So Scared. Newb needs help!

[AdvocateJen]

:shock:PLEASE HELP!!!! (btw...I LOVE all these forums)

I'm scared out of my mind that my credit is going to be ruined beyond all hope. This post is an accumulation of questions that could individually go to different forums, but the bottom line I want to find out is if my credit can be saved.... So here's the skinny on my situation:

I'm 24 years old and started my own business out of college. Well, horrible things happened ~ 6months ago (busines failure, ill family, etc)...well, I basically stopped paying ALL my bills.

I have ~35,000 in student loans; ~ 10,000 CC debt; ~15,000 in private/personal loans; ~5,000 in other debt. A grand total of about 50,000 in unsecured debt and 10,000 secured (car) I have no house, nothing of great value, a car (with two liens on it).

I pulled all three reports and all of them show I'm 60,120, etc. days delinquent on most of the accounts. I have not been given over to a CA (yet), but still dealing with the OC. They all want ridiculously large amounts of money up front just to get my accounts current, and my credit went from "good" to "poor" from all the deliquency marks.

The monkey wrenches and my questions:

1. Is BK my only choice since my credit is ruined, I have no assets, and $60,000 in debt? (This being most unfavorable to me)

2.I'm still planning on applying to graduate school for which I will need to get MORE student loans (but how can I with such poor credit)?

3. ******Can I negotiate with the OC to remove the negative marks from my CR? Can they legally do that? What do I say to them to remove the marks?*********

4. ****Can I negotiate settlement on my own debts and if so...where in the world do I begin? (I'm VERY hesistant in paying someone to handle my affairs without a guarantee and there are far too many scams)*******

Also, I have some negotiation cash available ~$10,000.

What do I do? Where do I begin? What will help my credit the MOST?

[VeVe]

Have you asked for a forbearance on the student loans? Claim hardship and that should get you 6 months (unless you've already used them up). You're going to have to pay these regardless. They aren't able to be included in a BK.

If you have $10,000, why aren't your paying bills?

Call the creditors and ask if they have a hardship plan. Many will stop or lower interest that way you just pay on the principle.

Don't worry about the negatives you already have right now, just work on preventing any more. You don't want the accounts to go to collections.

[AdvocateJen]

ABsolutely. I got forbearance on all my student loans for 6 months (as of yesterday). I just got the 10k today, and haven't decided whether or not to pay past due amounts; negotiate with the OC to settle for a lesser amount. Or will this further mess my credit up when put "settled" on the CR?; pay a "debt settlement/consolidation" company (read bad things, so this is not too thrilling); or possibly pay an attorney and file bancruptcy (also not too thrilling).... I don't know what would be the best in term of saving my credit. I read on a forum that BK was a 'no brainer' for someone with no assets, 60k in debt, and high debt/income ratio. However similiar this case was too me, the biggy missing from their situation and mine is that I will desperately need good credit to go to grad school (25-50k/ year in tuition). I thought to stay away from BK at all costs, but then I read that and was confused again.

When you say forget about the marks already on there, does that mean that they can not be removed? Will threatening with BK give me any leverage in having them remove the negative items or reduce the amount I owe (in terms of interests, wiping out late charges, and possibly reducing the principle amount).

[ShortBus]

Welcome!

No need to be frightened. Your life could be a lot worse than simply being broke. That may sound over simplistic, but it's worth bearing in mind when it looks like the floor is going to fall out. The absolute worse thing that could happen is that you BK and learn to live without much credit for 7 years. The best thing that could happen is that your credit is ruined, but you claw your way out of debt and begin repairing the damage. Either way, expect some work ahead of you, but it won't be an overwhelming amount-- just don't let it get to you.

Can OC's remove bad marks on your CR? Yeah, but in your situation it's very unlikely. Getting one or two late pays on an otherwise excellent account is doable, but it won't happen when you've owed them a ton of money and are slipping even farther down the slope. Don't worry about it though. You can begin tackling the repair steps after you first have your finances under control.

With the aspirations of starting a business and then grad school at a young age, you kinda sound like I did. Have you considered slowing down your life plan a bit? Putting off grad school might be prudent.

Also...you're approaching the problem backwards. Instead of asking what kind of breaks can you get from your creditors, you need to be asking "what can I afford?" Sit down with a pen and paper (or Excel) and figure out how much money you have coming in and how much you have going out. Be honest with yourself: cut as deep as you can, even if it hurts. But also be honest by not committing to pay an amount towards your debt that you know you can't reasonably sustain. Then once you have that figured out, confidently approach your creditors with a clear cut plan "I know I made mistakes and I'm trying to remedy them. This is what I can afford. Will you accept it?" If they aren't buying into your plan, then you can begin seriously looking into BK without doubting whether it's the correct answer.

