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Good credit soon to be bad credit - Question...


KappaMan
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Hello everybody,

I need some advice. I'm going to make it as simple as possible.

My wife and I have a lot of CC debt but we had a whole lot more about 6 months ago.

I've always been a credit-conscious person. I monitor my credit scores every 6 months. Over the past year and a half my scores have slowly but surely turned downards from 720s to 638. My wifes scores have actually risen a bit.

We've been working on her credit cards because she had more high-interest cards than myself. She began with $48,000 in CC debt. This has been accumulated over the last 10 or so years (before she met me). There are some very odd reasons for her debt but none-the-less it was there. Having said that, she now owes roughly $15,000. It has taken serious attention and hard work but as you can see we've put a major dent into it.

WIFE

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Warehouse card - 2800.00 (23%)

Target Visa - 1200.00 (25%)

Suntrust MC - 1500.00 (14%)

AMEX - 5000.00 (14%)

Bank America Visa - 4400.00 (19%)

Due to my work transfer my wife is no longer working. All of our positive progress has come to a halt.

Now on to me. Let me preface by saying I'm very embarrassed. I have 4 credit cards, a very small student loan and a car payment. Breaking it down:

Fleet Visa - 8000.00 (15%)

MBNA MC - 4000.00 (12%)

Discover - 4000.00 (16%)

Citi Bank - 9000.00 (12.99%)

A huge chunk of my cards have gone to medical bills before I had insurance and two rather large vet bills.

I make 60K - 70K before taxes

We rent - 1200 per month

Car payment - 330.00 per month

Wife's cards - 370.00 per month min. payment

My cards/Loan - 600.00 per month min. payment

Presently I'm able to pay these bills but I'm at a point where nothing is changing. Quite frankly I feel like I'm being squeezed harder and harder. Please understand that I want to pay off all of our debt. Hell, we spent the money so we should have to pay it back.

I need some direction and guidance. If any more info is needed please let me know. I'm happy to add more embarrassing facts about myself.

Are thare any avenues I can take to help relieve our situation? Yesterday and today I've been researching the "B-Word" and other options.

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Hi there, welcome aboard. No need to be embarassed...we've all been there...some of us (like me) a couple of times. In todays world it just doesn't take much to put us in trouble, debt-wise. Much of it is beyond our control.

Anyway...here's some thoughts (sounds like you've already had some of the yourself).

First, total up all the money you need for housing, food, transportation...maybe a little entertainment.

Take what's left and divide it up among your CCs. If the amount you can pay doesn't equal the minimum they want, you've got several choices...

1. Cut expenses. Go back to basic cable? Drop some phone costs? Don't eat out as often?

2. Increase income. Can you get a second job? Wife?

3. When you've got the totals you can pay, call the CC companies. Ask for their hardship departments. Talk it over with them. (Realize that most do have such programs...however, be sure to recognize what they're offering. Most only run for 6-12 months, and may have a downside when its over.)

4. Stop making payments. Wait until the CC's are 4-6 months delinquent, then negotiate a settlement. While you may be able to negotiate for 50-60% of the balance, there are all kinds of bad news associated with this...you'll probably need a lump sum, your credit will be shot, you'll be getting nasty phone calls, you'll have to pay taxes on the difference between what they say you owe, and what you actually pay, and, you need to be very careful to make sure they don't sell the balance to a junk debt buyer.

5. Declare bankruptcy. Since you have income, it would probably have to be a chapter 13. It will cost you about $2000 to file. You'll still wind up paying off most if not all of the CC balances (you and your lawyer and the trustee will figure it out). Your spending will be curtailed for 3-5 years, and your credit rating will be shot.

When this happened to us back in the 1980's, I did number 3. It worked and we recovered. Then...in the late ninety's our business failed and we wound up in BK. Stuff Happens.

Good luck. Be glad to answer any questions if I can...

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2. Increase income. Can you get a second job? Wife?

I'm already working two extra nights a week. Unfortunately my day job won't afford me a whole lot of extra time I'd need to completely work a second job or else I'd do it. Being 8 months pregnant my wife won't be working anytime soon. I didn't mention that we have a 19 month old child as well. Personally I think she's better off not working right now since day care would probably equal her income. That's only my opinion though. However yesterday she said that she would work from home if there was a legitimate way of making money.

3. When you've got the totals you can pay, call the CC companies. Ask for their hardship departments. Talk it over with them. (Realize that most do have such programs...however, be sure to recognize what they're offering. Most only run for 6-12 months, and may have a downside when its over.)

