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Question: Is it morally wrong to do debt settlement?

(Posted by: mom5 on 2008-11-14 10:01:32)

I see alot of advertisements for debt settlement where a company charges you a fee but then gets your unsecured debts settled for partial of what you would have to pay them off as. Is it morally wrong to default on your cards for three months then have a debt settlement for less than what you would have to pay if you are way, way in over your head?

Posted by: Net Advisor on 2008-11-14, 10:22:34

I would ignore all the hype and what ifs, and go talk to a bankruptcy attorney for legal advice. Then he/ she can guide you to what may be best for your situation. Good Luck!

Posted by: William on 2008-11-14, 10:06:56

Technically you didn't default but you settled for a reduced amount. Beware of the companies who ask you to do this for a fee, most of them are scams. If you are late for a prolonged period of time the credit card company will turn it over to a debt collector, you will no longer be able to deal with your credit card company. They will almost always settle for 50% of what is owed. However it does effect your credit negatively.

Posted by: mldjay on 2008-11-14, 10:07:11

No it isn't morally wrong but there are better ways to pay off your debt. You can negotiate lower interest rates and if you are behind a final pay off balance that is lower. The company is agreeing to the lower amount so you aren't ripping off the company. However, if you do negotiate with your debtors, make sure you get it all in writing before sending them the pay off amount and DO NOT give them electronic access to your bank account...they will wipe out your entire amount. I also suggest reading The Total Money Makeover by Ramsey. His book explains how to get on a written budget (each and every month) and how to negotiate with debtors/ collectors.

Posted by: Violet on 2008-11-14, 10:08:17

No, it is not morally wrong if you have unintentionally gotten in over your head. The economy is terrible and getting worse. Good people do wind up doing debt settlement and filing bankruptcy. I would be very careful about which company you attempt to do debt settlement with. A lot of them are crooked, and wind up hurting your credit rating almost as much as a Chapter 7. Depending on how in debt you are, it may be better for you to file BK. Do a LOT of research and shop around.

Posted by: Angela P on 2008-11-14, 10:09:35

I see nothing morally wrong with it. It is certainly no worse than credit card companies preying on consumers and charging 30% interest. Debt settlement indicates an interest to pay your debt, which is better than bankruptcy. If you go that route, be very careful about which debt settlement company you choose. Many are dishonest. Also, be aware that it will negatively affect your credit score.