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Not Delinquent Yet, But 2007 Will Break Us.


curemyreed
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I'm not sure how to proceed. Have defered my husband's enormous student loans and racked up CC debt to help pay for chronically ill child's health care. (Child is considered disabled, but qualifies for no state help as attorney dad's income exceeds caps.) After years of deferement the student loan company says time to pay even with ill child's enormous monthly expenses....appears these loans must be repaid as husband's law license could be messed with if we don't.

We can't afford to pay back school loans AND minimum payments on the credit cards every month. There is no additional money each month after paying the $810 in min. monthly CC payments, but we are now needing to come up with an additional $539 monthly to pay the student loans. I don't know what to do. Loan repayment will have to take precendence over CC.

I've always been a meek person but have learned how to fight to get what my daughter needs. I called the CC companies. Did not talk about student loan issue, just spoke about chronically ill daughter, need to reduce CC debt as we won't be able to continue paying as we have, etc. I couldn't even get any of them to lower the interest rate!!

We've never been late paying the CC and aren't delinquent now. I am not employed outside the home as I am full-time caring for the ill child, but believe I could work graveyard shifts to the extent of bringing in $1200 per month for the 12 months of 2007 which would strictly go toward paying debt. Not sure how I'll do both, but will if it is the only way.

Here's the CC info:

Washington Mutual $7878 $200/mo.

MBNA America $4965 $130/mo.

Capital One $2580 $125/mo.

Chase $6900 $355/mo.

It would be easier if I could get the loan balances reduced or lower interest rates or some, any, break here as my $1200 income will have to split...$539 to the student loan then only $600 left to pay down CC debt. Can anyone offer advice as to how to proceed? Dumb question, I'm sure....somehow getting the balances reduced will mean a negative put onto our credit report, right?

Thanks for any help you can give.

Penni

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Wow, I wish I had some good advice for you, but I don't. We were in your shoes 35 years ago, and I don't think we ever recovered. Made too much money to qualify for assistance, but not enough to cover the medical costs and everything else. It was worth the effort, but I wouldn't want to do it again.

Have you looked into a debt consolidation loan? I'm not a big fan of trading unsecurred debt for securred...but I put your total current debt at about $22,500. With your husband's income, you might qualify for even a signature loan for that amount...or, if you're working on a house, maybe a second mortgage?

I can tell you from experience that you only want to go the refi route if you're 100% sure that everything is under control and you'll be able to cut up the CCs and live on the balance of your income...if you look at this as just a stop-gap measure, beleive me, it won't stop.

And...you're right...all of the "settle your debt for pennies on the dollar" schemes wind up screwing your credit AND may even get you sued.

What type of law does your husband practice? (Ah geez, I hate myself for mentioning this, but I know there's lots of money in debt collection).

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The only good advice I have for you:

Six units of college per term will keep the student loans (at least the federal ones) deferred indefinitely and will cost less than the payments. He may have some not-deferrable loans.

The college I attend is in California but has a TON of online classes, so no schlepping back and forth. Six units would be about $600/quarter for out-of-state. Best to sign up this week, though, before the last seats fill.

PM me if you want specific info.

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I'm not sure how to proceed. Have defered my husband's enormous student loans and racked up CC debt to help pay for chronically ill child's health care. (Child is considered disabled, but qualifies for no state help as attorney dad's income exceeds caps.) After years of deferement the student loan company says time to pay even with ill child's enormous monthly expenses....appears these loans must be repaid as husband's law license could be messed with if we don't.

We can't afford to pay back school loans AND minimum payments on the credit cards every month. There is no additional money each month after paying the $810 in min. monthly CC payments, but we are now needing to come up with an additional $539 monthly to pay the student loans. I don't know what to do. Loan repayment will have to take precendence over CC.

I've always been a meek person but have learned how to fight to get what my daughter needs. I called the CC companies. Did not talk about student loan issue, just spoke about chronically ill daughter, need to reduce CC debt as we won't be able to continue paying as we have, etc. I couldn't even get any of them to lower the interest rate!!

We've never been late paying the CC and aren't delinquent now. I am not employed outside the home as I am full-time caring for the ill child, but believe I could work graveyard shifts to the extent of bringing in $1200 per month for the 12 months of 2007 which would strictly go toward paying debt. Not sure how I'll do both, but will if it is the only way.

