TiredPayer

Keep Struggling or Give Up?

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For at least six years, we have been struggling to make a small dent in about now $25k in credit card debt (from $32k). All cards are at 15%, and we are usually on time, minimum payments with between $0 and $40 extra each time.

Whenever we get slightly ahead, a car breaks, a medical bill comes, whatever...and we are exhausted, set back months of timely payments.

Our spirits are broken and we don't see any light at the end of the tunnel. We are ready to stop payment on all cards as none want to negotiate lower rates or lower monthly payments. We have a house, car...do we say, "Take our 720 credit scores and shove them," stop paying, and deal with the consequences later? Or keep struggling for years?

Bankruptcy is not an option because I'd lose my business (otherwise I'd swallow that pill and tell them all to scratch!)

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Some thoughts...

Lacking BK it is best to carefully look at your future on the proposed scenario of strategically halting your cashflow bleeding.

Is your business dependent on your personal credit and/or score?

Dunning calls like "Be a man and pay your bill!", threatening letters from OCs and CAs, and lawsuits are likely to follow.

Fighting can be invigorating and/or stressful depending on the person (and their mate).

How likely are you to learn and be willing to fight to avoid a judgment?

How execution proof are you if you do get a judgment? (Exemptions for house car, etc.)

Will you enjoy documenting the misdeeds of the debt collectors and suing them or filing counterclaims if they sue you?

Have you talked with a couple of BK attorneys to make sure you fully understand all your options in the world of BK? A Debtor in Possession - DIP for example.

As painful as the current situation is it may be less so than the stress of learning to deal with and battle debt collectors and their well oiled machine that runs on lies.

You are asking a serious question that only you and your family can answer based on your personalities and detailed situation.

I would not suggest that being accused of allegedly defaulting is the easy way out by any stretch. It may be a battle of years going that route.

Some people like and follow Dave Ramsey and his debt snowball. I am sure there are other legitimate plans out there that would be worth a look for accelerating debt retirement.

Study this forum and see what many people that don't have a shiny 720 fico score are dealing with to get an idea of what that world looks like.

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A few years back I gave up, felt much the same as you do, the next 6 months were brutal with the sheer number of calls coming into the house, it wasn't until after charge off that I found this site.

The the collection agencies started to call, If I would have had the money at the time I would have gladly settled the debts and just taken the hit on the credit score to get it over with

If you handle your budget right you can live without credit cards, I did keep one with a small very small credit limit and otherwise just use cash or the debit card, but it does change the way you do things.

in addition to the above I'd say are the cards and debt in your name alone or are they joint accounts? can you let the debt that you have go and keep your wife's scores good?

Do you want to try and settle some of these debts as you can or not?

Its a good time to look at assets and whose name you want them in, a good time to look at a budget restructure and what would you do with the money that has been going to bills, whether or not you want to drop your landline and go to cell phones that the creditors don't have at this time,

If your bsuiness is not set up as a LLC before you go bust you might want to consider that.

The most important thing is that you take the time to learn and prepare for the onslaught of collection agencies and the lawsuits that will inevitably follow

I remember how hopeless I felt when I was in your shoes, but you have a leg up here.

My first FDCPA suit came about 10 months after the first delinquency, when I think back there were 2 or 3 that got away because I didn't realize that they were breaking the law and could be sued and I did not know what I needed to do to document their violations.

Thing is you are in a good place to make a more informed decision and to learn when you are not under the gun with 10 days left to learn how to answer a summons.

For me, the collection agencies are paying off my debts with their donations or are dispensed in the settlement and I have not had to file bankruptcy.

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Was in a similar situation as you, struggled for years, then lost employment.

I was unable to do a BK due to the equity in my home and crappy homestead exemptions in my state. I could no longer afford credit card payments so I started researching settlements.

What I did before I stopped paying was to get a google voice # and updated EVERY account I had with the google voice #. I then cancelled my landline phone and got Netalk (like Majic Jack), saved me $70 a month. This was a saving grace in this fiasco, no phone ringing off the wall.

We settled all of our cards, except one which we are current with a 3.99 int rate. We were able to settle 90k for about 37%, no law suites, although Amex sent a 36k card to a local atty which we settled with.

Our credit scores are crap, but we sleep better now.

Good luck.

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Q: If it's going to get bad three months after, how long will it last (the hard part) and when does it start getting better? If I have the house and car, and don't expect to need credit for five years, do I need to worry about the credit score?

