Expert: David McArthur - 3/21/2009

Question
Hello, I lost a high-paying job a while back and now owe American Express almost $19,000.00 (my only debt).  I had been paying as much as I could on time every month, but due to reduced income I have been having to use my AMEX card for necessities, so I can't reduce the debt and I can't find another job to earn me anywhere near enough to pay off my debt.  Anyway, I am constantly seeing/hearing ads about how you can supposedly get the credit card company to reduce your debt to a fraction of what it was.  Are these programs legitimate?  I am at my wit's end and need help from someplace that isn't going to take advantage of me or ruin my credit rating (which used to be really good).  Please help, thanks.

Answer
Tracy,

Make sure you do your research on whomever you choose to use.  I am not an expert on those types of companies but I can tell you that many of my clients were very disappointed with the services that they received.  The basic formula is that they will have you set up a substantial payment to them and have you stop paying all your creditors. They then strongarm your creditors into reducing the debt to get payments.

Keep in mind that this process is as damaging to your credit as a bankruptcy.  You'll probably drop 200 points right away.

I would also consult a BK attorney to see if that is a better option if you run out of options.  Hopefully you can fix your cash flow first.