need advice: debt reduction strategies

[busmaster11]

Has anyone heard of places like these:

http://www.zerodebtnow.com/index2.html

They want you to save up 50-60% of your debt to a creditor, then they take it and are generally successful in negotiating a settlement with them for that amount, and according to them, there's no record of anything negative (ie. "managed") on your credit report afterwards... Because you manage your own money and they initially contact the creditors to freeze the debt account, and halt the interest as well.

Has anyone used a program such as this before, and does it work? Is there anything to be aware of?

 

[Yossarian]

If you were able to pay off 50% of your debt to a creditor you wouldn't need a place like that in the first place. Sounds like a scam.

 

[busmaster11]

Originally posted by: PipBoy
If you were able to pay off 50% of your debt to a creditor you wouldn't need a place like that in the first place. Sounds like a scam.

They have a special account where you accumulate the 50-60 percent over the course of 1-2 years, then they bring it forth to the creditor. In the mean time they're handling negotiations for you so you're not getting collection notices. Or so they say...

 

[Frenchie]

Look at the fees they charge! Of every dollar, 38 % is yours, 35% to the creditor, and they get 27%. Do it yourself. Save up some money and negotiate directly with the creditor. Most creditors will settle past due accounts. The standard in the industry is to accept 70-80% of the balance in a lump sum. Some creditors will go as low as 60 or even 50%. Some creditors have specials where the reduce their normal reuquirement (say normal is 60%, they will accept 50% around christmas). If you have any detailed questions, PM me. I am a collections attorney and I have represented a number of large creditors (AmEx, Discover, Citi, student loan comapnies, etc.), so I'm familiar with their real requirements.

Basically what they are doing is taking a $2000 debt, negoitating a payoff of $1100, and having you give them $1700 for their cut and the creditors cut. If you handled it directly, you would probably only pay $1300.

Whatever you do, do not go to a consumer credit counseling organization. They will allow the debt to increase while ruining your credit. (If you go through a ccc organization, you are treated as if you filed bankruptcy).

 

[busmaster11]

Originally posted by: Frenchie
Look at the fees they charge! Of every dollar, 38 % is yours, 35% to the creditor, and they get 27%. Do it yourself. Save up some money and negotiate directly with the creditor. Most creditors will settle past due accounts. The standard in the industry is to accept 70-80% of the balance in a lump sum. Some creditors will go as low as 60 or even 50%. Some creditors have specials where the reduce their normal reuquirement (say normal is 60%, they will accept 50% around christmas). If you have any detailed questions, PM me. I am a collections attorney and I have represented a number of large creditors (AmEx, Discover, Citi, student loan comapnies, etc.), so I'm familiar with their real requirements.

Basically what they are doing is taking a $2000 debt, negoitating a payoff of $1100, and having you give them $1700 for their cut and the creditors cut. If you handled it directly, you would probably only pay $1300.

Whatever you do, do not go to a consumer credit counseling organization. They will allow the debt to increase while ruining your credit. (If you go through a ccc organization, you are treated as if you filed bankruptcy).

Frenchie,

But according to them you save 38 cents to the dollar. Thats only 1240 paid for every 2000...

And I'm afraid I don't know nearly enough to negotiate with the creditors directly. And they stop my interest from accrueing immediately.

In your opinion do they look legitimate? Thanks.