The problem with debt elimination programs

This is an account of an experience with an unnamed debt elimination program in 2009.

In Jan. 09 I was laid off from my 8 year job at a major company along with approximately 500 of my friends and workmates.

My wife and I had, over the last 28 years of marriage accumulated a ridiculous amount of unsecured credit card debt assuming the good jobs would always be there, until the economy tanked. After about 6 months we had run dangerously low on savings, had no job prospects and knew there was no way to budget ourselves out of debt in 5 years time.

Then the “saving grace” – a very attractive commercial on television promised we could be DEBT FREE in no time by taking advantage of laws already on the books that they could use to “reduce our principle debt by as much as 70%”. So I did some research on the company in question and found no significant complaints listed on the BBB and also checked with a banker in the family who told us they were one of the best debt elimination programs out there.

So natch we signed right up…the following narrative is an account of the next 5 months of pure hell we were put through. I urge anyone thinking about taking this course of action to read on before signing anything.

The gentleman on the phone was very cordial and ready to lend his company’s knowledge to assist us. I asked what I needed them for; couldn’t I call my creditors one by one and negotiate lower rates or even ask for grace until we got back on our feet? “Sure” the man told us “you can try but all they are going to do for you is lower your interest rates temporarily, what we can do for you is actually negotiate the PRINCIPLE amount you owe, something they will not do for you as an individual”.

We were at the time current on all our credit cards (14 of them) and had a credit score of 780; however we knew the near future did not look so bright.

So we took the bait and signed up, signing over to them power of attorney so that my creditors would allow them to discuss my accounts with them. The deal was we would pay $440/month for three years and at the end be debt free.

The first thing we were told to do, and note I said we were TOLD to do this, they never put anything like this in writing, was to stop paying our bills and stop communicating with the various banks when the collection calls started. They even offered a device to install on my home phone to automatically transfer collection calls to them.

So we did just that – stopped paying and forwarded all bank calls to them. Of course our credit was quickly ruined, what took 28 years to build up was trashed in the first three months. (Yeah I know how stupid that sounds but I really did not think about the consequences, which is why I am trying to warn you).
I also scanned and emailed every collection letter and dutifully sent them in during this time, each time being told not to worry, it was all part of the game and that they (my creditors) will say and do anything even lie to try to get us to call them. We were told time and time again NOT TO CALL ANYONE.

After about 4 months we were served a notice of lawsuit by the local sheriffs office, again we were told not to be concerned it is all part of the plan, and the summons would be forwarded to the legal department to take action.

A month later I called the local city hall and asked if the debt elimination company I was working with had contacted them…I was told there have been no calls or communication at all from them or anybody else on this matter and I now had less than two weeks to take some kind of action or I could be in danger of losing my home.

LOSING MY HOME? It was then that I realized I needed to do something more.

So we contacted a local attorney who went white when he saw the summons I had taken no action on, and immediately instructed us to file for chapter 13 bankruptcy as it was the only way to stop legal action this late in the game, since our debt was so blown out of proportion to our income we easily qualified for the bankruptcy plan and filed with the court a chapter13 and fired the debt elimination company.

It turns out that what they do is collect the $440/month for three years taking no action on your behalf except sending out lame cease and desist papers – by that time your creditors are so out of the loop that they are willing to settle for pennies on the dollar and the debt elimination company keeps all the rest of the money as well as the first three payments as their fees.

That’s right folks they did nothing but collect from us and sit on our money (earning interest for them of course) while we were ruined.

I know there are many in this situation out there and many in a worse one than we were, So if you and your loved ones are considering calling one of these companies. (The very same commercial is still running and dozens of others). Be forewarned it is not an easy road to travel, yes I think the plan probably would work given enough time and if you have the stomach for it. But I can tell you the best way to go is to steer clear of these programs and contact a lawyer FIRST and be sure of the steps you take. Sure bankruptcy also ruins your credit but at least it is all above the table, legal and much easier to swallow.

Remember bankruptcy is a government program designed to give you a fresh start, debt elimination is a for profit program designed to make someone else money.

God bless America and Good luck to you all.