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About to go down the tubes


ndkblondie
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Hi Everyone,

I'm new and in big, big trouble.

We just had the worst financial year you can imagine. We were forced to live off credit cards due to company cutbacks in my job and huge losses of income for my hubby who is a contractor, the housing crash in Cali this year was devastating. Our debt load has been more than unmanageable for the past 6 months, sliding more backward every month as we dip into credit cards and transfer money around to keep things afloat. Now we are maxed out and one by one the credit card companies, which haven't been paid late, are taking away our low interest rates and giving us 32% interest rates because our credit report shows we are overextended. Do they really think this is going to help them get paid? Unbelievable, it's total BS.

We can't pay and I need help with damage control. What should I do to best handle this situation? I want to be "smart" and deliberate about the choices I make and really have no idea what to do. For example, I am considering defaulting on just my accounts so that my husbands credit stays clean. Other things that come to mind are what's worse, having a bunch of lates that eventually lead to collections and worse? Or just filing bankruptcy? What is the best way to avoid a lawsuit and please don't say "pay your bills" or "get another job" this is wayyy beyond that. There just has to be a good way to attack this...

I look forward to hearing your thoughts, did I mention I'm having a baby in six weeks? Things looked great when I got prego and now I'm scared to death. We really need help.

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First, take a deep breath! Don't be embarrassed, many here have been there and some (me) are still trying to pull their way back out.

A couple of questions:

How much debt are we talking about here?

How deliquent are you on the credit cards?

Have you contacted the credit card companies and honestly explained your situation? This doesn't always work but sometimes they do surprise you.

Are you also deliquent on the mortgage or car payments as well?

Have you contacted the mortage company? If not, do so immediately, they will work with you in 90% of cases and have lots of options.

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Thanks for the breathing advice, sometimes I forget these days! I have fiercely guarded my credit report up until now, after watching my parents suffer through a bankruptcy after a fire several years ago, and it's incredibly frightening, like watching a huge tsunami wave above you, knowing it's going to crush you and having nowhere to go.

So the good news is, I am current on everything. I've been able to squeak by with loans from family, cashing in IRA's, 401k, but it's all gone now. We are looking at about 220k in credit card debt. We're so screwed.

My husband is a contractor and bought a house early this year to fix up and sell. We used our credit cards to fund the project with total confidence that we would get back all our money and make a nice profit. The housing market crashed one week after we finished and put it on the market. We sold it at a huge loss after carrying it and all the debt for 6 months. Devastating.

So, that's how you get into this much debt, now what? I have not contacted the credit card companies yet. I wanted to get information before I did anything. I heard that you can refuse to pay the higher interest rates they impose on you if you agree to close your account. Would voluntarily closing my cc accounts damage my credit too? What a mess!

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Credit scoring is so complex, I don't know how closing the accounts would effect it overall. I believe it's the length of history and "on time" payments that counts so much more.

It will be very difficult to get the CC's to work with you when everything is current, but you need to try. I'm a firm believer that communication always helps, so get out the list, take a hot bubble bath then hit the phone.

$220K is ALOT of money, so you might also post in the Bankruptcy forum for some advice in that area.

You have to take a look at your financial situation and what money you have coming in. Will you be able to EVER pay it all off?

One thing that might help you get a firm grip on that question is a financial calculator, go to this website: http://www.timevalue.com/Tools.aspx

and click on "how long will it take to pay off my credit card". The calculator will figure your payment, interest and balance and tell you how many months it will take to pay it off and how much you'll pay in interest.

I used it to discover that if I made two payments per month on my second mortgage, I could pay it off in 2 years instead of 15 years and save over $50K in interest charges.

Good Luck! Remember, people here are wonderful and will always listen and help in any way they can. I only wish I'd found this when I was still current and struggling. By the time I ran across this site, I was defaulting on everything and it's much harder to get out when you are at that point. You are current and there is still hope!