Here's the CC info:

Washington Mutual $7878 $200/mo.

MBNA America $4965 $130/mo.

Capital One $2580 $125/mo.

Chase $6900 $355/mo.

It would be easier if I could get the loan balances reduced or lower interest rates or some, any, break here as my $1200 income will have to split...$539 to the student loan then only $600 left to pay down CC debt. Can anyone offer advice as to how to proceed? Dumb question, I'm sure....somehow getting the balances reduced will mean a negative put onto our credit report, right?

Thanks for any help you can give.

Penni

You can always call your cc companies and explain your situation. Perhaps they will lower your interest rate to help you from becoming deliinquent. They'd rather lower your rate than see you get in such financial ruin that you file bankruptcy and pay them nothing.

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Thank you so very much to those who replied to my post. I appreciate you taking the time. And I had not thought of some of these avenues. Tomorrow I am calling all the card companies again and repleading my case for lower interest rates AND attending job orientation. One step at a time...

Penni

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You can always call your cc companies and explain your situation. Perhaps they will lower your interest rate to help you from becoming deliinquent. They'd rather lower your rate than see you get in such financial ruin that you file bankruptcy and pay them nothing.
I, as well as many others here, know from experience that this is ... unfortunately ... not the case. CC companies generally will not work with you until you've already gone delinquent and your credit is already dinged. My guess is that they figure if you've been able to limp along and stay current even with the extremely high interest rate, that you'll find a way to keep doing it ... meaning more $$$ for them. Only when you start to miss payments do they think "Uh oh, things are going south, we may get nothing," and start to work with you. However, even that is a temporary thing.
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It's tough to know what to offer as I am not aware of your complete financial picture.

Ask yourself some of these questions;

1. Is there anything you (and your family) can cut back on? Newspaper delivery, cable, dsl (a completely unnecessary expense unless you work online, IMHO), eating out, mag. subscriptions, etc...these funds can be better used by applying them to your debts or his student debts.

2. Where is all the money going? I don't mean with JUST bills, but EVERYTHING. Track spending for a month, see what it is you folks do with the money you have. I actually had to consider if we were in "more house" than we could afford! The ways to save money are endless, some folks just won't consider them in which case, it will continue to be the viscious cycle that it is.

3. Medical coverage. What kind do you have? Is there a way to qualify for supplemental coverage from another source? Have you tried applying for any DSHS coverage? They use different qualifiers when just calculating medical care needs. Will your medical coverage allow for "payments" or are they demanding "payment up front?"

4. Is anything deductible? What do your yearly tax returns look like? Do you get anything back? If so, apply that to one of your cc's. Remember-if you do, you're saving yourself not only in monthly payments of 125.00+ but interest you would've otherwise paid in the long term! That equals a lot, but I'm too tired to do the math.

Here's an initial idea...

Your Capital One CC carries your lowest balance. Attempt to pay your 125.00 pmt PLUS additional. Merely note, "remainder to principal" on your check so you aren't dinged for any "second payment" as I am aware some CC's do (bleah, swines!). Once that is paid off, whatever "extra" you were paying (cap it maybe at like 50.00 extra to keep it reasonable) apply to your next "lowest balance." If you're able, attack your MBNA in the same fashion. Again, without knowing your complete financial picture it's tough to offer an idea on how much extra to pay. The important thing though, is making a deal with yourself to NO LONGER rely on credit like this.

And yes, I'd strongly urge you to find some means of employment. After being a SAHP for 7 yrs, it's a place I now find my own self in. These extra funds should be geared towards the debt, and than it should be geared towards savings.

Whatever you do, avoid debt consolidation (paying debt with more debt) and any company telling you that they can "reduce your debt." Much of that crap you can learn on your own.

Don't give up! :)

Elyse

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  • 2 weeks later...

I wanted to update everyone. The suggestions & information you gave were SO HELPFUL and will allow us to not go under this year!!!

