Debt Relief Companies » Debt Settlement Plan

I have approx. 45-50k in unsecured debt- I have talked with a several agencies about a debt management vs debt settlement program-I would like to know how both programs will affect my credit report about 12-24 mos. later if all payments are timely-will my credit report reflect that I am in a c.c. program until the program is completed?which program will help you to raise your credit score faster once completed?

Scott — Thu, 10 Jul 2008 15:30:26 +0000

Your credit score will typically be damaged more severely with a debt settlement plan than with a debt management plan. During the debt settlement process you stop paying your credit card bills until a negotiated settlement is reached so your credit score obviously suffers and will take time, strict budgeting, and effort to repair. However, most of the time, a debt settlement plan is a quicker solution than debt management so it allows you to begin your credit score rebuilding process sooner.

Yes, with debt management your credit score will reflect the fact that you are in a management program but assuming the debt management company is diligent about paying your creditors on time every month, your credit score will not suffer as much.

So there is a tradeoff, how fast do you want to get out of debt (faster with settlement) vs. how concerned are you about your credit score (less damage with a debt management program)?

That’s the question you need to consider. I hope that’s helpful.

I just signed up with Campos Chartered Law firm for debt settlement. Are they reputable? because I wanted consolidation and they told me it was consolidation of debt only to find out now it’s settlement.

Scott — Tue, 17 Jul 2007 21:35:14 +0000

The use of the word “consolidation” of debt can be very confusing. Consolidation is lumping several debt payments into one but there are several primary ways to accomplish that:

1. Using home equity in your home to refinance and “consolidate” your debts (means you pay off credit cards and other bills by increasing your mortgage balance).

2. “Consolidate” your credit card (and similar bills) through a debt management plan which is usually a service offered by a credit counseling agency. They will help you better manage your bills and help lower your interest rates and late fees getting you out of debt typically in 5-7 years.

3. When you enter a debt settlement program you do “consolidate” your bills into one monthly payment which should be less than the payments you are currently making when you combine them. This is really a more aggressive startegy that will have you debt free in 18-36 months but has more risk to it.

So it’s really a question of what type of plan you originally wanted. Did you intend to enter into a:

1. Debt management plan OR
2. Debt settlement plan

Follow those 2 links to read more and then discuss with the company you signed up with who I have not yet heard of until now. Best of luck to you.