Im a 22 year old full time college student with a part time job. About three months ago I joined in charge debt solutions because I thought it would be easier for me to manage my credit card bills that way. However now after joining, I’m realizing that Im unable to keep up with the payments Im making to them. It’s like after my other bills and this payment are taken out every month, I hardly have any money left and I think I’ve put myself in a bind. If I leave the program now will this mess up my credit, will it make it harder for me to join a debt management program in the future, will my creditors be resistant to work things out with me in the future because of this? I simply just can’t afford to be in the program now.
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As as a professional collector that has represented many creditors, debt management companies are usually a bad deal. Many require you to make them a payment every month in return they promise you and end to harassing phone calls, letters, and to negotiate settlements. Most of these companies are fly by night and do little if any work in your behalf. They hope you will get frustrated and stop making payments so they can keep your money. It is best to work out a repayment plan directly with your creditors or the collection agency they have chosen to use. My only exception would be if the debt has passed the statute of limitations for suit in your state. In that case find out if the debt has been SOLD not simply assigned. There is a difference! If it is pass the statute of limitation you can not be sued. I would be careful about dealing with an agency that buys debt. They are usually the bottom feeders and will do or say anything to get a dollar out of you. There is no easy way out of debt. If you really can’t afford to pay your debts you should also consider bankruptcy. Pull you CBR for free at http://www.annualcreditreport.com. Most Credit card companies will take 40-60% to settle your debt even if it is only been a year since you were charged off. Use those negotiating skills and work out a deal and follow through on it. When dealing with an agency keep a cool head and a good attitude and you might make out better than you thought. Good luck.
If you get off of a DMP they stop paying the creditors. Unless you make specific arrangements with each creditor and pay them you will now become past due on your accounts again. Because of this the interest and late payments will start to be added again, and they will make collection calls to you.
You can always get back on a DMP, unless the creditors have sued you in court. Also if the creditor sold your account to a collection agency, these agencies may or may not participate in the program.
Since you say you “hardly” have any money left after your bills and this payment, it might be good to just tough it out. One thing you may want to do is take a very hard look at your budget. Determine what is essential and what is optional to see if you can free up some money. If you do a lot in entertainment(such as going to movies or eating out) you may have to stop those for a while.
One last option is to consider bankruptcy. It will effect your credit for a while, but if you practice good credit managment after the bankruptcy it can help.
Speaking as a nationally known credit score and lending expert (book, radio shows, newspaper columns, etc.)…
I get lots of crap-credit clients every week. Most over-spent when they were your age. Then they started reaching for unusual solutions instead of just working hard to pay what they borrowed. Debt management services, bankruptcy, just stopping paying monethly. Really all bad solutions.
If you leave the program, chances are the credit cards will rise to the default interest rate. This is 24.99% to 34.99% depending on the state you live in.
Fulfill your obligations, whatever you do. If you don’t, you’ll be one of those people asking me how to help rebuild your credit because “I was young and stupid”. I hear that all the time.
You spent the money. Now you figure out how to pay it back. It is an excellent lesson in responsibility and you’ll thank me for this years down the road, even if it is painful to read it now.
Great blog!I added it to my bookmark so i can visit it again.Love What happens if you get out of a debt management program?
Debt management is one of the most featured and required guidance of these days for improving personal finance and also the entire economy of the world. The recession and slow down have made the people stunned and the investors who have lost their money in the wall streets or any of the other commodities. Also the current scenario is heading towards the unemployment and loss of jobs that lowers the new income and generating the vicious circle of economy which is quite difficult for the person to eliminate fully. The process of eliminating this vicious circle of finance is called “debt management”.
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