I would like to relay one couple’s journey through debt settlement I first met Matt and Sarah* a little over two years ago, when they came to my office for a consultation. Matt had a good job and Sarah had previously stayed home to raise their kids and was now watching their grandchildren during the day while their children worked. They lived modestly, but over the years, between trying to help their kids get started with their lives and a bit of overspending, they found themselves facing close to $30,000 in credit card debt. They hadn’t fallen behind on any payments yet, but money was starting to get tight and they worried about how much longer they would be able to stay afloat.
I recommended a Chapter 13 bankruptcy for them. This would allow them to pay back what they could afford on the debts and at the end of five years, the remaining credit card debt would be forgiven. Matt and Sarah thought this made sense, but they had a very hard time accepting the idea of filing for bankruptcy. They had worked hard and paid their bills all their lives without anyone’s help. They weren’t willing to “give up” that easy.
Fast forward two years. Matt and Sarah are in my office to meet with me again to update me on their current situation and catch me up on what’s been happening since we first met. Sarah is still watching the grandchildren. Matt is still at the same good job and, in fact, has gotten a couple of raises that have increased his yearly salary by about $6,000 per year. Seemingly, not a lot has changed, but their debt situation has gotten much worse.
While Matt has seen an increase in pay, the cost of living, especially healthcare costs, has more than eaten up that increase. In an effort to avoid filing for bankruptcy, Matt and Sarah first decided to keep up the status quo and continue to pay the credit cards like normal. As they predicted when I first met with them, they quickly noticed having less money left over for things like food, gas, car repairs and home repairs. They turned to using their credit cards to make up the difference. The interest rates and monthly payments on their credit cards continued to increase and they were making almost no headway in paying down the debts since the minimum monthly payments they were making were almost all going to interest and fees. About eight months ago, they decided that they could no longer deal with the credit cards on their own and began looking for an alternative way to settle their debt.
Matt and Sarah started doing their research to see what programs were available to help with credit card debt without filing for bankruptcy. They stumbled upon the website of Nationwide Debt Relief*, which looked very credible. Their website was full of client testimonials about how Nationwide had helped settle their debts for much less than what was owed. One portion of the website boasted about how many millions of dollars of debt the company had settled and the accreditations the company had received. The program seemed easy enough. You send a monthly payment to Nationwide. Nationwide uses the money you send to negotiate lump-sum settlements with your creditors, saving you thousands of dollars. While Nationwide is settling the debts, it protects you from creditor harassment and will handle all of the communication with the credit card companies for you.
Matt and Sarah called Nationwide for a free consultation. The Nationwide representative was very helpful and felt confident that Nationwide would be able to help them settle their debts at a huge savings. Matt hung up the phone feeling like they had found the perfect solution. Sarah had her doubts. The monthly payment they discussed making to Nationwide was sizable, but didn’t seem to be large enough to pay all of the debts in the three years that Nationwide said they’d be in the program. After talking it over, Matt and Sarah decided that going with Nationwide was their best option to get out of debt. Matt called Nationwide and enrolled them in the program.
About a month after signing up with Nationwide and no longer making payments directly to the credit card companies, Sarah started to receive phone calls from the creditors during the day, while Matt was at work, informing her that they were late with their payment and demanding that they make one immediately. This wasn’t supposed to happen. Nationwide was supposed to notify the creditors that it represented Matt and Sarah and that the creditors weren’t allowed to contact them. Matt and Sarah notified Nationwide of the problem and the Nationwide representative said that it would be taken care of. Soon, Matt started to receive creditor phone calls at work warning him about his late payments. Once again, the Nationwide representative apologized and said it wouldn’t happen again. Then, the unthinkable happened. Matt and Sarah received a certified letter from their local magistrate stating that they’d been sued by one of their credit card companies.
Immediately, Matt contacted Nationwide and demanded to know how they were going to handle the lawsuit. All of a sudden, the Nationwide representative changed his tone and told Matt that he and Sarah were on their own with the lawsuit. Needless to say, Matt and Sarah were upset with Nationwide for giving them false promises and scared as to what would happen now that they have been sued.
The good thing is that I could still help Matt and Sarah settle their debt by helping them file for a Chapter 13 bankruptcy. They would be able to keep their house and cars while paying back what they could afford to pay to the debts over five years. After those five years, they would be debt-free besides their mortgage payments. The best part is that the Chapter 13 gives them legal protection from their creditors. The creditors can’t call them, send them letters or sue them. Now, Matt and Sarah can relax, knowing that they have found a real solution to their debt problem.
If you’re in debt and you’ve been tempted to call a debt settlement company because their promises seem too good to be true, give Steidl & Steinberg a call first. We can explain the difference between bankruptcy and debt settlement and give you straight answers to your questions. Having a free consultation with us could save you from a lot of stress, frustration and even more debt.
*Names have been changed.