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Collections - refinance - the "B" word

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WOW... just found this website... I hope I can find some answers here too...

Here's the deal... I defaulted on a credit card and the company has turned it over to collections...

I have two cards with them (5k and 34k) and they are trying to have me refinance my home to pay them off... it would be a sub prime loan due to my current credit condition (come on economy... please rebound)...

At closing (of the refinance) the check(s) would be cut directly to them and which I am told is standard procedure with a credit rebuilding type of loan. I'm not sure if this is true.

At this time I am pretty tapped out financially speaking. I owe the money but I am not sure if I can qualify for a refi. I live in Texas and my home is homesteaded... if I put this off for a while what can they do?

I have no appreciable assets and if things don't turn around soon... I may look into bankruptcy.

I’d like to start a dialog with some Q&A to help me determine what I need to be considering or a plan of action.

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Well, since you live in Texas, you have some great laws that protect the consumer. You have good property exemptions, they cannot garnish wages, statute of limitations is 4 years. How long since charge off? Here is a link with a lot of good info:

http://www.debt-consolidation-credit-repair-service.com/cgi-local/cutecast/cutecast.pl?forum=18&thread=3818. The problem is, if you refinance and get into further trouble, your house is collateral for the loan. They may go for a judgement, but you would be summoned first, and would still have time to file bankruptcy if needed. Have you sent debt validation letter yet? I would start by reading and studying the info from the link above and the info on this site, then post more questions as needed.

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Yes... I am fortunate that I live in Texas and I am a homeowner here.

The charge off occured in Febrary this year so it's recent.

No I have sent a debt validation letter yet and I am not familiar with it. I will take your advice and research the information on the link you provided..

Never been in a position like this before so I am not comfortable. I know there are laws in place for this and if I need to lean on them to the fullest... that is what I'll do.

I am sure I will post later with more questions...

So far so good. Keep it coming.

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Read about the debt validation process at http://www.creditinfocenter.com/rebuild/debt_validation.shtml then read the posts in the debt validation section of the message board. There is a lot of great info, and most people here have been through this and will answer your questions. Never talk to collection agency on phone and never give out any pesonal of financial info such as bank account info. Deal with them by certified mail only to create paper trail so that you have everything in writing in case you ever do go to court.

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If you have to be in dire straights, Tx. is the place to live. DO NOT RE-FI YOUR HOME! They can't sieze it, all the equity is exempt in a bk proceeding and, there is no wage garnishment in Tx. The best thing for you to do right now is get caller id and decide if you need to file bk or, make a fight out of it.

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Got the caller ID already and I have taken that stance... on the smaller debt I gave them my routing, account number and three check numbers for 3 payments of 200 each over the next 60 days...

Yes I know I screwed up... Knowledge is everything and a little information helps too... fortunately it's not an account that I keep any money in... and if you were a betting person... how much over the next 60 days do you think I'll have in there???

Y'all don't get me wrong... if a few business deals go the right way... I'll retire the debt as quickly as possible... I already got them down to 85% on the first try and bet it go lower as this continues.

Business has just got to get better...

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Absolutely do not refinance your house! The next step for the creditor will be to get a judgment against you. You will need to open a new checking account and DO NOT under any circumstances use the new account to make any kind of payments to these creditors. If they get a judgment they can seize the money in your account if they have your banking info. In Texas a judgment is good for 10 years and can be renewed (although this does not usually happen). Also remember if you settle, be sure you negotiate to have tradeline deleted from CR's.

[Edit by tulipchic on Wednesday, April 2, 2003 @ 02:57 PM]

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If you want to settle, maybe 25% - 30% would be more appropriate. Think of it this way. How much of that debt is actual charges and what percent is that high rate of interest plus late fees, etc..

If it's already gone to collections, then so what. What do you think the collection agent is making? Probably about 30% minimum.

If the collection agent is working on a commission, doesn't it stand to reason that the more he collects, the more he makes.

Is there anyway you can circumvent the collection agent and work with the original creditor if you want to settle?

Remember, when it comes to money, there's no such thing as friendship, these people don't care about you, all they want is their money and the more they get, the greedier they become.

When dealing with them, tell them this, "100% of nothing is nothing". It will make them think! Remember, you're the one who is going to write the check, not them, you're in the drivers seat and have control, there just a bump in the road. And bottom line is what can they do to you besides a judgement, and if they get a judgement, the other side is for them to enforce the judgement, you can't squeeze blood out of a rock!

They don't want to have to file a suit against you because that's also costly plus time, etc. they would rather get something, rather than to go through all that. Remember, to err is human, so don't beat yourself up on this deal, it's not worth it, it's just money, something that they can get somewhere else. You're in a hardship state right now, they aren't. Put yourself as #1.

AS far as the refinance, don't! Besides the increased interest rate, I'll bet there will be Thousands of Dollars of origination fees, costs. etc.. How do you think those mortgage brokers make a living, they're not a bank. They don't get paid a salary. That's just another ripoff down the line. Ask yourself why the banking industry is so strict. It's the government trying to protect people from getting in over their heads and getting into a mess, not like these credit card companies who would even "rob Robinhood" if they got half a chance!

Hang in there and take your time and don't rush into anything, patience is a virtue, and right now you've got more time than money, in fact you've got alot of time, they want to push you by putting the heat on, they play on your emotions! Remember this, "the older the colder". The more time that elapses, the less chance they have of recovering and the more willing they wiil be to negotiate a more reduced settlement, you might think that by them reducing the amount is their endeavor of being a nice guy, not so, this is what they do and they're trained in this stuff, now it's up to you to get educated as to their game and how they think. "The art of war is to know the enemy".

Go to the Federal Trade Commision website and read the FDCPA and the FTC's opinion of the act. You'll see how the government feels about debt collectors and how they need to be regulated.

Look under opinions and advisories. Good luck!!!

[Edit by smokyjoe on Wednesday, April 2, 2003 @ 07:00 PM]

[Edit by smokyjoe on Wednesday, April 2, 2003 @ 07:09 PM]

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Depending on the OC they will get a judgment on a large balance. Providian sued me one month after charge off on 11k balance. But time is on my side, and I'm just going to wait it out. They were the only creditor that wouldn't work with me, and I am in no hurry to give them anything. With any luck they'll go bankrupt in the next few years.

[Edit by tulipchic on Thursday, April 3, 2003 @ 08:53 AM]

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