Options: Optional
From the October Edition of "Debt Bytes" Newsletter
by Michael Bovee, CRN Specialist
Working with consumers often provides me with the opportunity to hear from a fairly good mix of people with different financial circumstances and with different goals. I conduct several free consultations throughout any given day and some of the most recent ones provided the inspiration for the theme of this edition of Debt Bytes.
I spoke with a woman earlier this week whose call I was returning days after her request for information due to the fact that I was out of town (which is also why this publication is a few days late). She said thanks for the return call but that she had talked with a CCCS (Consumer Credit Counseling Services) and that she had made a decision to work with them. I said that’s fine, but the call was free so if she wanted to discuss some of her challenges and goals, that I was available.
Her goal, ultimately, is home ownership. Her credit scores, however, were too low to qualify for most sub prime loan packages. She had some collection accounts that were 2 years and, in some cases, six years old. The CCCS program indicated that she would start giving them money each month that they would then break the money down into smaller amounts and forward off to each collection account. Over time, she will have paid off these debts. This is, typically, the approach a CCCS program takes.
Here are the issues that I covered with her.
In her state, the Statute of Limitation that applies to most of the defaulted accounts is 4 years. This means that her creditors or the collectors would only be able to sue her as a method of collections for up to 4 years from the date of default. So, the accounts that are 6 years in default can no longer legitimately use the courts. Were she to start making payments through the CCCS program and suddenly find she is unable to keep up with those payments, she would run the risk of the collectors having access to the courts for a newly established 4 year period. The oldest of these collection accounts that are reflecting poorly on her credit reports are due to start falling off her report in the next 12 to 18 months. Most negative items on your credit report can only be reported for 7 years (though the way this is interpreted can mean up to 7.5 years). So, starting a year from now her credit report is going to start looking better.
Some of the more recent defaulted accounts have not gotten a payment form her in 2 years. A CCCS company generally will try to get interest reduced and penalties waived when they can and then start making small monthly payments. They don’t, at least to my knowledge, attempt to negotiate a settlement for less than the balance owed. Overall, the length of time you are enrolled in CCCS programs is dictated by the amount of overall debt and how much you are able to pay down each month. Some payments are so low that you really could end up just treading water with certain accounts. Meaning, you are paying almost nothing to principle balance.
While you are enrolled in the CCCS program, it is usually noted on the credit bureau reports. Lenders generally look at CCCS enrollment the same they would a bankruptcy.
So, for an undetermined amount of time she would be paying down debt while greatly reducing her ability to accomplish her goal of home ownership.
I know that it would appear as though I am putting CCCS programs in a bad light. That’s because I am. The example I have given shows that she would be far better served by seeking an alternative method of reaching her goals. I am sure that CCCS serves a purpose for a small amount of people. Generally though, CCCS serves the creditors.
The point of all this being; Know Your Options! Seek out answers to all of your questions and make comparisons of any given method. Don’t throw money at something until you know that it will provide the highest percentage of success towards achieving your goals. Talk to several people and read up on your issues. Don’t get sucked into a sales pitch. And, my personal opinion, don’t pay upfront fees for a program or service that says they are going to get you out of debt (bankruptcy as a last alternative being an exception).
CRN would like to hear feedback from those of you that read the ‘debt bytes’ articles. Please feel free to email us at; info@consumerrecoverynetwork.com . Tell us about your experiences with debt and credit issues. As always, we are available to consult with you and assist you in exploring options to handle any of your debt challenges.
by Michael Bovee, CRN Specialist
Working with consumers often provides me with the opportunity to hear from a fairly good mix of people with different financial circumstances and with different goals. I conduct several free consultations throughout any given day and some of the most recent ones provided the inspiration for the theme of this edition of Debt Bytes.
I spoke with a woman earlier this week whose call I was returning days after her request for information due to the fact that I was out of town (which is also why this publication is a few days late). She said thanks for the return call but that she had talked with a CCCS (Consumer Credit Counseling Services) and that she had made a decision to work with them. I said that’s fine, but the call was free so if she wanted to discuss some of her challenges and goals, that I was available.
Her goal, ultimately, is home ownership. Her credit scores, however, were too low to qualify for most sub prime loan packages. She had some collection accounts that were 2 years and, in some cases, six years old. The CCCS program indicated that she would start giving them money each month that they would then break the money down into smaller amounts and forward off to each collection account. Over time, she will have paid off these debts. This is, typically, the approach a CCCS program takes.
Here are the issues that I covered with her.
In her state, the Statute of Limitation that applies to most of the defaulted accounts is 4 years. This means that her creditors or the collectors would only be able to sue her as a method of collections for up to 4 years from the date of default. So, the accounts that are 6 years in default can no longer legitimately use the courts. Were she to start making payments through the CCCS program and suddenly find she is unable to keep up with those payments, she would run the risk of the collectors having access to the courts for a newly established 4 year period. The oldest of these collection accounts that are reflecting poorly on her credit reports are due to start falling off her report in the next 12 to 18 months. Most negative items on your credit report can only be reported for 7 years (though the way this is interpreted can mean up to 7.5 years). So, starting a year from now her credit report is going to start looking better.
Some of the more recent defaulted accounts have not gotten a payment form her in 2 years. A CCCS company generally will try to get interest reduced and penalties waived when they can and then start making small monthly payments. They don’t, at least to my knowledge, attempt to negotiate a settlement for less than the balance owed. Overall, the length of time you are enrolled in CCCS programs is dictated by the amount of overall debt and how much you are able to pay down each month. Some payments are so low that you really could end up just treading water with certain accounts. Meaning, you are paying almost nothing to principle balance.
While you are enrolled in the CCCS program, it is usually noted on the credit bureau reports. Lenders generally look at CCCS enrollment the same they would a bankruptcy.
So, for an undetermined amount of time she would be paying down debt while greatly reducing her ability to accomplish her goal of home ownership.
I know that it would appear as though I am putting CCCS programs in a bad light. That’s because I am. The example I have given shows that she would be far better served by seeking an alternative method of reaching her goals. I am sure that CCCS serves a purpose for a small amount of people. Generally though, CCCS serves the creditors.
The point of all this being; Know Your Options! Seek out answers to all of your questions and make comparisons of any given method. Don’t throw money at something until you know that it will provide the highest percentage of success towards achieving your goals. Talk to several people and read up on your issues. Don’t get sucked into a sales pitch. And, my personal opinion, don’t pay upfront fees for a program or service that says they are going to get you out of debt (bankruptcy as a last alternative being an exception).
CRN would like to hear feedback from those of you that read the ‘debt bytes’ articles. Please feel free to email us at; info@consumerrecoverynetwork.com . Tell us about your experiences with debt and credit issues. As always, we are available to consult with you and assist you in exploring options to handle any of your debt challenges.
