Saving the Kitchen Sink

July 28, 2006 10:45 AM

Recently I was contacted by a company called Liberty Settlements regarding my outstanding debt.

Apparently I had clicked a checkbox at some point while browsing the Internet and they received my name as a result. The caller spoke with me briefly about debt and mentioned that they were able to usually reduce debt by a significant amount (with $10k debt, he estimated a person would save about $4500).

I asked him to send me more information via e-mail and mentioned that I was intrigued but needed to do a bit of research on the company before even considering giving any more information. The gent was very friendly, non-invasive and seemed very helpful. He said that he completely understood my concern and suggested that I check the BBB, with whom they aren't registered but allegedly they have to record all complaints regardless.

One anecdote that he offered was about the company wanting to help people who were actually in debt for good reasons. He remarked that they recently denied a person who had maxed out all of his credit cards buying a new Lexus as a side story.

As a person with a sizeable debt that I'd like to pay off the idea of saving money and consolidating my debt into a single payment (despite bad credit at the moment) seems very appealing. Does anyone have any experience with Liberty Settlements or any similar companies? Is this a scam?

posted by Raze2k to work & money (10 comments total)

As I understand it, debt helping agencies need to be non-profits. If you do a quick ask metafilter search for debt and non-profit, you'll see all sorts of recommendations for these type of companies.

And using these services DOES show up on your credit report.
posted by k8t at 10:52 AM on July 28, 2006

The only link I could find, outside of the company homepage, that wasn't googlespam about Liberty Settlements was: http://wanderingsalsero.typepad.com/wanderingsalsero/2006/06/debt_solution_d.html

The amount of googlespam that the company does does not bode well for their trustworthiness, IMHO.
posted by SpecialK at 10:56 AM on July 28, 2006

Did you ever click that "checkbox" online? Likely not, and someone is sitting by the phone with a page torn from the phonebook. I worked briefly in sales when I was a student and the line back then was "a survey you or a relative has completed in the last 18 months," when in reality we were phoning people up randomly and hassling them.

As a rule I would never do business with someone who comes to my door or phones me, I'd rather go out and do the legwork.
posted by fire&wings at 11:04 AM on July 28, 2006

Debt consolidation companies have been in the news lately for not actually meeting the requirements for non-profits. Be veeeeeeewy carewful.
posted by ewkpates at 11:26 AM on July 28, 2006

I would never, ever do business with a company that cold-called me like this.
posted by raf at 11:42 AM on July 28, 2006

Well, if you think you've got bad credit now, wait until after you work with someone like this. Their modus operandi is putting you in default on your obligations, and then negotiating a lower repayment amount after your creditors get pissed. Good luck in getting credit for quite some time after that - it's as good as filing bankruptcy.

As to the particular company in question, well, it's probably as reputable as just about every other companies in the field. Which is to say, not at all...
posted by Doktor at 11:49 AM on July 28, 2006

He's talking about debt settlement and not credit counseling or debt consolidation. They'll advise you to cease payment to all creditors while paying them a "settlement fee". This settlement fee is how Liberty makes their money. It's not non-profit at all. Once you have what Liberty considers a fair payoff amount, they will negotiate the settlement for you. They will also tell you that this does not harm your credit nearly as much as credit counseling. That's just plain wrong. A company would rather you paid them back slowly than little or nothing.

just my .02.

on preview, what Doktor said..
posted by alightfoot at 11:54 AM on July 28, 2006

fwiw, this strategy led to bankruptcy for me and that was less damaging to my credit than "debt settlement"
posted by alightfoot at 11:55 AM on July 28, 2006

If it sounds too good to be true.. it probably is.

Paying $5500 for $10k in debt seems to fall into that field. Theres no easy out to debt.
posted by SirStan at 8:05 PM on July 28, 2006

The short answer: under no circumstances should you do business with these people.

Marginally longer answer: If what they're pitching you is a scheme where your creditors take partial payment on the debt you should also know there's no such thing as a free lunch. Over a certain amount you will get a 1099 form from any company that forgives your debt and you will have to pay taxes on it as income. Or, if they don't forgive it, they'll sell it to a junk debt buyer and you'll be hounded for the rest of your says over it.

Your earlier questions seem to imply that you've made arrangements with your creditors and are paying them off, meaning you're current with your bills. If that's the case then the only better deal you may get is to use a reputable debt management organization. They often have the ability to negotiate better rates than you do.

I know from unpleasant experience that Citibank will not alter rates for a person whose account it still overdue, even after being in their 'hardship' 0% interest rate scheme for 6 months. They flat out told me that they wouldn't make any deals with me but they would with a DM org. So if you are still paying the default-level rates (29% or so) then you should go sign up.

If you haven't asked any of your creditors for better rates, do! It's amazing what some of them will agree to. One, who had moved me to default rates, agreed to set my rate at 10% in perpetuity so long as I agreed to an auto-debit of a (quite reasonable) low payment every month. The only other condition was that the account be closed. Given that I'd been over 6 months overdue with them and the card revoked before than (not to mention my decision to never use credit again, which I have kept to) it wasn't much of a sacrifice....
posted by phearlez at 2:00 PM on July 31, 2006