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This is my experience with a similar problem. I found that most credit card companies will not work with you on reducing your monthly payments until you are 4-6 months late. By that time they have maxxed out your interest rate and put you in deeper trouble. And, they will not work with you unless you have a realistic plan to get out of debt. That means some money to pay off the debt. And, unless you see things changing soon, you probably cannot do that. Once you stop paying, they will call you every day, sometimes numerous times per day. When we got behind recently with Citi, they were calling 10-15 times per day. After I spoke with them two or three times in a day, I just quit answering the phone. Both Citi and Chase will call multiple times per day once you get behind. For some reason, they think that by increasing your level of stress, they will be helping you come up with the extra money you need.

By working with you, I mean some will take less than full payment which will mess up your credit. But they will want their money in a lump sum or in payments over maybe six months. Others will put you on payment plans with no interest. But some may send you to collections very soon after you stop paying. By law, they have to do a charge off within six months of no payments. Some will do it sooner.

Once they go to collections, you will be dealing with collection agencies who are usually very nasty and tend to violate every law in the book. Some will settle for less than full payment but others want the whole amount with all kinds of interest tacked on. There are ways to get the CA's from calling you.

After dealing with this for so long, I wish I had done a bankruptcy and just started over. But once I got to the point where I would even consider bankruptcy, I was back to work and making decent money so under the law, I would end up paying most it back anyway. If your husbands business rebounds, you may be in the same position.

Will he lose his license if he declares bankruptcy or defaults? If so, can you do a bankruptcy on all your debts and then be in a position to pay off his debts? Or are his debts too much? When I was in Florida, I know it was common practice for builders to loan their license to someone who had one revoked.

Having been in your situation for a number of years and still digging out, I wish I had done some things differently, What you need to do is what is right for you. You have started on the path to recovery by asking questions that may lead to a solution. Good luck. Sorry I could not be more positive.

One more thought before I shut up. I have about $150,000 in debt, almost all of it from credit cards. Some of it was charged off over five years ago. No one has ever sued me. Some of the debts are beyond the statute of limitations so I don't have to worry about those ($34,000 worth). I worked out no interest repayment plans over a five year period for about $55,000 of debt at $900 per month which I can afford now. Most of the rest have offered settlements. So all is not hopeless.

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One more thought before I shut up. I have about $150,000 in debt, almost all of it from credit cards. Some of it was charged off over five years ago. No one has ever sued me. Some of the debts are beyond the statute of limitations so I don't have to worry about those ($34,000 worth). I worked out no interest repayment plans over a five year period for about $55,000 of debt at $900 per month which I can afford now. Most of the rest have offered settlements. So all is not hopeless.
So, what you wound up with is a BK 13 like settlement, without the benefit of a BK court to enforce your settlement. Hmmmm....

So...to the OP...go talk with a couple of BK lawyers NOW. See what your options really are (most will give you a free consultation to help you decide).

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I agree with Willing here.

Sometimes you reach a point where there are no good answers. This is the the time for damage control. Me and the wife were once in a similiar situation and we choose wrong. Talk to the BK attorney now.

IMO it is better to have one big oops on the credit report than 100 smaller ones.

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I wish I could have given you this advice sooner.

NEVER! EVER! cash in retirement accounts to pay unsecured debt. Retirement accounts are shielded from creditors in every possible way, even bankruptcy! That money is your no matter whatever happens.

Do you have any assets left?

If not, just Chapter 7 and get it done with. If your read here, most people can get all the credit they need within 2 years.

If you have a fair number of exempt assets, you may want to consider a 13, you can then keep those assets. Judge may knock down credit cards to as little as 10 cents on the $ in that case. But you will be put on a 60 month pmt plan and need a regular income with a lot of discretionary income.

If you have a large number of exempt assets, you may forego BK and do what I did, default, negotiate, and sometimes fight. This takes time patience and a lot of paperwork and many hours studying this site.

