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Sub-Prime Lenders & Credit Cards !

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Welcome...and, wow...

First, your lawyers friend's advice is semi-correct. If you stop paying the CC's they will eventually be willing to settle...or sue you. The problem is, to settle, you need money to work with, and it sounds like your cash flow is pretty much negative. I'm thinking you've got 3 choices...

1. Sell some or all the properties at a profit.

2. Rent all the properties so your cash flow goes significantly positive quickly.

3. File BK.

You'll have to figure out how likely 1 or 2 are to see if you should actively pursue number 3.

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I'm sure not an expert in mortgage financing. You might want to post in the Mortgages forum to see if FirstSource (Charles) can offer any advice.

But, my thoughts are that just because your lenders were sleazy doesn't mean there's any advantage to you. Its been my experience in such things that the shareholders get bailed out and the consumers get screwed.

You might be able to interest another lender in a package deal on all 6 properties that could bail you out. Of course, that would all depend on equity and so forth.

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The timeline varies. Usually, after the second missed payment, the CCs themselves will start calling. They can be pretty nasty. After 3 or 4 missed payments, they'll get collection agencies involved...there are laws (FDCPA) that you can use to make them play nice.

Partial payments may not help. Fairly early (1-2 months), they'll pull your credit reports to see how much you owe and if you're paying anybody. If they see anything that says you've got money, it may make them more agressive...if they see anything that says you're about to collaspe, it may make them more agressive.

Most CCs do have "hardship departments" that will lower your interest rates and payments for some period of time (6-12 months) but, if you fail to meet their payment schedules, they get nasty.

At this, I guess I'd suggest you call...ask for the hardship department...see what can be worked out. Don't agree to anything until you've had a chance to talk with them all. If one won't play along, the whole ball of wax might come tumbling down and you don't want to be stuck with something you can't handle.

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What about taking a strategy to close the accounts with the highest penalties/interest rates and try to work with the CC who are agreeable?

CLosing the accounts won't do you any good if you don't pay them off. In fact, after a couple months of non-payment, they'll close them for you...and still try to collect.

My "hardship" letter explains what has happened -- no equity or reserves left. What exactly can the CC companies gain by suing me?
Business hardship usually doesn't fly...particulary on personal or personally guranteed accounts.
There is nothing left to claim or repossess.
It will take awhile (like many 12-18 months or more), but they'll go after liens on your property. They probably won't be able to force a sale, but if you do sell, they'll take their cut after the mortgage holder.
Also, I have an unlisted telephone number and the phone numbers on my accounts are all incorrect (old #'s).

They'll find you. They hire collectors who are paid to know how to find people.

One last point I should mention, I have been ill this year and have had unforeseen medical bills to pay (some of those went on the CC). Would illness serve as an explanation or does it just sound like whining?
This might help in your conversations with the hardship department. Again, don't mention the business...but, "...I've been sick and unable to work, but I'm better now and things will pick up..." might help.
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  • 5 months later...

Good...I'm glad that some of it is getting settled. Hope you're feeling better too!

The key phrase you're looking for as far as the creditors go is "Write off" which implies they have written the accounts off completely. (Charge off means a couple different things...not all of them good for you).

How likely? Don't really know. Depends more on what's happening at the creditor than your particular situation. You might be able to hurry that along by calling and asking (demanding?) for your 1099c from them also. According to the IRS, they are required to issue one when they finally decide a debt is uncollectable. The 1099c's will add to your tax problems, but, may protect you from further actions by your creditors. And, if they should decide to sell the account to a junk debt buyer, you can argue that the IRS "owns" the debt.

On the other hand, if you do file BK7, that will avoid any further problems with those creditors...

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