sierra financial solutions? way to go?

[Metric6]

I am in debt, both credit card and personal loan. My bills are theoretically manageable, but after I slipped behind once or twice, they are beginning to get the better of me. I feel overcome by financial grief. I spoke with sierra financial solutions on the phone. We talked some numbers. He said that it does not negatively affect your financially history like some programs do. he said my credit score may take some hits while I am in the 2-3 year program, but once I am out it would recover.

I just want to be out of debt. I have done some maturing. I realize the value of a dollar now and just want to be able to save and live without constant financial dread.

It seems too good to be true. Anyone know of these types of services?

I clear about 2500 a month

I owe the following:

15k amex - about 360/month
2.4k amex - about 79/month
18k Loan - about 550/month
10K lLoan - about 200/month

I also have student loans, auto loan, cell phone, auto insurance, and such.

[kork13]

I personally don't like credit/financial "fix-it" companies. Most everything they do is stuff that you can do yourself--without paying the expensive fees of employing a financial services company. I won't say that it's easy to do, or that you'll see exactly the same results. But if you are in such dire straits that you are worried if you'll ever be able to pay off your debt, creditors would generally prefer to re-negotiate the terms of your debt than to see you declare bankruptcy, in which CC's and personal loans will often be completely ignored. Basically, instead of getting part of everything you owe, they recieve all of nothing.

A note about your credit score... Any debts that they re-negotiate the terms for will be listed on your credit report as such. I don't know the exact termonology, but basically, it looks worse on your report (reflecting to your score for a period much longer than the 2-3 years they promise) if you have a financial services company negotiates with your debtors than if you work with them yourself and convince them to modify your debts on their own.

In short, I would say to avoid using one of these companies if at all possible. Exhaust all your options with your debtors before going to a financial services company. Be persistent. Negotiate. Show your debtors what you can afford, and pay those obligations as agreed. Do everything you can, and only if all of that fails outright, then consider getting outside help.

One last thing... would you mind detailing exactly what your debts, income, and expenses are? The people on these boards may be able to get you pointed in the right direction, and again, our advice only costs the time it takes to read it.

[boosami]

It won't affect your financial history but it will affect your credit score?

Some credit counseling agencies basically file bankrupcy for you whether you explicitly know/understand or not. Ask for specifics. WHY will it affect my credit score. WHAT will go on my credit report. HOW do they accomplish these goals for you? Don't sign anything or let them do anything until you find out. If you don't understand the answers, post them here and they can be explained or examined.

There are agencies out there that will negotiate with your creditors to lower you interest rates, stike deals with collection agencies on your behalf, or help consolidate your debt payments. You just need to know specifics so they don't cause damage you might not want.

[Metric6]

I had asked my contact there a few more questions:


Since my total debt savings would be about $20,000.00, or 6-7K a year,
I am guessing I would have to pay tax on that savings annually?

Not on a yearly basis once your debt is paid in full and your balances read zero on the credit report it possible the creditors 1099 you for the difference, regardless it's a loss and your savings out weighs that scenario anyway. Also,

are your fees included in my monthly payment.
.
Yes fees are included in the settlement amount.

I also read that I can be sued and/or have creditors come after my wages while I am in your program. Can you please elaborate on this?

Yes, although statistically we have found this only happens to 8% of the clients enrolled in our program because they were already excessively past due. (8 months to one year past due resulting in a declining relationship between the creditor and the client prior to joining our program.)

On there website under FAQ, they had this as an explanation of what they do:

4. How will Sierra Financial Solutions settle my debts?

You will be asked to put aside and save a set amount of settlement funds on a monthly basis. This amount will be determined in your initial analysis based on total amount of debt and will be in line with your income and expense budget. Once you have accumulated enough settlement funds to make a reasonable offer to your creditors to settle the debt, Sierra Financial Solutions will begin the negotiation process. Each person's situation is different and the negotiation process will begin at different times depending on the amount of your debt. Once the creditors agree to a settlement amount, we will present this offer to you. If you approve of the settlement, we will instruct the creditor to fax over the ‘settlement offer’ in writing. Then have a three way recorded conversation with you, the creditor and us to settle the account. Debts can be settled in two different ways; one lump sum or a term settlement. One lump sum is just that, one payment and the account is paid. A term settlement is a settlement which is paid over an extended period of time until the account is paid. Sierra Financial Solutions then moves through each debt until all of your debts have been paid and you are debt free. Sierra Financial Solutions strongly encourages you to read our Debt Settlement FAQ.