[VeVe]

When you say forget about the marks already on there, does that mean that they can not be removed? Will threatening with BK give me any leverage in having them remove the negative items or reduce the amount I owe (in terms of interests, wiping out late charges, and possibly reducing the principle amount).

I mean it's better to concentrate on bringing the accounts current than it is to worry about cleaning up negatives that are already there. Once you get everything under control, then worry about clean up. The odds of getting them removed later are far better than getting them removed now, especially since you're still delinquent on the accounts (but of course nothing is a guarantee).

You have $35k in student loans (currently under forebearance), and $10k cash on hand. If you go back to school, will the loans go into deferment?

So, really we're only talking about $15k in debt here, part of that being a car, right? I don't think you're in that bad of a situation. Do you work and/or have income?

Have any of your accounts been closed by the lender? If not, I would start with them and make whatever payment would bring them current. You need to try to keep the accounts open. Don't ask them for a hardship plan, because then they will close the account permanently.

If they have been closed by the lender, then call and ask for a hardship plan. They should be able to work with you.

I would try to avoid BK. It will be on your record for 10 years, visible to potential lenders AND future employers.

[jq26]

If you are not current on your student loans, then you will not be able to get any future government loans (currently $20,500 for grad students).

Option 1 is to BK. You'll clear lots of the debt, your loan payments will stop then retsart after discharge, and you will be immediately (post BK) able to get gov't student loans again if you need them. Your credit will suck for about a year but with hard work, you could have decent credit in about 2 years (700+ scores if you really work your butt off and re-establish lots of credit). Keep in mind that you WILL have a BK on your public record. Creditors generally won't mind because you are much more creditworthy after BK than you are currently. Employers are not supposed to mind (federal law?) but they might view it unfavorably.

Option 2 is to dig yourself out. May take years with current debt levels unless you have a serious income. And all of your lates pretty much make you non-creditworthy for the next 5-7 years.

Unfortunately, this is the reality of the situation. Whatever path you take, please keep in mind it is not the end of the world. It sure felt like it when I was in your shoes a few years ago.

[AdvocateJen]

You have $35k in student loans (currently under forebearance), and $10k cash on hand. If you go back to school, will the loans go into deferment?

So, really we're only talking about $15k in debt here, part of that being a car, right? I don't think you're in that bad of a situation. Do you work and/or have income?

Not quite, I have 35K in student loans, and another 30k in private/personal loans and/or lines of credit.

My grand total in debt is approximately $65,000....

If I do go back to school, my loans will go into defer. and out of forbearance. Which is just fine by me, but if I can't improve my credit....well, I'm not going to school. There's no way I'll be able to 'save' 40k a year for tuition, nor get a loan for that amount with poor credit.

As for the accounts being closed: I had my credit card (10k in debt) closed by the company. How should I approach this? I have always made all my payments on time, I didn't have anything negative on my CR until 6 months ago when my business failed and a close family friend died. The poop really hit the fan all at once, and before that my record was impecable.

[AdvocateJen]

Welcome!

With the aspirations of starting a business and then grad school at a young age, you kinda sound like I did. Have you considered slowing down your life plan a bit? Putting off grad school might be prudent.

Well, I actually started the business because of a family member (who bailed on me when it started crashing...err). So, I have certainly learned that lesson. As far a grad school, well, I have put it off for 2 years now, because I moved states and had to aquire residency, but the problem I'm having is that the application/acceptance process takes 1 year which puts me back even further. I wouldn't mind so much, but I'm having a hard time finding an "in between" job (as opposed to a long term career) that makes decent money to help pay all my expenses. Also, the second I get an acceptance letter, I have to pack up an go. I don't mean to seem as if I'm exaggerating but I'm applying to Medical School.....so....I can't pass it up. I feel like I am stuck in dead end jobs, not making enough money (although qualified) because of reasons beyond my control (i.e employers/ coworkers stereotyped views of me)

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.... confidently approach your creditors with a clear cut plan "I know I made mistakes and I'm trying to remedy them. This is what I can afford. Will you accept it?" If they aren't buying into your plan, then you can begin seriously looking into BK without doubting whether it's the correct answer.

