Debt negotiation

[tpajet]

I know someone who was checking into a company that does debt negotiation. Apparently the way this works is you set up a savings account and make regular payments to the account. Once you have enough money to pay off one of your debts they go and negotiate the debt for you, and pay it. But they negotiate multiple accounts at once. In other words they would go to Citi Bank and negotiate 20 people's accounts at once.

In the mean time you simply stop paying on those debts, and let them go into the collections process. Forget all of the obvious red flags for a moment. My question is this - it sounds like they are basically buying the debt the same way a collections agency would. Is this correct?

 

[army judge]

Does it matter?
This is a SCAM.
Run away as fast as you can.



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[jharris352]

I have to disagree with Army Judge. It may be a scam depending on how you define scam or it may be a legitimate debt negotiation company (DNC). Some states require DNC's to be run by attorneys but they are largely unregulated. I would avoid putting money in anyone else's hands except possibly an attorney's escrow/trust account. Credit card companies will negotiate down charged off debt.

I will have to agree with one statement Army made: Does it matter? If they buy the debt and let you pay it off cheap or if they negotiated it out cheap you get the same price. See what I mean?

 

[tpajet]

I understand all of that. As I said, forget all of the red flags for a moment. I would never go for something like this, and this is what I have told to the person who was filling me in on this.

My basic question is are they simply buying the debt the same way as a collections agency would?

The company in question appears to fully on the up and up. The problem is the program itself. One of the biggest things I see wrong is that they don't go buy the debt until after you have racked up enough money for them to go do so. So in the mean time there's nothing to keep a regular collections agency from buying the debt first. Oh and if you get sued, their advice is go hire a lawyer. Be sure to check with your state bar first.

To me the program is for people who are beyond desperate, and it's second only to bankruptcy.

 

[army judge]

Actually and legally bankruptcy is far better than a DNC. Bankruptcy has legal standing and is accomplished through a federal court under the auspices of a judge.


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[jharris352]

Army, why would you say bankruptcy is a better option? DNC is just as enforceable and the consequences on your credit report do not last as long.

 

[jharris352]

Even more interesting in my book Tapjet, is that they are having you accumulate money in an account that is attachable by those credit card companies that might sue you!

 

[tpajet]

As has been my question - I think they are basically buying the debt the same as a regular collections agency would, which if that's the case then you are paying in advance for them to buy the debt. As for a lawsuit, that part may not be so bad in the grand scheme of this crap. Remember, the purpose is to pay your debts after they go to collections status anyway, so if you did get a judgment, and they dip into that account, then that debt is off the list anyway.

As I said, I've told the person doing the asking that run from this thing. I just wanted to know if anyone else can verify the fact that they are buying the debt the way a collections agency would.