And...are they generally willing to settle for a lump sum when I pursue this path? If I give up, can I expect BofA, Discover, Citi, HSBC, and US Bank to accept a settlement in three to six months? (The cards range from $3,000 to $8,000.)

More Background: I can't do bankruptcy because it will invalidate some of the contracts I rely on to run my business. My credit can go to hell and it won't matter, but a BK filing will put me out of business.

The 720 credit score is the result of literally years of sacrificing putting food on the table for my kids to make the payment, or even living a "normal" life that we work hard for. Wife and I both have full-time jobs (me during the day, her in the evenings), but we barely see each other because I get home and she leaves...all to make sure the credit card companies get paid.

My house is underwater by $30k, my car is underwater. Technically insolvent, yes, but BK is not an option.

Have we learned our lesson? Yes! We haven't used the cards since 2008. They're open and we pay, but no charges. Whatever we decide, we will never be back in this position again. (Aside: We cut everything years ago. No cable TV. No home phone. No meals out, vacations, etc. Every penny we make goes to the mortgage, car, insurances, groceries, credit cards, taxes.)

I can deal will calls from creditors, letters, etc. Freeing up the $1,000 a month in payments will give us such peace of mind financially that (if I know what to expect) I won't be stressed by phone calls. In my business, I've developed a thick skin so empty threats and lies won't phase me.

I'm not looking for someone to validate my decision to not pay (I haven't made that decision yet), but more input on what to expect and whether throwing my hands in the air, accepting the damage, and swallowing the tough pill today is worth it.

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A couple years ago my wife and I went to see a BK attorney. After that meeting, we looked at one another and said to eachother - NO, we can find a way to get things paid off.

I had $50k in CC debt mainly from our wedding, but at the time of planning that party I was making around $200k a year, so I thought I could have it all paid off in a year. Then 2007 came around and I lost my job.

My wife had around $12k in CC debt.

My wife was making around $100k a year and was forced to leave due to a medical reason. All of a sudden roughly $300k in income was only $30k. All we need to be able to pays all the bills is roughly $60k a year, including the mortgage.

I had to stop making CC payments. A couple months later, the phone started blowing up with calls. I did not know how to handle it. My entire adult life, my credit score was around 780. So, after the first go around with BOA...I learned the hard way by having to figure out how to defend myself.

I stumbled onto this site and soaked up information, read laws and articles on debt collection. The smaller balance accounts, were usually the easiest to get FDCPA claims on. I sued 6 CAs and had them payoff 6 accounts. I also learned step-by-step how to dispute debts, create a papertrial to show each step in the dispute and how to bait the CAs into violating the FDCPA.

I was sued twice, BOA and Chase. I lost to BOA, cause I did not know what I was doing. Since I never stopped fighting after I lost the suit, BOA gave me a very favorable settlement.

I beat Chase in court w/ prejudice and that debt was deleted from my credit report. The smaller debts were all deleted from my credit report as well. Part of the settlement was to get a deletion. Even on the debts that I paid in full, I kept a papertrail to just in case the OC did not update my credit report properly or did not abide by any stipulations to the lump sum payoff.

There are a couple nicks in my credit report that I have no choice but to wait it out for 5 more years, but at least they al show that they are paid. After about another year, as long as I keep building good lines of credit, those bad accounts wont hurt me that much. It will take me 10 years to get back to a 780 score, but if I am in the high 600s or low 700s, that will allow me get access to credit, if I need it.

Do not give up, but if you cannot afford to make payments, make sure your start creating a papertrail with the creditors or CAs!! It will save yourself a lot of headaches and stress!!

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Q: If it's going to get bad three months after, how long will it last (the hard part) and when does it start getting better? If I have the house and car, and don't expect to need credit for five years, do I need to worry about the credit score?

...

Credit score can also effect insurance premiums and the like.

I have know idea when it starts to get better. Suits as a defendant are running well past a year in my experience. YMMV

When I stopped concerning myself with the stupidity spouted by liars and cheats things improved. The briar patch is still all around but the thickened skin has adapted.

You're insolvent. What was your question again?

I view being insolvent as holding a nice hand of cards. I know it sure doesn't feel that way.

Exiting is a mental decision based on your family. You may be thick skinned (collectors are experts at finding any emotional buttons for you) but how about the rest?

There are no guarantees on lump sums or lawsuits. Things will be unpredictable to some degree. DCs breaking the law is the only reliable factor.

As for a credit score vs. cash flow. Not a hard decision for me.