7. Does Debt Settlement have a negative impact on my credit?

YES. Your credit score will decline due to entering this program. How much it will decline depends on your original circumstances. Most of the accounts you place into negotiation are likely to “charge off”, which will reflect negatively on your credit. However, once this charged off debt is settled, the settlement is reported to the credit bureaus. Settled accounts are positive compared to unresolved delinquent debts or bankruptcy. After all the debts have been settled and paid, the credit score should begin to improve since the negative items have been resolved. A high credit score is desirable to have, but if you have a financial hardship and are unable to pay your debts, then your first priority should be to pay your delinquent debts and get back on your feet financially.

9. What will I pay for your services?

Sierra Financial Solutions has a 15% fee which is calculated based on the total amount of debt that an individual brings into the debt settlement program. This program requires one or two down payments then small monthly fees paid throughout the first year of the program.

All costs and fees are always fully disclosed and are you are required to sign for approval before you commit to our program.

[disneysteve]

Originally Posted by Metric6

Sierra Financial Solutions has a 15% fee which is calculated based on the total amount of debt

You listed over $45,000 in debt. What are they going to do for you that is worth paying them nearly $7,000 that you can't do on your own?

[MYOM]

The first step for you is to craft a budget. Use Spending Caps to prevent over spending. Financial failure is the result of not making smart decisions about your money. If you can't pay cash for what you want then you have not earned the right to have it. That has been my rule for all of my life. You can never be wealthy if you spend more money than you make.

I would cut up the credit cards and pay cash for everything you buy until all debt is paid in full.

Good luck to you!

Dan Clemons

[mrpaseo]

It’s a scam.

You will go to them with 45,000 in debt.

They use this number to charge you their fee of 15%. They ensure they get their money by charging you upfront for the fee. This is because the rate at which people drop out of the program must be high.

They then call each creditor and basically tell them, “Look, you have two options, you can either settle for less than what this guy owes, or he is going to file bankruptcy”.

At this point the creditor has two options:
OPTION 1: They lose everything if you file bankruptcy.
OPTION 2: They lose a little and gain most of their principle back that they loaned to you.

Obviously the creditor is going to go with option 2, (9 out of 10 times). The fact that you are going to the agency is a LARGE clue that you are seriously contemplating Bankruptcy. So, it’s a no brainer for them, get what they can.

At this point, let’s say when they called, you owed this credit card 10,000 dollars. You were charged the fee of 15% (1,500 dollars) to cover this card alone. They then talk your settlement payment down to 5,000 dollars (Sometimes pennies on the dollar). This agency that you went to will pay the 5,000 dollars. (They are out only 3,500 at this point because you already paid them 1,500). The agency does not really care how much the credit card company drops your balance; they get their money up front on your original balance, so there is no motivation to get you the best possible balance drop.

This is then done with all your creditors bringing your total 45,000 debt to about 22,500. You paid them $6,750 dollars upfront so their out of pocket is $15,750

What they do not tell you is you can call each creditor yourself and do this same process for free. The only thing you’re paying for is the experience that they have in calling the creditors and knowing what words to use to get the best deal. I would put money down that the credit agency calls these creditors and tells them what they (The agency) think you can afford which is NOT always the best deal for you.

Now, how will this affect your credit/credit score?

A black mark is a bankruptcy or repo. It will be on your record from 7-10 years, then it is gone.

A white mark is a perfect loan/line of credit. Stays on your credit report indef.

A gray mark is a settled debt. This settled debt will be on your credit report for at least 7 years from the last interaction with the debt. So, if the company that you defaulted on re-affirms that it is still a settled debt, the time period restarts. A gray mark is just as bad as a black mark but it can be permanent. At least a bankruptcy last only at MAX 7-10 years (Depending on which bankruptcy you chose).


