Asked about 1 year ago - Los Angeles, CA
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Hi,
I have $20,000 in Medical Debt. I call Freedom Debt Relief, they said their average settlement is for 45% of the total bill. So if I decide to go with them, that means I would be owing them around $9,000. They require the payment to be made within 36 months.
*Is this a good deal??? Is this something that I should seriously consider??? What other things should I be keeping in mind???
LRJ
Unfortunately, the overwhelming majority of so-called debt settlement companies are outright scams. If you are having trouble paying your medical debts, there are a number of legitimate ways to deal with the issue without getting ripped off.
You should seriously consider a consultation with an experienced bankruptcy lawyer, because even if BK is not the first or best option for you, an experienced BK lawyer could provide you with unbiased information about which options would provide you with the best chance of successfully dealing with your debt problems.
Without discussing this company specifically, I can say that most debt collection companies are scams. You pay them first. After they get your money, and your credit is ruined, they will try to negotiate with the creditor. I have had a number of cases in which the debtor has paid a lot of money to such companies, have not gotten a settlement, and been sued by the creditor. Hiring such a company does not stop or delay the creditor from suing you. If and when you are sued, you will pay a lawyer to represent you to defend the lawsuit.
Many times, actually quite often, if you are sued on a medical debt, and you have an attorney, you will receive a good settlement offer. That is because the creditor has the burden of proving, by competent evidence, that the charges of the hospital/doctor were "reasonable." Doctors rarely, or never, go to court to justify the amount of their bills.
What you need to keep in mind is that debt settlement offers no guarantees.
Generally, the promise is to attempt to settle the debt for 45% of the balance owed at the time of settlement. Since it may take you 3 years to come up with the money, the debt will increase and you have to keep that in mind when estimating your costs. Additionally, the company cannot guarantee that the creditors will all accept settlements of 45% or less. They will try, but if a creditor will not accept a discounted settlement, generally you will be entitled to (at best) a prorata refund of the fees you paid the debt settlement company. Then you will be back to trying to deal with that debt on your own.
You also have to keep in mind that the creditors may not wait three years to settle the debt. One or more of them may sue you before you get hte 45% saved up. The debt settlement company cannot prevent this. Read the paperwork carefully and you will see that they disclose this risk. They downplay the risks, but there is a significant chance that one or more of your creditors will sue you and look to garnish your wages or bank accounts before there is enough money saved up to settle the debt. I was told by one major debt settlement company that this happens with 1 account in 6. That means that if you have 6 creditors, chances are one of them will sue you before you are able to settle.
Debt settlement is a huge gamble. If you insist on trying it, keep the number of a good bankruptcy attorney handy in case the gamble doesn't pay off.
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