I had over $550,000 in unsecured debt from a similar type multiple business failure. (So it could be a little worse than minor challenge you may have.) I sold off pieces of my business to cure all my secured debt 100%. I negotiated $250,000 of the unsecured debt out, ON MY OWN, for less than 30 cents on the $. The rest have either ignored the debt validation notice I sent or choose to sue for the full amount, rather than negotiate. I have 1 arbitration and 1 litigation currently in process, but I vigorously defend myself. I make them prove it up, and its proving to be a headache for the party suing me. No judgments yet. I choose this route because I have a large number of exempt assets and a 13 plan would be almost impossible at 100% payback on my current income. I also exceed the 13 unsecured debt limits. I would have lost all my assets or had to sell them. My other option was business Chapter 11, but that is expensive, difficult, & unlikely to work. My lawyer advised this strategy, negotiate and fight those that sue, in hopes of a better settlement deal. He was right!!!!

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If you've been smart enough to keep separate credit accounts... see who owes less and keep their credit pristine! I think it's a good way to go for married people.

My DW's credit is in an abyss at the bottom of the ocean and my credit is beginning to rock (hey I've done what I can and made hers a bit better). So it won't affect our ability to vacation or buy cars or a home provided it's all done in my name. Both with ideal credit is nice, but only one is needed.

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  • 2 weeks later...

Thanks for all the input, I think it's pretty obvious that I need to learn a lot about bankruptcy before I can make any good decisions about this. I'm really afraid to go talk to a bk attorney but I guess it's inevitable. I will try to be as informed as possible before I take that step.

I guess I'm looking for last ditch efforts to avoid the bankruptcy road but from what I understand here, unless you are already months behind, there isn't really anything you can do to avoid the train wreck.

It disheartening because I'm trying to grab the bull by the horns but the answers all point to turning around and bending over instead! (Sorry to be crass.)

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I just read about a "hardship program" on another post. Does anyone have info on how this works?

Also, how do I find out which credit cards are more likely to work with you? I read a suggestion that amex might give discounts to help you rebuild.

Is there a place to find all this info in one spot?

Maybe there is hope...

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No "trustworthy" one site on hardship programs. Some debt fixer sites claim to have all the info, but, in truth can only speak for the OCs that they have contracts with.

IMO, you should call each creditor personally...and ask for their hardship department. Don't agree to anything over the phone...get it in writing, and make sure all your creditors will work with you and it all fits in a workable budget. It only takes one law suit to make it all go south...

Also, realize that often their decesion as to whether to work with you or not may not have anything to do with you personally. Big corporations make deciesions based on things completely beyond your control.

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:)++

There are a lot of people who pop in here and who want a quick fix after years of stupid mistakes on their part. To me, the fact that you're trying to work through this without BK (even though it may not be possible) and have asked for help before the bottom has fallen out says a lot about your character.

You're likely to have some tough times ahead, but keep your head up. You're definitely not a deadbeat, so this will only be a temporary setback. By the time your child is in the first grade (possibly sooner), all these problems will be in the past and you'll have learned plenty along the way.

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  • 2 weeks later...

I just have to emphasis what others already said: Please go and see an attorney NOW!

He/She will inform you of your options.

I have been in BK situations personally and through a few corporations. The worst mistake that you can make is to delay the appointment with the lawyer.

Same as being sick and not wanting to go to the doctor...

It is not a good idea for you to worry about all this debt now when you are pregnant. Go speak to a lawyer and you will feel a tremendous relief afterwords.

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Thanks, I think you are right. I can't even imagine what it would feel like to not have this pressure right now. It's been a black cloud for the past 7 months, with me every second of the day. Just tying to figure out, how long is too long to try to hang on? I've been looking on all the bankruptcy websites and it's all so complicated. An attorney will be able to tell me right away what my options are and just knowing might be the relief I need. How do you find a reputable attorney? I don't know anyone who has gone through a bk.

