies, at which point that debt is no longer reported and my score goes up. I'll remind you this process of letting my accounts purposely go delinquent would apply to several creditors that I am currently in good standing with. That is the process as I was told -- all I have to do is give them my banking info and sign up for the 23-month program.
Not only did the total payments ($268/mo over 23 months to get rid of $14k in debt) seem too good to be true, but the method seems sketchy as f**k. And while I'm not morally opposed to "sticking it" to behemoth banks or asshole debt collectors -- and of course I'm desperate to relieve this debt and lower my payments, so I'm willing to try anything -- something about this just doesn't seem right. Is this even LEGAL? Is there any sort of gray area here (i.e. sketchy but screw it, fine, let's just do it)? Or is this super messed up, possibly illegal, and I might just be being straight up scammed?
Long story short, my wife and I both had great (750+) credit scores for the last 10-15 years. We never used to use credit cards. But 3 years ago she had to take a new job with a $7k/year pay-cut at the same time we started paying $600/mo in day care... so we started putting stuff on cards because we had to. Between all sorts of living expenses, multiple expensive car repairs, a huge tax bill, etc, we've accumulated about $14,000 in credit card debt across 7 cards.
All but one account are current and in good standing. But the one "bad" account is a Chase card with about $5,000 on it, where the monthly payments just plain got to be too much and we fell behind several months. We're trying to make it right and want to consolidate the debt from all (or at least most) of the cards... both to lower our monthly payments and to pay off the accounts that have become unsustainable. Just paying the minimum payments adds up to about $350 to $400/mo across all the different cards.
** START OF ACTUAL QUESTION **
So I've contacted a few debt consolidators and loan companies. And yesterday I got a call saying I was denied a consolidation loan (poor income-to-debt ratio, and my credit score has dropped to 560 due to my delinquent Chase account and one collection I had years ago, but DID pay, on a medical bill -- sidebar: F**k Aetna) but was referred to this other company for their "Debt Rehabilitation Program".
They stressed several times that it was Debt Rehabilitation and NOT Debt Consolidation -- it's not a loan, and they would NOT be paying the creditors. Instead, I would pay them $268/mo for 23 months and then be done. Debt disappeared. Credit score going back up to the 700s. Saving lots of money per month, becoming debt free in two years, and villagers rejoicing.
How would my debt disappear? Well I am to stop paying ALL of my credit card bills. Not only the bad Chase account, but all of my cards in good standing as well. Just stop paying any of them. Then they will all send my accounts to collections (the whole spiel about debt collectors buying bad accounts for pennies on the dollar after being written off by the original creditors)... and then THIS debt rehab company would basically work to prove that the debt collectors have no legal right to collect that debt.
They would demand that the collectors produce documentation proving they can legally collect that debt -- which theoretically they can't? -- at which point the debt collectors give up and move on. Once they can't produce the necessary proof/documentation, and this company I have hired has basically stopped them from collecting the debt they bought for pennies, then the collectors cannot legally report that to the credit agencies, at which point that debt is no longer reported and my score goes up. I'll remind you this process of letting my accounts purposely go delinquent would apply to several creditors that I am currently in good standing with. That is the process as I was told -- all I have to do is give them my banking info and sign up for the 23-month program.
Not only did the total payments ($268/mo over 23 months to get rid of $14k in debt) seem too good to be true, but the method seems sketchy as f**k. And while I'm not morally opposed to "sticking it" to behemoth banks or asshole debt collectors -- and of course I'm desperate to relieve this debt and lower my payments, so I'm willing to try anything -- something about this just doesn't seem right. Is this even LEGAL? Is there any sort of gray area here (i.e. sketchy but screw it, fine, let's just do it)? Or is this super messed up, possibly illegal, and I might just be being straight up scammed?