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Debt Settlement

The last post in this topic was posted 4876 days ago. 

 

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I'm trying to help a friend who was (is) in debt and went with a debt settlement company. As I understand it, they settle with your credit card companies and take a monthly amount from you to pay the credit cards (and themselves for the service).

 

Wouldn't this mean that on your credit report it would be listed as chargeoff settled for less than the full amount, which is (obviously) not good?

 

In addition, I read that settling the debt with the credit card company restarts the clock in that instead of the reporting period being 7.5 years from the DOFD, it's from the settlement date.

 

Can anyone tell me if these things are correct?

 

Thank you!

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I'm trying to help a friend who was (is) in debt and went with a debt settlement company. As I understand it, they settle with your credit card companies and take a monthly amount from you to pay the credit cards (and themselves for the service).

 

Is it debt consolidation or debt settlement? Consolidation means you are making a monthly payment, which is divided up amongst your creditors monthly.

Settlement is when they have you pay in monthly, but instead of forwarding the money to your creditors, they accumulate it in an account for a settlement offer sometime in the future.

The first can be useful, the second (settlement) will probably end in a collections lawsuit.

 

 

Wouldn't this mean that on your credit report it would be listed as chargeoff settled for less than the full amount, which is (obviously) not good?

That's possible. Occasionally the creditors reward completed payment plans by cleaning up the reporting some. Not always. Sometimes, as you pointed out- it ends in a mess.

 

In addition, I read that settling the debt with the credit card company restarts the clock in that instead of the reporting period being 7.5 years from the DOFD, it's from the settlement date.

That can happen if you enter into a new agreement to repay the old debt, then default on the new agreeement. That happens commonly with those "new credit card" with your old balance pre-charged to it offers. I'm not aware of it happening with debt consolidation.

 

Can anyone tell me if these things are correct?

 

Thank you!

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