Options:

Now, what you can do is take charge of your debt. After all, you did not have a problem going into debt, it is your responsibility to pay back the debt. It seems to me that you do not have a plan, get on a plan and half the frustration will go away. Just knowing that there is a light at the end of the tunnel will relieve some of the stress.

Instead of settling, why not call your creditors and ask them to lower your interest payment? I know many people that have done just that.

Another option is paying interest only on certain debts for a certain amount of time while you pay off the other debts. You would call your creditor and arrange to pay only interest payments (They should freeze any further transactions). So instead of owing 2% of your bill (Say 200 dollars) plus the interest of 15%APY (150 for a total of 350) you would pay only the interest for that month (The 150). Some creditors do not mind doing this because they continue to earn interest on the same dollars month after month. Keep in mind you only do this if you intend to pay off another card or two so you can then use this additional money to pay off the interest only cc.

Let’s assume no one budges, no one adjusts your interest rate, and no one allows the interest only payments. You then need to snowball the bills and get them behind you one at a time. Here you even have options.

First you can keep all bills current save for one or two that you chose to not keep current. This way your entire credit report will not flash red. Try not to ever get more than two payments behind. Anything behind is bad, but after two payments they can start their “Where’s my money man” tricks. One point of note, you should always send everyone something, this will let them know you have not forgotten about them, that you want to pay them, but right now you cannot pay the agreed amount. This will still hurt your credit report (It will count as a late payment) but the chances of being sued are very low.

You could also pay a percentage to each bill. List all your bills, and figure out what percentage of your total debt each bill is. Then figure out how much money you have to pay your bills. Take you rbill money and multiply it by the percentages of your bills. So, if bill number 1 is 20% of your overall debt, then they get 20% of your available debt money.

This is bad info right here but remember your utilities do not go on your credit report, if you are 20 days late paying your utilities, usually there is a 3 dollar fee at worst. Very rarely will they shut anything off that is not 60 days late.

Ensure you prioritize your necessities:
Mortgage/rent
Food
Clothing
Transportation
THEN and only then, bills.

Please ask any questions, if you need help getting on a budget, post all your bills/income and we will assist. The bottom line is, education, persistance, and a goo dplan will get you out of debt in a few years but starting this will releive some of the stress right now.

Good luck,
Ray

[boosami]

Charge offs, which will stay on your credit report for 7 years, are very bad marks to have that have huge affects on your credit score. A charge off says to potential lenders "this person had debt they absolutely could not pay." This agency wants to basically let your accounts go delinquent to this point, and then negotiate with the lenders or collection agencies. On top of that, they want to charge you a ridiculous amount of money.

It's not too good to be true, it's almost too HORRIBLE to be true (but it is). You say yourself your bills are manageable. Why pay someone tens of thousands of dollars to manage what you already know you can yourself?

[Metric6]

You guys have been great so far. It must be frustrating dealing with someone who has clearly been dumb enough to get themselves this messed up. I really appreciate your help more than you know. I know I need guidance, but don't even know who to ask for advice.

I got a 2nd job working the door at a bar. This gets me 400-600 a month after taxes.

I cut up my CC's in April and haven't used them since.

I no longer spend any money on non essential things. I only pay bills, buy gas, and pay for my gym membership.

AMEX cut back my lines of credit to basically equal my balance, so late payments bump me over the line of credit and I get screwed on fees. I am making my 15K amex a priority to get under the line of credit as quick as possible. After that I plan on paying off the 2.5K amex by sending in 120 instead of the min 75 a month. After that is paid off I will go after the 15K card. The loan will be payed off in about 2.5 years, as will my car.

What is hard is that I do not have any buffer in my bank account. One slip and I get hit with over draft fees of 35 dollars per item. I have been trying hard to monitor this, but Bank Of America does things like monitors when things post, but not when money actually comes out. I just need to keep better track of the whole account.

There are a couple of bills I need to pay soon, but can't seem to divert money away from my normal bills. I owe my old landlord about 1,200 dollars and am trying hard to get him money asap. It seems like every time I think I will have it I get hit with something unexpected.

I am glad I did not go through with the sierra financial program. What do I say when I call up amex? Just ask to lower my interest rate?

