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Finally, the amount the creditors forgive in the end is considered income for you, and you owe taxes on that amount.“If you’re going to take this route, you might as well declare bankruptcy,” Greenberg says.Basically, the DMP plays policeman, taking your monthly lump-sum payment and distributing it to your creditors until the accounts stand at zero. According to Greenberg, less than 35 percent of the people who call consumer credit counseling agencies truly can benefit from a DMP. This is a numbers fudging claim that holds true only in the narrowest of circumstances.For instance, if you miss two 0 payments on a ,000 balance, the third month’s bill will make it 0 that you owe.Today, a majority of the home equity lines he approves as owner of Priority Plus Lending will be used to pay off Americans’ credit card debts.Nor is his route the only one to spring up in a capitalistic society: Where there’s a need, there’s a buck to be made, even among the broke.
Debt-management programs — or DMPs as insiders like to shorten it — are one tool in the credit counselors’ kit.So you can bet that where competition rules, advertising spin appears.Here are 10 myths about debt consolidation and the truth about them.It drives Richard Musci, chief lending products officer at Schwab Bank, crazy to see teaser ads for low interest rates on home equity lines.Any quotes that fall within prime minus 75 basis points to prime plus 2 percent are reserved for those who make the A credit list.
At that point, the debt-settlement personnel negotiate to repay cents on the dollar. Greenberg urges anyone introduced to a debt-settlement program to run hard in the opposite direction. “It’s just wrong to make payments on an account and have the money sit in someone else’s pockets until the creditor gives up on the collection calls.” The real skunks insert a clause in the contract that says if you miss a payment to the debt-settlement company, it keeps all the money in the ante as a fee.