Jump to content

How do I proceed?


JumprDrvr
 Share

Recommended Posts

Due to some bad investments, I racked up about 90 grand in credit card debt. I'm current on all my payments, but barely making minimum payments. I make 80 grand at my job right now, but virtually all of my income is going to paying these bills.

I looked at Debt Settlement companies, and thankfully, looks like this forum talked me out of them.

Given your experiences, what would you do? I really appreciate all words of wisdom!

Here are some points:

- I'm current on paying all these accounts, but after making all these minimum payments, I get left with barely enough money to get by. In other words, I'm one hiccup away from a total bust.

- I can save up around 20k or so in 6 months by not paying on credit cards.

If I didn't have credit card debt, I wouldn't need credit because I'd be able to start over, so at least for now, credit score is not that important to me - I just want out of debt!!!

PLEASE HELP!!!

Link to comment
Share on other sites

Another thing is... from what I gather by reading things here, it appears that many CC will send things to collections after the account has been delinquent for 180 days. In that time, I could save enough to start settling...

No significant equity in the house (25k tops), no other property to speak of...

Is there anything other than BK?

Link to comment
Share on other sites

It's hard to offer any real advice since we don't know your whole situation.

Settlement is really a lousy option. Your credit will be destroyed, and you end up paying every penny back that you owe plus fees and interest. Whatever you don't pay the CC companies will be sold off to CAs. Also, there may be additional tax liability.

Can you get a consolidation loan? Can you get lower interest cards? Do you have equity in your house? Can you live on the cheap for a couple of years? Get a second job?

-r

Link to comment
Share on other sites

No consolidation loan - not enough equity. Lower interest cards, nope... already have plenty.. and now it's all "balances too high on revolving credit."

I thought I could settle with CC companies and get a letter saying this debt is settled in full and as such updated with the credit bureaus. If I didn't have credit card payments, I could live just fine on my income without ever needing a credit card.

Second job, not really an option. I've BEEN living on the cheap because I was paying on these cards, but I can't live my life like this much longer.

Link to comment
Share on other sites

I thought I could settle with CC companies and get a letter saying this debt is settled in full and as such updated with the credit bureaus.

Sure, you can negotiate on your own. You would stop paying them, negotiate a settlement, get it in writing.

Potential problems:

They may very well want a lump sum to settle.

They might just go ahead and sue you.

They can simply close the account and not negotiate.

You will have to pay taxes on any forgiven debt over $600.

In order to get the CC companies to accept a settlement offer, you have to demonstrate financial hardship-you may have a problem with that if you are paying all your bills on time.

If you come to an agreement, the CC companies will consider the debt "paid" or "settled in full" but the debt will not be "paid in full".

-r

Link to comment
Share on other sites

Your between a rock and a hard place and believe me we all feel for you. I have customer that is a BK attorney. We had this conversation a couple weeks ago, and they stated that about the only people that they are currently able to get out on BK for -0- $'s are medical hardship. Normally there is some type of payment plan invoked by the court.

You have your work cut out. If I was in your shoes I would by start by getting 0 interest teaser credit cards and throwing account balances with the highest interest rates into them, and do everything you can to pay them down before the interest rate jumps. Its a full time job but people do it all the time. My wife for a period of time years ago was great at this. In fact we actually bought a car on a credit card that had 0 interest on teaser rate for the life of the balance transfer. Got a car loan, bought the car and then transferred the balance into the credit card. Instant Zero interest car loan.

If that does not work then I would consult a CPA attorney that specializes in working with credit companies and reducing the debt down. Credit Agencies have a tendency to be more flexible with debt reduction when they know you have lawyer up. Its in there best interest because your a stones throw from filing BK and they will be lucky if they see ten cents on the dollar.

Link to comment
Share on other sites

I just wanted to reply to the OP b/c I went through exact same thing (but about half the debt). My thought process was similar to yours. I was one bust away from missing my obligations. I couldn't get my rates lowered. I was in a bind. So I did what you are thinking of doing. Did it work? Not really too well. I thought the same thing, I'd save up all this money and be able to settle on my debts and that I didn't care about my credit, etc etc.