[minnie1928]

You made a good move by not going with Sierra, that was bad news.

I think you need to create some type of emergency fund, even if it's only $100. That might be enough to prevent you from overdrawing your checking account.

Can you post your expenses? That way we can see what your expenses are and make recommendations. Perhaps by cutting some of your expenses you can come up with the money you need to fund your emergency fund (and hopefully beyond!).

[disneysteve]

Late fees and overdraft charges simply shouldn't happen. They aren't the bank's fault or the credit card company's fault. Make your payments on time and don't charge more than you have in your account and those fees will stop happening.

[Metric6]

weekly income after taxes from my engineering job is about $631.00/week
bi-weekly income from bar is $200-$300/ every 2 weeks

expenses per month

cell - 90
parents rent - 200
car - 432
car ins - 151
student loan - 121
Bank Of America loan - 193
TDB loan - 530
amex 1 - 350
amex 2 - 79
gym - 44
dr. copay 20
presciption copay 30
gas - 200
netflix (for my parents xmas gift every year) - 18
parking downtown for my bar job - 80-120
(am buying a parking pass soon which would bring the cost down to 48 per month


Thats about it besides a haircut every 2-4 weeks and maybe a movie once a month.

[kork13]

Thanks for posting the expenses, that will help everyone alot. Much of what you're able to reduce is going to be sort of nickel-and-dime type stuff, just a few dollars here and there.

Cell phone-- are you in a contract right now? What % of your available minutes do you use? Do you text often? Look at changing to a lower plan. Most companies have a basic plan(500-ish minutes) around $40, then a higher plan at levels every $10-$20. Eliminate texting and any other add-ons, then swich to as low (in minutes) a plan possible. Find out how many minutes you average per month, add a 10-20% buffer, and get a plan as close to that as you can.

Could you refinance your auto loan, or trade down to a cheaper car? That's a BIG payment, so you either have an expensive car or a really high interest rate (or both). Also, look into higher insurance deductibles, and reassess what coverages you have, and if you really need them as is. Make sure you're adequately insured, but no point in being over-insured.

Esp. if you're working the door at a bar, the gym membership is understandable. However, is there a cheaper gym you could look into?

The parking pass is a good idea. A better idea would be to use public transit if possible. Sounds like you live in a larger city, so they probably have a public transit program. Getting a monthly bus pass would save on parking and also on gas.

[minnie1928]

Netflix, can you switch to a cheaper plan or move to blockbuster (if that's cheaper?). I have a plan with Blockbuster for 7.99/month. I get 5 movies/month with that plan.

I'd also look into that cell bill, that seems like you could cut that one down.

[Metric6]

I am looking over my cell plan now. I think I can def. cut that down.

If I had to be late on a bill which one would be the safest? I am guessing auto loan is something I should try not to be too late on. I don't know at what point they would repossess a car, but i don't want to test my limits on that. I have recently been about a month behind on it.

From your stand point am I completely screwed? I feel like my life is over. It is a real depressing feeling. I understand that it is my own fault, and I alone bear the burden, but still I like to hope for some sort of way out at some point.

[minnie1928]

Originally Posted by Metric6

I am looking over my cell plan now. I think I can def. cut that down.

If I had to be late on a bill which one would be the safest? I am guessing auto loan is something I should try not to be too late on. I don't know at what point they would repossess a car, but i don't want to test my limits on that. I have recently been about a month behind on it.

From your stand point am I completely screwed? I feel like my life is over. It is a real depressing feeling. I understand that it is my own fault, and I alone bear the burden, but still I like to hope for some sort of way out at some point.

If things are really that bad, then you should be canceling the phone, the gym, and Netflix. I think your parents would understand if you had to cancel the Netflix . Call to see if you are getting the best rate on your car insurance. Sell the car and get a cheaper one (with cheaper insurance?) if need be. If things are that tight, then you are going to have to do something dramatic. Keep in mind that the changes you make don't have to be permanent. Once you are out from under this debt (and having learned from your mistakes) you'll be just fine.

Would you be able to defer your rent payments to your parents in order to get some of the other things current? Explain that you would pay them back (plus interest) for the few months you need deferral. Draw up a contract if it makes everyone feel better.