I looked at our situation and felt that if I got a job I could pay off enough debt in 6 months to free up the $600 a month the school loan people are asking for (NOT the $530 we thought). My husband has enrolled in 6 hours of on-line classes at our local community college and this will give an automatic loan deferment for the next 6 months. It is trading one debt for another, but it will allow us to keep our heads above water. I am working 32-hour weekends so that my husband can care for our ill child while I work and vice versa. This was my first weekend working and everything went smoothly at home and for me although I have been out of the nursing field for years. We plan to reassess in 6 months and if the working situation has not negatively impacted my daughter then we plan to have my husband do the in-school loan deferment for another semester while I work to pay off another $10,000 in credit card debt, thus freeing up another $330 monthly that had been going for min. monthly payments.

I have some questions about the best way to go about paying these credit cards off...there's a lot I don't know, apparently, like that they might consider extra money sent a "second payment" instead of automatically applying it to the principal. If I need to post this somewhere else, please let me know.

I get paid every 2 weeks. Is it better to just send the CC company a check once a month instead of every two weeks so they don't try to rip me off by calling it a "second payment"? (My thought had been that I'll be knocking down the principal every 2 weeks which would allow me to pay it off faster. Is that logical? It would be nullified if they pulled the "second payment" shenanigans) Forgive my obvious stupidity here....how do I calculate what the minimum monthly payment should be? Is the min. monthly payment all interest? I need to be able to confirm what they say each month is correct and can only do that if I know how to calculate the figure. Lastly, what is the best thing to do for our credit score as each card is paid off? My husband believes we should immediately close the account down as we have heard a lot of "too much revolving credit" comments. I've heard for some unknown reason it can be bad for your score to close an account soon after paying it off or to close all of your accounts. Could anyone explain this to me in more depth and the best way to handle this credit-score-wise? If we are able to pay off all the credit cards this year is it best to hang on to one or more credit cards? If so, why? And how many should one keep? (This would be with the understanding that the credit cards will never be used again so as not to get into this situation again. We will have to operate as if the cards do not exist, regardless of medical needs, etc.) Also, is there anything particular I would want to say to the CC company when I pay off the card...like "please report such-and-such to the credit agencies"...or do I not do anything further?

Thanks....thank you so very much everyone who has helped me. I will pay it forward some day.

Penni

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So glad things are looking better.

Here's my thoughts...

1. Credit scores really don't mean anything good to us, the debtors. They're set up to tell creditors who they can make money off of. Given a choice between having high scores, and low debt...go for the low debt.

2. So...yes...make one payment per month. As soon after the bill comes as you can. This will avoid many of the CC company's shanigans. And, the federal reserve changed the rules a little while ago so that more of the minimum payment actually goes to the balance...but...the mins are still designed to keep you paying as long as possible. Note that the minimums will go down as the balance goes down. Not in your best interest. You might want to sit down and work out a spreadsheet. List balances, current minimum payments, interest rates...figure how much per month you'll have to throw at them. Divide up that amount among the CCs and stick to it.

3. When the balances are paid...don't close the accounts, unless they charge you a yearly maintainance fee.

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"...yes...make one payment per month..."

Financial experts like Clark Howard recommend paying more than once per month, since interest is calculated on the total owed. Send one payment to meet minimum requirements and keep the account current. Send an extra delegated to the principle (ONLY, if possible) to bring the sum down sooner. If they refuse to apply extra money to the principle, I'd recommend paying another payment anyway, just to get it over with sooner. Interest charges and fees can Kill you financially. Have you called and requested they lower your Interest Rate? You may want to try this, repeatedly. It worked for those people on Oprah.

"...Is there anything in particular I would want to say to the CC company. when I pay it off.."

Nope. IF they report, it must be accurate.

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I personally pay at least the minimum on each credit card each paycheck (I'm also paid twice per month). I figure out how much extra I can put on them and do so. If you can't pay them all each paycheck, put half in one bin and half in the other. Pay as soon after the statement as possible. I always pay online.

In strict financial terms, you're always best off paying the highest interest rate first (thus, student loans would generally be dead last as they're the lowest rate in most situations).

Interest is calculated on average daily balance, thus paying earlier in the cycle reduces the average daily balance more than paying the same amount near the statement close.

When you get cards paid off, yes, by all means keep them open. Ask for an interest rate reduction and credit limit increase.

Good luck, and I'm glad we were able to help your family out in a tough spot.

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