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unsure on debt settlement vs. credit counseling

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I don't know which we should do.
We owe approx 20,000 on four credit cards. None are past due.. yet. But that time is rapidly approaching.
Our monthly payment on all 4 is around 400. We can afford half that. We had a lot of car expenses and medical expenses. I've done a lot of balance transfers but now all the cards are maxed (at decent rates, except for one) and we can't get any more credit so we really have to deal with this. I can't live like this anymore.
We had to short sell our house, so our credit (formerly good) will be dinged anyway. debt settlement is tempting, but I'm afraid of being sued, wage garnishment, etc.
Any advice is welcome..




Another complication is that we owe about the same amount (20k) to my MIL. She's been quite generous about not asking for repayment, but I'm sure that's not going to last forever..

Sub: #1 posted on Thu, 07/17/2008 - 07:48

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Let me give you an overview of the different debt solution options that you have in front of you.

Let me start with credit counseling. This is a very good option to become debt free. This will help you to re-evaluate your savings as well as spending habit and consequently help you to enter a debt management program (dmp). This program in turn will help you to make single monthly payments with a reduced apr to the credit counselor and he will disburse the money to your several creditors on your behalf.
The best part of this process I think is that it doesn't have negative effects on your credit score or credit report. As you payoff your debt, your score starts to improve.

Debt Settlement6, on the other hand, is also a very good option to payoff your debt but only in the situation when you are on the brink of bankruptcy. It is also considered as a tool to avoid bankruptcy. In this system the settlement company will help you by reducing your debt to the tune of 40-60%. Here you don't have to make monthly payments but a one time lumpsum payment to payoff the debt. All negotiations with your creditors are done by the debt settlement firm.
But the downside with this system is that it affects your credit score significantly and thus hampers your credit potentiality.

For taking informed decision you can also get Free Counseling from our community's Professional Counselor

Sub: #2 posted on Thu, 07/17/2008 - 11:54

phoenix phoenix
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