[Metric6]

Since my car is an SUV, the value took a nose dive lately. The trade in value is about 10k, and I still owe 13K on it. I am half way through the 5 year loan on it.

I might be able to defer my parents rent. I haven't told them about my troubles yet so I have been trying my best to not alarm them.

[minnie1928]

Originally Posted by Metric6

Since my car is an SUV, the value took a nose dive lately. The trade in value is about 10k, and I still owe 13K on it. I am half way through the 5 year loan on it.

I might be able to defer my parents rent. I haven't told them about my troubles yet so I have been trying my best to not alarm them.

Come clean with your parents...it will probably take a great deal of the load off your mind. Right now, along with dealing with everything else, you are trying to keep them under the impression that everything is ok. Keeping up a facade like that has to be stressful on you. Come clean, maybe they will even have some ideas to help your situation.

[kork13]

Originally Posted by Metric6

If I had to be late on a bill which one would be the safest?

From your stand point am I completely screwed? I feel like my life is over. It is a real depressing feeling. I understand that it is my own fault, and I alone bear the burden, but still I like to hope for some sort of way out at some point.

I can't say anything to which is least critical to be late or underpaid on... that's risky no matter what, but others can advise you better there...

Are you in deep? ... well, yes. Too deep you can't recover? Not at all. Here are my recommendations for you, take them for what you will. This is going to take some time, but you're in a place where you CAN make it work.

From what you've said, it seems you have an average income of $3025/mo, and expenses are $2560/mo (at current levels). This means that you make $464/mo above your current expenses. This is GREAT NEWS (you aren't going further in the hole each month).

Step 1: Work with your debt holders and try to negotiate lower interest rates for your debts. You can also try to get them to decrease the monthly payment. This would stretch out your debt over a longer period of time, but free up more money each month to put toward debt reduction. It will help if you can explain to them that you're having trouble making the payments as they are, but with a lower rate and/or with a lower monthly payment, you will be able to pay everything off over time. Guarantee them that you can and will pay everything off, that it will just take some time.

Step 2: Reduce your expenses as much as you possibly can. Get creative. You can (should?) also look at selling some stuff you can't/don't use on eBay, Craigslist, or in a yardsale to give you some extra cash.

Step 3: Open (or designate) a savings account as an Emergency Fund for yourself. Look for something that will give you 2.5-4% interest on your money. You need an EF no matter what, because it provides a security backstop for you if something happens. Send $100/mo to your EF, at least until it is $1000 strong, or better. Also, ensure you keep no less than $500 in your checking account at any time--this is your buffer, and will prevent you from paying any more overdraft fees.

Step 4: Reserve enough in your accounts to pay your monthly expenses. Take ALL remaining funds you have and pay down your debts' principle balances. Focus in on one debt at a time so that you can eliminate them one by one. When one debt is totally paid off, take all of that money and now pay all of that toward your next debt.

Two options here: you either (A) pay down the lowest-balance debt first (this will lower your number of debts faster, which for alot of people can be encouraging); or (B) pay down the highest-rate debt first (this will save you money on interest charges over the long run).

Follow step four until all of your debts are gone. This will likely take up to 3 years from when you start, but remember... If you do this and stick to it, all of your debts WILL be gone, PAID IN FULL, at the end of that 3 years.

Step 5: Congratulate yourself. You are debt free! Now, you need to build up 3-6 months' worth of expenses in your EF. At your current expenses, that's $4200-$8400. That will help you make sure something like this doesn't happen again, because instead of going into debt when something happens, you will have cash available to you.

Step 6: Never let yourself get into serious debt again. Act responsibly, and this will not be a problem for you.

Good luck! You CAN dig yourself out. It's just gonna take time and dedication.

[disneysteve]

Originally Posted by Metric6

Since my car is an SUV, the value took a nose dive lately. The trade in value is about 10k, and I still owe 13K on it.

The car payment is killing you (among other things).

Sell the car for 10K. Get a loan for 3K to pay off the balance. Buy a used car for 5K (or less). That will reduce your debt from 13K to 8K, lower your payments and reduce your insurance costs.