This is the problem: your credit cards may not play ball. Its tougher than you think. One thing is for sure, you must catch it before they charge it off and before they pass it to a CA. I found that my CC's didn't pass it to a CA. I let one chargeoff by mistake and that got passed to a CA and I'm still in deep doodoo over that one. But for the ones that I caught in time, this is why it didn't work. Only one card was willing to settle. They settled for about 33%. Sounds great right? Not really. Here's why. During the 4 months, I racked up late charges, increased interest rates, and of course interest. I believe my balance balooned 2K over the 4 months to around 9K. So I paid off around $3300. Balance before defaulting was around 7K. So I really "saved" $3700. However, Unlce Sam wants his take of that money I saved. Well, according to the Uncle, I saved about $5700. So that's going to be at least another $1000 in taxes. Probably more. So that brings me up to around $5K at least. So I really saved $2k. And that was the best settlement (and only) that I got. All that for $2K or about 20% off original debt before default.

The other cards only worked on my interest rate. They got me a really good rate, however, they required accelerated payments for 3-4 months to get my account current. So those were really sizeable payments I was making for 3-4 months on 3 other cards, plus I had to pay the $3300 on the one card (which they were nice enough to spread over 6 months, so I paid a little over $500/month for 6 months on the settled card).

There is no easy out and it won't save you money. What happened was the card I let get charged off was b/c I had no choice. I was making such high payments on my negotiated cards that I had nothing left over for this last card, then it got charged off and I'm screwed and will prob. be sued at some point. So you have to think of that. How do you think you'll come up with the cash to settle? Most won't settle below 50% unless you have a good story, and even then, not all will do it as I found out.

You said you make $80K a year. After taxes that's probably, what, $60K? Then you have living expenses. Before that, you'd have only $30K in 6 months time. But you have to live to. Rent, food, gas, life. So its doubtful you'll be able to save enough from just your income to be able to juggle it. Believe me, if you want to go the settlement route, you need cash and a good supply of it. You get away with minimum payments now. If you settle, that won't happen. They want it now or in 3 months time. Or maybe 6 months if you get lucky. Then the tax consequences.

So take the advice of the other poster and see a BK atty. I wanted to share my experience with you b/c I went through it. Its not fun. Oh, and during that time you get the pleasure of the added stress to your life. Fielding the phone calls. Getting nasty letters. Your neighbors getting called. Not worth it man. Find another way.

Link to comment
Share on other sites

Good luck Jump! I know you'll have some heavy thinking and tough decisions ahead of you. It truly is the proverbial catch 22. I called all my creditors BEFORE i defaulted and not a single one woudl help me out. NOT A ONE. I had some legimate hardships too, serious medical issues in my family. In addition, I had been cardholder with most of my creditors for at least 5 years, on one it was 10 years! They did thank me for being a loyal customer before giving me the finger. I'm not saying not go this route, try talking to their hardship departments, maybe you'll have better luck than me.

Really sux b/c my credit was excellent before all of this. In a years time, its a good batting average. It seemed to all boil down to high utilization. I think that's BS. I think they take high utilization to mean that the consumer won't be able to do a balance transfer so they are stuck.

In the end, there is no easy route. If you are choosing b/w food and necessities and your CC bill, that's different though, not sure if its come to that point for you yet. Obviously put food on the table for you and your family if you have to choose b/w that and your CC. Maybe someone will have a good success story with getting out of it without goign the default route.

Link to comment
Share on other sites

Second job, not really an option. I've BEEN living on the cheap because I was paying on these cards, but I can't live my life like this much longer.

I DITTO The idea of keep paying the minimum and getting an attorney to contact the creditors. If they would just reduce your interest rate, you could pay off the balances off so much faster.

Is there any way at all you can work a second job? There are some very part-time options like waitering or pizza delivery that would give you fast cash and the best hours are nights/weekends. It will be good now with the holidays approaching. Football season is starting that is a good time for pizza. You could probably do it just Fri/Sat/Sun nights and make enough for electric, phone, internet, food, and gas, and part of your rent. You would always have some cash available too.

What is going on that you can't live like this much longer? Maybe we can help with some frugal ideas or things we have done to get by?

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.. For more information, please see our Privacy Policy and Terms of Use.