So, if I tell them I can only afford $200 as opposed to the $400 a month that they want and they agree, then I should probably make sure all my lenders agree to their individual terms. Right? Otherwise, even if one lender says no and ruins my credit, takes me to court, etc., then it's not worth it paying them and I should consider BK. Or should I still proceed to pay everyone off even the ones that don't agree to the terms?....gee. my head hurts.

Oh thanks for the tid bit on how to approach it. I will certainly sit down figure my income/ expenses and how much I can afford to pay each. Unfortunately, I do not have a set income. Ironically, I'm a process server (and serve many people in debt), and my income is never the same because it all depends on how many papers I served but i'll work it out. You know, amongst all my anxiety and worries about how i'm going to combat these issues, I forget to start with the most basic things.

[Plastic97]

Stay in that frame of mind. It's a hard road but when you start seeing some debt's disapear or minimize it's a great feeling. Try to stay patient and on top of your finances even if your not meeting your personal goals. You got some youth on your side so take advantage of that. Good luck.

[Oldfrog]

First thing I want you to do is take a breath. Get away from this subject for two days. Relax. Once you do that, your mind will no longer be in panic mode and you'll see the whole situation from a fresh perspective.

You are young and you've already learned a few things. Be thankful for that.

With regards to the $10K of liquid cash, the first thing you need to do is to establish an emergency fund equal to three months living expenses at the very least. If you dont, then you're setting yourself up for another fall.

Right now, I would NOT keep it in a financial institution where it can be seized. Keep it in cash and maybe in a safe deposit box .

Then work out your plan, and make it one that benefits YOU...not anyone else. Work on it for a few days....then get away from it again....thus resting your mind.

The solutions are already in your head....all you have to do is just allow them to come forward by relaxing.

I've been broke and I've been wealthy. Neither satisfied me, because there is more to life than money.

Educate yourself as much as possible, plan your work and then work your plan with tenacity and purpose.

Pep talk over....for now.

[AdvocateJen]

thank you old frog. Your advice is insightful and assuring. You're right. I'm so stressed I can't even focus on what to do but with your advice and others, I'm to work on a strategic plan today, rest tomorrow and start the phone calls on Monday.

The money is definately out of the bank. It's in a friends account and hopefully safe.

Next question:

If I start calling the OCs.....well..... how should I initiate the bargain of telling them what I can afford and if they remove late fees, penalties, etc? Who should I speak to, an Accounts Manager? Furthemore, should I get a consensus from all my OCs that they will agree to the new terms before dishing out payments?

Would anybody advise me to hire and/or go speak to a 'debt consolidation/settement company' or 'debt management' couselor? If so, any advice on where to start (the ones that aren't scams)? My Father seems to think that "debtconsolidationcare.com" is trustworthy. I've done my BBB search on them and seems pretty good, but still very hesistant.

Please advise.

[Amerikaner83]

Here at this forum, the general consensus on debt consolidation/settlement companies is the same: Scams. The things they can do for you, you can do yourself with the info here. many many many people have done just that with teh information and advice here. Not to mention that those places usually keep your money for 6 months until they can do one lump sum payment down the road. meanwhile, your credit gets even MORE thrashed due to the 6 months of not paying your creditors.

[willingtocope]

If I start calling the OCs.....well..... how should I initiate the bargain of telling them what I can afford and if they remove late fees, penalties, etc? Who should I speak to, an Accounts Manager? Furthemore, should I get a consensus from all my OCs that they will agree to the new terms before dishing out payments?

Get your plan together first before you call anyone. I sat down and built an Excel spreadsheet that showed what I need for food, clothing, housing, and transportation. What was left over, I divided up among the unsecured creditors...I used balance owed to decide who got what...some people use interest rate. The point is, get a number in mind before you call. Ask for the hardship department...tell them what you can afford. Don't negotiate over the phone. And yes, you need to be sure that all will agree. If one of them gets nasty, it may change your plans.

Would anybody advise me to hire and/or go speak to a 'debt consolidation/settement company' or 'debt management' couselor? If so, any advice on where to start (the ones that aren't scams)? My Father seems to think that "debtconsolidationcare.com" is trustworthy. I've done my BBB search on them and seems pretty good, but still very hesistant.

Absolutely NOT. Debt fixers won't help. They're collection agencies that have found that you can take more money out of people's pockets with honey than with harasment. If they don't happen to have contracts with all the people you owe...you wind up getting sued. Plus, you lose the protection of the FCRA by even using one of these people.

And...the BBB is not a good indication of the quality of work these people do. By the time they're done screwing you over, the least of your worries is reporting them to the BBB (which is actually a "good ole boy" network that has not power and little interest in helping the consumer).