YANAL, YANML, I’m not seeking legal advice etc. A few years ago I had racked up debt on a few credit cards, a few of which had gone to collection agencies. So I enlisted the help of one of those debt management places. Fast forward to today, I call the three companies I owe. First one, it’s almost paid up, joy! Second one, hmm there’s still quite a bit on there, but I don’t remember how much the initial debt was so I go on to the next one. I call them and it’s ridiculously high still. I ask them what the initial debt was and how much I’ve paid. The initial debt was about $4k, I’ve paid about $3.8k, and the current owe is $4.5k! The amount I owe has gone up! Apparently my debt management company didn’t bother to tell me about the 23% interest they weren’t able to negotiate out of. I call up my debt management company and they tell me my only option is to increase my monthly payment amount, and that they don’t have as much negotiation ability with collection agencies as with the original creditor.
Now this seems amazingly unfair to me. Obviously if they had told me that I would end up owing more after a few years of paying than when I started, I wouldn’t have bothered with structured payments with them. And since I’ve basically paid off the initial balance I owed, I don’t feel like I should now owe that same amount again just in interest.
So I’m wondering what my options are at this point, and if anyone else has been in a similar situation?
Might the debt management place be liable at all? It seems like they misrepresented their services. I feel they definitely should have warned me about the interest issue. The problem is aside from their monthly fee, all the money I’ve given them they gave to the credit places.
Is there anyway to force the collection place to write off my debt as paid in full and ignore the interest? Doesn’t seem like they would want to do this. I’m not sure why they can charge so high an interest rate. They aren’t the original creditor, so it’s not like I agreed to that rate with them. Can they just charge any interest rate they want? What’s stopping them from deciding to charge me 75% interest?
Is bankruptcy an option? I know it used to be, but I’ve heard rumors of some new law being passed to make it harder to write off credit card debt through bankruptcy.
I’m not likely to be able to afford a lawyer anytime soon, so I’m hoping there’s an easier option.
Do you guys have an equivalent of the Ontarian “consumer proposal”?
Under a consumer proposal, the debtor enters an agreement with a trustee; the trustee makes a proposal to pay off part or all of the debt based on what the debtor can afford to pay per month; the trustee sends the proposal to all the creditors; and the proposal becomes binding on all creditors who do not object to it. Even if the creditor does not respond, it is still bound to the agreement, and the debtor has no other obligation towards it.
What you have now sounds like the trustee or credit counselling service seriously slipped up.
My suggestion would be that you negotiate directly with the collection agency, either for an interest rate reduction or a settlement. Most will settle for a substantial amount less than the listed debt because (generally speaking):
A) they bought the debt from the original grantor (or another agency) for pennies on the dollar
B) they added their own “fees” to the debt which inflates the amount due
C) all they are really after is a quick profit
If you have the cash on hand to settle the debt, I would recommend a starting offer of 30% of the outstanding balance. In your case, since you have paid a huge percentage of the original debt, maybe even 20%. Hold your ground, even when they counter offer 50%. You would be surprised how many times the collection company will eventually accept your offer or something very close to it, and usually sooner rather than later.
Sounds like your payments must have been less than the interest that was accruing. Loan payments always combine interest and some portion (which may be zero) of the principal, so no, you haven’t paid off the initial balance (the principal) you owed even though it might look like that; all you have been doing is paying interest.
I would recommend at the very least that you figure out how much exactly you still owe to companies one and two, and when you will have paid it off in full. It sounds like you don’t have a very good understanding of what agreement the debt management company negotiated on your behalf.
I realize you don’t think you can afford a lawyer. However, you need to renegotiate your debt. The debt management company you have been dealing with don’t seem to be up to that task.
What I would expect would be that -[ul][li]You figure out “I owe $X in principal to company one, $Y to company two, and $Z to company three. This does not include future interest.”[]Then you go to companies one, two and three and say “Look, I owe you $X, and I want to pay. But I can’t if you keep jacking up the amount with interest. If you do that, I might have to declare bankruptcy, and then we all lose out. So how about we come up with a plan where I pay off the balance, and you forgive some of the past interest?”[]As you have already been told, this will probably work better with the original company to whom you owe the debt, and not at all with the collection agency.[/ul]I would have thought that was what the debt management company would have done in the first place, and that you would have gotten that clear before you agreed to the debt plan. [/li]
You need a lawyer. Sorry, but there it is.