The way I feel lately, especially over the last few days, I'm going to have to do something. I've already begun cutting expenses. We spend little to no money. It seems as though all of our money is going to CCs and the rest of our necessary living expenses. As a matter of fact, I haven't used a CC in a little less than 2 years. My wife probably hasn't used one for almost the same.

When you say "hardship department" and "recognize what they're offering" what can they offer? Do they allow you to delay payments? Do they work with you as far as lowering minimums? Lowering APR? I've called and asked for lower APRs with all of my cards. I'm probably going to do it again soon.

I would assume if you have to travel any single avenue that you listed above my/our credit would be shot. I'm so frustrated right now. Actually I'm curious to know if there might be any kind of benefit to me dedicating all of my/our time to my cards or her cards. My thoughts: This would keep one of us in good standing and one of us in less good standing. Is this thought process correct or incorrect?

Sorry for being so jumbled. I don't enjoy this type of conversation but I guess I have to face the facts.

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Being 8 months pregnant my wife won't be working anytime soon. I didn't mention that we have a 19 month old child as well. Personally I think she's better off not working right

Absolutely. She's got a full time job now. Let her concentrate on that...

When you say "hardship department" and "recognize what they're offering" what can they offer? Do they allow you to delay payments? Do they work with you as far as lowering minimums? Lowering APR? I've called and asked for lower APRs with all of my cards. I'm probably going to do it again soon.

Each CC has differing programs. Some will lower payments...some will cut APIs. The only thing they share is making it as difficult as possile to get through to the program. The front line phone jockeys are so used to dealing with deadbeats, they are not really helpful. You'll have to talk to a bunch of people to get through to someone who cares.

I would assume if you have to travel any single avenue that you listed above my/our credit would be shot. I'm so frustrated right now.

Probably true. You need to ask yourself if you really need credit right now. If the answer is no, then you can let your scores suffer for a couple years while you continue to rebuild. And, yep, know the frustration...it galvanized me into inaction for years. I'm still not convinced I made the right deceisions but I'm certain I didn't make those soon enough.

Actually I'm curious to know if there might be any kind of benefit to me dedicating all of my/our time to my cards or her cards.

You can check community property laws in FL. It is possible that one of you could default without affecting the other, maybe even do a BK...but...I suggest talking with a lawyer before you tried such a thing.

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You got some excellent advise, but my questions to you are:

1. You talk about your scores going down, but is this because of your balances?

2. Are you currently behind on any of your cards and how many months?

3. Have you looked at your credit report lately, and if so what is negative, if anything?

I think we can help you further, just don't give up yet!

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1. You talk about your scores going down, but is this because of your balances?

This is my assumption.

2. Are you currently behind on any of your cards and how many months?

We're current on every one of our accounts. I've, literally, never paid late or missed a payment. Things are beginning to tighten much more though. We "might" be nearing a rough period very soon. Our bank accounts are taking rather large hits and they aren't being replenished in a faster fashion.

3. Have you looked at your credit report lately, and if so what is negative, if anything?

I haven't looked at mine or my wife's in a good 8 or 9 months. Last time I fixed both of them up good. I had a couple of accounts listed on mine that were not mine. So I made the CAs aware of the mistakes and they removed them. Did the same for my wife's. It's a new year. It probably wouldn't be a bad idea to pull them again.

I think we can help you further, just don't give up yet!

I'm not giving up. I don't do that. However, like I said above, we are watching our bank accounts shrink faster than they are being replenished.

The worst thing of all is that most of this has derived from a paying error from my employer. They claim that they overpaid me. Now every pay check is docked a substantial amount of money. This is their method of re-claiming their "alleged" mistake. This puts me in a situation lacking comfort. Not to mention that I'm disputing their "alleged" mistake.

Anyway... I'm here and reading as much as I can retain.

Thank you everybody!

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First word of advise: Please do not go late (meaning over 15 days) on any of your credit cards. Some cards will not report you until you are 30 days late,but they will hit you with a late fee and possible rate increase.

Second: Pay close attention to your cards, I don't know about your wifes credit rating, but yours is fine with no negatives and just high balances at this point. Keep your credit rating good no reason for both of you to have bad credit.

Third: Try and get a debt consolation loan to pay off your credit cards if feasible, if not pay the minimum until you get back on your feet.

Fouth: Hard times mean hard decisions. Start selling off unused or unnecessary items in your house to pay off your debt. You don't have to keep up with the Jones's.

Fifth: Call the credit card companies and see if they can help you, but be careful! They can put you in a lower payment but they will also cancel your credit privileges.

Whatever you do keep your credit rating good, don't fall into the negative because it will take longer after a negative then it will now if you take the necessary moves to stop the spending and apply to your cards.

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