Top 5 Things We Learned About Debt Settlement and How We Recovered

Oftentimes, in my line of work, I get asked about my experiences on debt settlement. I decided to write this article about it sharing my life experiences on the topic. Additionally, giving insight on how debt settlement works.

Hope this helps…

My Financial Crisis

What would you do if you received a notification stating your student loan payments will be $1,200 per month?

Unfortunately, this was me in 2015, I remember like it was yesterday …

Several years ago, I decided to pursue my bachelor’s degree in Biomedical Sciences (Healthcare Information Technology). Sounded like a fabulous idea at the time, but there was one problem. The ramifications of my student loan came to haunt me. I mean seriously, my house payment was not $1,200 at the time, this is a disaster!

No matter what I did or said, the lender refused to negotiate the payment. In complete disarray, I decided to do something drastic. At the time I came up with this bright idea … “Maybe if I could lessen my debt, then I could possibly make these student loan payments”. Some of our credit card accounts were joint accounts. So, my husband and I agreed on joining a debt settlement program to reduce our monthly expenses to try to accommodate my astronomical student loan payment.

If you would like to know about my experiences with debt settlement and recovery keep reading.

What is debt settlement?

Debt Settlement is the process of a third-party company negotiating your credit card accounts on your behalf to be settled for less than owed. On your first consultation they will do an evaluation of all your credit accounts and the balances owed. At this point they will let you know what percentage your accounts can be reduced, 50%, 30%, etc. The customer signs a contract for the duration of the program and pays a monthly fee for the settled amounts. Plus, any other fee the company charges to handle your case.

The monthly payments made by the customer must accumulate for months before the debt settlement company can make an offer on one account. Let’s say you have 10 accounts in the program. One of your accounts will be settled for $1,000. The original amount was $2,000 settled for 50%.

Example for Account #1:

$250 (Monthly payment to settle the debt)

+ $125 (fee the company charges for working on your case)

____________________________________________

$375 (per month made by the customer)

$250 x 4 (months) = $1,000 - This one account will take 4 months to settle.

In the meantime, while one account is in negotiation the other 9 accounts are not being paid. Once account one is settled, the company works on account #2 and so on. The customer is advised not to make ANY payments on the accounts that were enrolled in the program.

Top 5 Lessons Learned

1. Our credit score dropped drastically over 100 + points - Keep in mind as I stated above while the company is negotiating your accounts, we DID NOT make any payments on our accounts that were in the program. The late payments started stacking up – 30 days, 60 days, 90 days this list goes on and on. Eventually our accounts went into “Charge Off Status”! Although we were still making a mortgage/car payment on time there were so many other delinquent accounts our credit scores continued to PLUMMET while we were in the debt settlement program.
2. Creditors sued me for the balances owed - Creditors started seeking legal action against us. We were summoned to appear in court. We went from receiving calls night and day to having individuals deliver court documents to our home it was a complete nightmare.?The debt settlement company was able to represent us in our court case to resolve the litigation issues; however, the process was unbearable. I quickly became overwhelmed with stress and depression.
3. My taxable income increased significantly - This is a kicker. Thinking we had weight lifted off our shoulders once the accounts started to settle, this happened. I started getting 1099-C forms in the mail from the creditors of my settled accounts! Get this, the $1,000 settled in the example above I still ended up paying for it! $1,000 was added to my taxable income for the year when the case was settled! Guess what? Putting me in another tax bracket for each year for four years straight! Could this thing get any worse??Yes, it can unfortunately!
4. We were left with unsettled accounts and collection accounts - Yep you heard it! Towards the end of the program, there were 3 accounts still not settled! The harsh reality is, there are no guarantees the creditors will accept a settlement by a 3rd party! This is like a slap in the face! Spending three to four years thinking that you will finally be free of this nonsense when all I did was paid thousands to be left with HORRENDOUS credit in the end. I can’t tell you how many nights I cried over this! It seemed to be never-ending. I felt hopeless!
5. We still needed credit repair at the end of the debt settlement program - This makes no sense. Here’s what I discovered; the debt settlement company doesn’t repair your credit nor did they have a recommendation for any company that does! Even though I completed this program. Now all I see is a sea of “Red” DEROGATORY marks on our credit reports! At this point I felt like a FAILURE. Not only did I let myself down, I dragged my husband into this mess also! This company has put me through the ringer! I have no idea who to trust! Something must be done! I am sick and tired of living like this. Ironically, the solution came to me on LinkedIn.

How we recovered from debt settlement

One night, I was strolling on LinkedIn I noticed a post asking if anyone wanted to come to a seminar to learn about the steps to repair credit and financial literacy.?I was very hesitant at first, but it was odd that this post was coming across my feed. It was almost like a sign or an “divine” intervention from a higher power. I only saw the post because someone in my network liked it. I wasn’t connected to the person at the time. I connected with the lady in the post and RSVP’d for the event.

When I got to the seminar, I learned about how to increase and recover our credit score. The information blew me away! Additionally, being able to discuss our situation with other people going through some the same challenges as we were was a breath of fresh air. To think I wasted thousands, destroying my credit by doing debt settlement. If I knew about the other options available, I would have made a better choice.

We repaired our credit by partnering with an organization to educate us on how credit and money works while fixing our credit at the same time. That is truly the secret! You can’t win if you don’t know the rules of the game! Strangely, we thought we knew about money and finances till this happened.

Through all the storms and heartache, a beam a light started to guide us on the right path. And it gets better, to date we have gotten back 300+ points on our credit reports! How’s that for a comeback!

The Conclusion

Moral of the story, debt settlement was NOT the best option for us. I made an EMOTIONAL decision due to my situation at the time! What this boils down to is understanding your situation and weighing all options, even if that option is bankruptcy. I didn’t consider ALL options! Combination of lack of education and not reading the fine print made our lives hell for several years!

But I truly believe that everything happens for a reason. Hopefully my story will inspire others to become more educated on debt settlement, credit and finances. From this point on, I’ve made a promise to help other families so that they won’t go to the stress we went through. Your past DOES NOT equal your future.

Oh, if you are wondering what happened with my student loan payment, I had to hire an attorney for them. I will write another article on how I resolved that situation.

Thanks for taking the time to read my story I truly appreciate it!

If you have additional questions, feel free to comment or reach out to me! I would love to hear from anyone who has done debt settlement as well. What was your experience?

Detailed credit course now available! App coming soon, see the link below.

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Charliette Cummings (Consultant / Entrepreneur) Follow me: LinkedIn @Charliette Cummings | Facebook - @creditnottaughtinschools | Instagram - @charliettecummings

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