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sounds like I am in a similar place to you - We have aout 100K in cc's- our business went down the tubes In the last couple of weeks things escalated for us ( am ex threatned to sue and someone with hubbie's company actually did serve us with papers - sheriff showed up at out house!) things have made it evident to us that BK was our only choice so we started talking to laywers this week and hired one today. What willingtocope says is right about thumping melons - Just talk to some - I had no idea where to start..I chose some names from googling my city and BK attny. - But once we started talking I felt pretty quickly that we knew who we liked - My hubbie and I both talked to some and without even discussing names realized we like tha same one - So talk to some and see how you feel. Someone said previously "1 big oops is better than 100 little ones" - That point was driven home to us when we went to a bank this week to open a new checking acct. and were told that we could not even do that - They seriously told us at this point a BK would improve our credit score! Not sure if that is true or not but it does become clear at some point that there are no other options. this is not a road I ever thought I'd take but hey - that's life - we all go down roads we did not plan on and we grow from it somehow right? keep thinking and talking and reading - this website has helped me a ton!

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They seriously told us at this point a BK would improve our credit score! Not sure if that is true or not but it does become clear at some point that there are no other options. this is not a road I ever thought I'd take but hey - that's life -
It is true that after a BK "some" new credit avenues will open for you. For example, as soon as you file, you'll be getting "pre-approved" offers in the mail to buy a new car. (They know you can't file again for 7 years, so, they know they'll get their money one way or the other). CC's will be harder to come by...particularly from the ones you burned in the BK. You can probably get a decent mortgage after 2 years or so. Checking accounts should not be a problem...just choose a bank you didn't have a CC with.

And, yeah...sometimes bad things happen to good people. Its hard not to keep second guessing yourself about things you might have done differently. But, you'll get through this...keep in touch...if there's anything we can do to help...ask.

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  • 8 months later...
Hi Everyone,

I'm new and in big, big trouble.

We just had the worst financial year you can imagine. We were forced to live off credit cards due to company cutbacks in my job and huge losses of income for my hubby who is a contractor, the housing crash in Cali this year was devastating. Our debt load has been more than unmanageable for the past 6 months, sliding more backward every month as we dip into credit cards and transfer money around to keep things afloat. Now we are maxed out and one by one the credit card companies, which haven't been paid late, are taking away our low interest rates and giving us 32% interest rates because our credit report shows we are overextended. Do they really think this is going to help them get paid? Unbelievable, it's total BS.

We can't pay and I need help with damage control. What should I do to best handle this situation? I want to be "smart" and deliberate about the choices I make and really have no idea what to do. For example, I am considering defaulting on just my accounts so that my husbands credit stays clean. Other things that come to mind are what's worse, having a bunch of lates that eventually lead to collections and worse? Or just filing bankruptcy? What is the best way to avoid a lawsuit and please don't say "pay your bills" or "get another job" this is wayyy beyond that. There just has to be a good way to attack this...

I look forward to hearing your thoughts, did I mention I'm having a baby in six weeks? Things looked great when I got prego and now I'm scared to death. We really need help.

While I am in no position to give advice, I am from California and in the same position as you are. I lost job at end of June and are mortgage is adjusting! Needless to say, I am sick to my stomach. We could both use some prayers.

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I'm so sorry to hear that! I can't believe how many people I know personally who are filing bk or about to lose their homes. It's such a bizarre time we are experiencing. Do whatever you have to do to take care of yourself and your family... we held out too long and we should have put ourselves first long ago. My work has been spotty and there were a few times I had to borrow money for gas and milk for my kiddos. I NEVER thought I'd be in this position and we are not alone. There are many others like us out there right now.

All my best to you!

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He is just beautiful and I thank you so much for asking! Just turned 7 months old and has kept me from the all time lows. They really love you no matter what don't they?! My kids don't care where we live or what our bank account balance is or even what our FICO is... they just want to be with us. It really reminds me what's sane in this insane game.

Incidentally, we have until September 30th until our redemption period is up for our Notice of Default. Then I guess they will set a sale, does anyone know how long we have at this point? We need to make some serious plans about where we will be living. I am going to give it a last ditch effort and call them to see if they can re-negotiate something with us but I'm not optimistic as our credit is now so trashed.

I did hear of a mutual friend who was able to set his price with the bank to keep his house from foreclosing. They basically said "Well what CAN you afford?" and he told them and they did it for him. Maybe something will work for us too.

We are both back to work but the work has been sporadic, nothing like it was before. We are even considering leaving the state...

Regards to everyone! Thanks for all the support! :)

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