- 1 Is Harrison Funding Running A Debt Forgiveness Scam?
- 1.1 How Credit Card Debt Forgiveness Works
- 1.2 Inform Your Credit Card Issuer Before Missing a Payment
- 1.3 Are There Other Debt Relief Options Besides Harrison Funding?
- 1.4 It Will Hurt Your Credit
Is Harrison Funding Running A Debt Forgiveness Scam?
Harrison Funding is flooding the market with unrealistic debt forgiveness offers to make you believe they will pay off your credit card balances. Harrison Funding, along with Georgetown Funding, Johnson Funding, and Taft Financial, has been aggressively advertising and targeting less-than-perfect credit borrowers and offering them interest rates as low as 3.09% APR. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect.
The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Personal Loan Debt Consolidation, the personal finance review site, has been following Harrison Funding and its cooperative of web sites for some time now.
Credit card forgiveness is a double-edged sword – on the one hand, your debt will be erased, on the other you’ll be on the hook for taxes and it will tank your credit score. That’s just how debt forgiveness is structured, there will be consequences.
It’s worth pointing out that debt forgiveness is definitely within the realm of possibility, but it’s rare. You’ll probably have to resort to something extreme such as bankruptcy.
How Credit Card Debt Forgiveness Works
It’s best to explain this with an example. Suppose you have a $10,0000 credit card balance and you’re 12 months behind on your payments. At this stage, your credit card issuer has most likely sold your debt to debt collectors, which means you’ll be dealing with them from now on.
You reach an agreement with the debt collection agency to pay back $8,000 in installments or in a lump sum. The amount of debt forgiveness in this case is $2,000. This isn’t the end of your problems though, you may be required to pay taxes on it (if you’re insolvent).
It’s highly recommended to get in touch with your issuer and check your credit card balances before your debt is sold to a debt collector.
Inform Your Credit Card Issuer Before Missing a Payment
If you know you’ll be missing a payment on your credit card bill, you should reach out to your credit card issuer before the due date. They’ll connect you with their hardship department where you’ll have to explain your financial circumstances. Your credit card issuer probably won’t write off your debt at this stage.
The most likely case-scenario is getting a temporary reprieve from paying interest on the balance. But you’re probably not getting a reduced balance, the chances of that happening are pretty slim.
The advantage of talking to your credit card issuer early on is to get a little more wiggle room and reduce the damage done to your credit score. But this leniency will only last for around 12 months.
You have to decide if this will buy you enough time to pay off your debt. If it exacerbates your situation, you’ll need a different solution.
Are There Other Debt Relief Options Besides Harrison Funding?
If the credit card issuer hasn’t given you relief on your debt, there are other options you can avail. Be careful to watch out for debt consolidation scams which continue to pop up at alarming rates.
Debt Management Programs
A debt management plan helps pay off your balance over a period of 3 to 5 years. You may be able to negotiate reduced interest rates with your lender.
Debt management programs are managed by credit counseling agencies. Make sure to only deal with agencies accredited by the National Foundation for Credit Counseling.
These companies can prevent or mitigate the damage done to your credit report by creating a budget and a working plan to repay your debt. Most agencies will offer a free consultation over the phone to help you discuss your options. Don’t worry, a few counseling sessions won’t reflect on your credit report and won’t hurt your score. In many cases, this option may be superior to declaring bankruptcy.
Many debt settlement companies engage in unfair and deceptive practices. They will often tell you to stop making payments, at which point you could default on multiple accounts. This is usually their goal – so you would have no other option than to have them negotiate on your behalf. However, your credit score will likely have taken a huge hit.
The telltale signs of fraudulent settlement companies are charging high upfront fees, falsely claiming that they work with the government, or that a new government program is going to erase your credit card balances (there’s no such thing). If they offer you a ‘guarantee’ on getting your debt removed, run for the hills.
Get in touch with your state attorney general’s office for a proper background check on these companies before working with them.
Negotiating with Debt Collectors
It is possible to negotiate with debt collectors on your own. This may work, but you’ll have to be careful about the terminology you use when talking to this type of debt collector. The Fair Debt Collection Practices Act protects consumers from unfair and deceptive debt collection practices. Make sure you read up on those to protect yourself.
In many cases, you might be able to negotiate a lump-sum payment or installment plans on a reduced balance.
Make sure to get everything in writing – oral promises are not easy to enforce and tough to prove in courts.
After you’re done with your negotiation talks, get it in writing. Do not make any payments until you get the paperwork. It’s highly recommended to lawyer up because of the legal issues involved.
Credit Card Debt Consolidation
This isn’t debt relief because you still have to pay the full bill. But the main advantage of this option are low-interest rates. If you have a good credit score, you may qualify for a balance transfer on a 0% annual percentage rate for about 12 to 20 months.
If this is not an option, a debt consolidation loan may be of help. Make sure to do your research to secure a lower APR than the one you’re paying right now. This approach will save you some money on interest payments. In a debt situation, every little bit of help counts.
Know the Consequences of Debt Relief
If you manage to erase part or all of your debt, the creditor will send you an IRS Form 1099C that shows the exact amount forgiven. You’ll have to take a solvency test to find out whether you were before agreeing to the settlement.
Bankruptcy May be a Better option
It may be better to declare a Chapter 7 bankruptcy rather than opting for debt relief. This definitely applies in the case of individuals who won’t be able to cover the installment payments negotiated in a debt settlement agreement. And that’s a bigger debt trap. It’s better to get an appointment with a bankruptcy attorney to weigh your pros and cons for the best course of action.
It Will Hurt Your Credit
Credit card forgiveness will mess up your credit score. The debt collection account will stay on your credit report for 7 years, starting from the date you missed your payments. Worse still, your credit card issuer may report your account as charged-off after selling your debt to a debt collector.
The point is, you’ll have to contend with a few trade-offs when securing debt forgiveness on your credit card. Try to pick the option that helps you get back on your feet sooner than later.