Debt-Free Forever by Gail Vaz-Oxlade (the beginning after the end read novel .TXT) 📕

to return the money you’ve been accumulating in their hands, but many take their fees out of that money, so you may not get back as much as you thought you would. And since you haven’t made any payments on your debt in the past several months, you now have a really big problem. Your credit score is in the tank, your history has multiple blemishes, and the collection calls will come with a vengeance. You’ve got to get busy sorting out the mess. Not all debt-settlement companies are created equal, and you’d best do your homework before committing to working with one so you aren’t left holding the bag. If you choose to work with a debt-settlement company, make sure you know the facts. There’s no standard accreditation or licence for debt-settlement companies. Do your homework, check references, and make sure you’re working with a reputable firm. If you want a repayment plan that is legally binding on your creditors, go see your local not-for-profit credit counselling branch or visit a trustee in bankruptcy to talk about making a Consumer Proposal. With either of these, interest will stop accruing, collections agencies won’t call, and creditors will have to stick to the plan they accepted unless you mess up.

You also need to understand that the “free if we can’t settle your debt” promise is a wolf in sheep’s clothing. Working with a debt-settlement company means suspending your payments until you owe enough to the creditor to put the debt-settlement company into a good negotiating position. So while you may not owe the debt-settlement company anything, falling behind comes with a huge cost:

• Being behind on payments will trigger interest and fees, and may even trigger a higher rate of interest to kick in.

• Once the late payment is reported to the credit bureau, it will affect your credit score negatively. A lower credit score may, in turn, trigger higher interest rates on other debt (like your mortgage at renewal or your secured line of credit), even though you’re up to date with those payments.

If it turns out that creditors are unwilling to accept the debt-settlement company’s plan, the debt-settlement company can walk away from its deal with you, waving its “we won’t charge you” promise as your consolation prize. But you will now be even further behind, you will have totally ruined your credit history, and you’ll be back at square one in trying to solve your debt problems.

Once you enter into a debt-settlement agreement, get ready for the collection calls. While some debt-settlement companies say they’ll help you avoid the horrible and unrelenting calls from collections agencies, this isn’t a done deal. In fact, some creditors who realize you may be working with a debt-settlement company will escalate their collection attempts. If the creditor takes legal action, the debt-settlement company may drop your account.

Make sure you see the documentation from your creditors, which supports your debt-settlement company’s claim that interest has been suspended. Don’t just believe what they say. If interest will continue to be charged while you are going through the process, know what those charges will add up to over the life of your debt-settlement plan.

OPTION TWO: DIY DEBT SETTLEMENT

If you think you’re a candidate for debt settlement, but don’t want to lay out for the fees, you can take a DIY approach. Here are all of the steps you need to take:

Step 1: Figure out where you stand. Write down what you owe and to whom, and the interest rate you have been paying. (You’ve already done most of this work in Chapter Two, so go get your notes.) Do not include any secured debt like a car loan, a line of credit tied to the equity in your home, or your mortgage. Do not include co-signed or joint loans, since the moment you start negotiating, the creditor will go after the co-signer or joint signer.

Step 2: Get a copy of your credit report. You want to see what’s already been reported so you know what your creditors are seeing. Look at your outstanding bills and identify how far behind on payments you are. Label the bills: less than 30 days, 30 to 60 days, 60 to 90 days, 90 to 120 days, 120 to 150 days, and 150 to 180 days. Remember that no one will even talk about settlement if you’re less than 90 days overdue.

Step 3: List your debts. Now organize your list of the bills from highest amount owed to lowest. Your list must include the company you owe (their address, telephone number, and a space for their fax number), how much you owe in total, and how late you are on each bill. Leave some space on your list so you can break out what you owe in terms of principal (what you actually borrowed) and fees/interest that have accumulated. You may have to look back over several statements to differentiate between what you spent and the interest you’ve racked up.

GAIL’S TIPS

If an account has been “sent to collections”—if it has been placed in the hands of an outside agency to collect—you cannot negotiate with the original lender. You must deal with the collections agency. You can use the same debt-settlement strategies with a collections agency, but you can’t go back and try to pay your original lender. The collections agency may now “own” the debt (yes, they buy the debt and then attempt to collect more than they paid to make a profit), and you’ll still owe them the money even if you’ve sent a settlement to the original lender.

Step 4: Create a budget. You did this in Chapter Four, right? (You did, didn’t you?) Now it’s time to show your creditors just how much you have available to pay your debt so you can convince them the whole amount is at risk. You want to demonstrate that you’re serious about fixing your problem, but that you have limited resources with which to work and need