how does the debt consolidation companies work?

Question

i heard that i will have to file for Bankruptcies.

Answer 1

I would consolidate it all by "selling the debt" to some
clever company with whom you can discuss a better interest rate, they pay your debt off for you then you just pay them, they get some good interest, you pay a lower interest... both win.
But you don't want to trust just about anybody, read up on it, get ammo first then it'll be easier, here you'll find tons more info than I could possibly
post here. It'll take a bit but it's your money and well worth
taking your time over it
http://credit-cards.ebookorama.com
and here http://finance.ebookorama.com
also plenty more to read here
http://credit.ebookorama.com
http://credit-repair.ebookorama.com
if you get any luck please don't forget about me lol, hope it helped you!

Answer 2

Debt consolidation means combining all your debt into one big sum, paying off all your credit cards, etc. and then paying it back over a longer period. The debt doesn't disappear: you still have to pay it back, but you make one payment to one lender rather than lots of smaller payments to credit cards.

It doesn't mean bankruptcy if you keep to the loan agreement. The trick is to use debt consolidation to get out of debt - don't use it as an excuse to keep on spending!

There are various types of debt consolidation and you need to do your own research. I recommend this website which has a lot of very useful information to help you decide.

I hope this helps. Good luck!

Answer 3

Not necessarily. What debt consolidation companies do is make a list of all your creditors and all your debts, then discuss with you how much a month you can afford to pay towards these debts. Then they approach the companies and say something like, "Look, John Doe owes you $5,000. He owes everyone else in town as well, as has debts totalling over $100,000 which he will never be able to pay off. If you will agree to accept $2500 in payment, and let him pay it off at $25 per month, you are going to get $2500 out of the deal. If you don't want to do that, he will declare bancruptcy and you won't get anything."
The companies usually agree to the reduced amount. Your role in all this is to make regular payments to the debt consolidation company, and they in turn pay out the money to your creditors, and to themselves, as they aren't doing this for nothing.
Until the agreements are all paid off, you are not allowed to get anything else on credit. Your credit rating is frozen solid.
Once the contracts are completed, you have to start at the beginning and begin to rebuild your credit rating, but the fact that you honored your agreement with the debt consolidation company is a big mark in your favor.
One of the good things about this sort of exercise, is that it teaches you how to live without overextending your budget. If you can't use credit, you have to pay cash for everything you buy, and that means you learn how to budget your money and put money aside for special projects.

Answer 4

For me it created the problem. I had good credit before I went to a debt consolidation company. I wanted to lower my interest rates and thought it would be better to make one payment per mo than 4. Guess what not!!!!! They took my payment lost it and didn't bother to let me know for 45 days at which time the credit card companies started calling me wanting a payment. Just do some checking before picking a consolidation company.

Answer 5

Everything depends on your unique situation. You should sit down with a credit counselor to evaluate what your needs are. There may be several options that are available to you, including consolidation loans, balance transfers and debt management plans. They may even be able to help you with a strategy to pay off debt faster.

Bankruptcy is usually a worst case scenario, but it may be recommended if your financial situation is bleak. This may help:

Answer 6

Some are good, some are bad. Typically, they are the middleman between you and your creditors. They consolidate your debts and work with your creditors to get your debts paid off. You pay the middleman, they pay your creditors. Watch out... if they don't pay your creditors, you'll be out the money you paid the middleman and still owe all what was suppose to be paid to your creditors! Ask questions, get names and see if they will send you a debit reduction plan/outline detailing all that they are going to do for you. AND CHECK UP ON THEM WITH YOUR CREDITORS...

Answer 7

Not always. Alot of times they take your current debts, consolidate them and have you pay them over a longer period of time. It makes paying the debts easier, but doesn't always solve the problem.

Answer 8

My roommate used DebtXs. The debtor is assigned a counselor who will call each company to whom you are in debt, they negotiate a settlement, which is less than the amount you owe. Most companies settle right away. Except Citibank!

http://debtxs.com/

The downside is, you have to pay taxes to the IRS on the amount of debt settled.

Answer 9

Those companies are rippoffs, consult a bankruptcy attorney about your legal options.