When you sign up with a debt consolidation firm, the program involves deliberately ceasing payments to all your creditors to force your accounts into default to attempt settlements for less. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating. You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.

Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.

A better option may be to enter a debt management plan through a non profit credit counseling firm like CCCS. They can negotiate reduced payments and interest but NOT settlements. Use this site for a referral: http://www.nfcc.orgYes, it’s a good way to pay your debt. Think about it – if you take a loan for $10,000 at an interest rate of, say, 8%, and then pay off your credit cards (which I can almost guarantee have interest rates of at LEAST 12-20%), there are a bunch of benefits:

1) You only have one monthly payment.
2) Your interest rate is lower
3) You avoid late fees, over-the-limit fees, etc
4) Your credit is improved because you can clear up some "available credit" and you don’t default on the original credit cards.

Just don’t get yourself into more trouble by re-maxing out the credit cards. Do yourself a favor and cut your credit cards up – they’re EVIL. Credit card companies are some of the greediest, unfair companies in the world. Don’t do business with them, you’ll be better off if you just learn to save up & pay cash for the things you want. "Living beyond your means" is a terrible habit and it doesn’t work.

Edit: CatDat is describing what debt consolidation firms do – and he’s right. But I’m not talking about those companies – I’m talking about doing it yourself. If you take a personal loan you can effectively consolidate on your own, without having to deal with such greedy exploitive companies.don’t do it. yes, it will ruin your credit. talk to your credit card company to see if they are willing to lower your interest rate. talk to them nicely.

put a few dollars extra on your payment and it will go down faster. there is light at the end of the tunnel.

good luck and don’t spend anymore.ok,first off,try working out a payment plan with the cc company.if that does not work,and your balance will not go down,you can either start defaulting and settle the debt yourself or just hire a good debt settlement company.if you settle the debt.the accounts involved will be closed.try to keep one credit card on time.yes your credit will take a hit.but what these other people did not tell you is that it will go back up once you settle.in your case,i would do this.think about it for a minute.if you go into a debt settlement plan with a good company you would end up paying about 55% of the debt including fees.depending how fast you can pay it off,it would take less time to settle and rebuild credit history than to keep paying min. payments.that means you would save about 4,500 of debt + int.if you do this with a settlement company,do your homework and read carefully.also try to get a firm that will rep.you if you have to go to court.another thing to keep in mind is any money you save on the debt is taxable income,but you would still save a small fortune.i just settled w/2 creditors myself for 38% of my total debt.my stepfather is going through debt settlement with a firm because is creditors raised his interest to 30% because of a stupid mix up on his credit report.if you do it yourself,get everything in writing and keep receipt’s.also get a confirmation letter of the settlement.good luck.

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