If I were in your shoes I might make a final call to the old CC companies explaining their new-for-me 4% interest rate plan that will permit them to keep collecting. Or the NO payment plan that is actually My preference. Is that your final offer? Negotiating is so much easier when the only tool you have is a big red button. :) Dunning calls could be fun, "Hi Collector, you remember on September 11th at 12:42 PM when Henry, your company representative, informed me that your company would prefer NO more payments rather than setting my interest rate to 4%? I do. I know I was shocked at the time but it has been most pleasant since then. It is now too late to modify your agreement so your NO payments will have to continue as you have agreed. Have a nice life. Goodbye."

I would plan my exit if I had it to do over. Business structure as antiquedave mentioned, joint liability, assets, community property (if applicable), etc.

Of course I would and do document everything, record everything, save envelopes, etc.

Good luck on your path.

Edited by Credator
minor cleanup

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Continue making payments while you educate yourself here and methodically assess your situation and options per antiquedave's post. Knowledge will empower you and lesson your sense of being overwhelmed and helpless. There are more knowledgable people here than you could imagine, and all want to help you because most have been where you are. I won't suggest stopping your payments as that is for you to decide. But, if you do...........plan for it. Start using cash only and empty your bank accounts as much as possible. Do not transfer property as fraud is a no no. (Don't sell the car to your dog.) The phone calls will drive you crazy and open the door for putting your foot in your mouth. DO NOT speak to them on the phone. I strongly suggest a cell phone for your personal use. I would respond to all written communications such not to jeopardize settlement opportunities. Do not consider a C&D unless you understand the ramifications. Doing a C&D may eliminate your chances at settlement. I would not focus on looking for FDCPA violations, but I would learn related laws re. your FDCPA rights. Many here have successfully countersued but they seem to really know what they are doing and enjoy the fight as much as the financial gain. When you do make your decisions wait a few days before you act on them. One step at a time ...and don't hesitate to ask questions here. We are all pulling for you, but you must do the work.

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I've been in your shoes, in a way, and still am to an extent. Here are a few thoughts.

1. Is your state a community property state? If not, is most or all the debts in your spouses name? If no then yes, your spouse may be able to file bankruptcy on their own, without you. Talk to a bk attorney.

2. You have a lot of options, and creative plans to start contemplating, while your credit is good, and you are paying on time. Read into that or not, but think about it.

3. Making yourself judgment proof is not fraud. Know the rules before you break them, I.e. research the bankruptcy exemptions in your state, get free consults with bk attorneys, evaluate your whole financial situation, etc.

Yeah, don't sell your car to your dog for sure! Instead, sell the title to a title loan place, lol.

I'm not giving advice here, just brainstorming....

The bottom line is this. If you are 100% against filing bk for whatever reason, you better damn well not let anyone know that. They will feed off that, and it will be open field day for them to sue you, then garnish your wages and start hitting your assets, if you have any. I think it might work a little differently if the creditors know they are dealing with someone who dgaf, and is a walking bk ready to happen, and who will pull that card at the right time...just my guess anyway. It can be a game of chess, or a coin toss....your decision.

Edited by wipedout

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It wouldn't hurt to talk to a bk attorney just to find out what creditors could do if you stopped paying and they sued. You don't have to hire the guy and file bk. Just telling him you're thinking about bk as a possible option. Most bk attorneys give free or low cost consultations.

Another option: If you have any available cash or could get some funds, is to contact the cc companies with who you have a low balance. See if your can't work out a settlement and pay those cards off with the cash.

Then apply the monthly payments you were making on those low cards to your card with the highest interest rate in order to start bringing that balance down. Minimum payments on a high interest account barely make a dent in the balance. Or apply the payments to the card with the highest balance. Whichever you'd choose.

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In my reaearch/experience, settlement talks won't even start until 90 days late.

Lowering aprs is maybe 60+ days late.

All banks have a "workout" option, but they won't tell you about their best options until 60-90 days late.

I called a cca and went through my financials. They said that they could get bank #1 to lower apr to x%, and they could get bank #2 to lower the apr to x%, etc.

Screw the middle man, I called the banks and asked if they could do that. They said yes. Unfortunately, I still couldn't afford the payments, even with the lower apr, so I didn't do a workout.

I've heard that the best settlements come after 120 days late, and before 210 days late. Once it gets to a collections agency, all bets are off. Could be the same or less, or could be a sue happy ca.

If you can realisticly come up with 20-50 % of what you owe, after not paying for 3-6 months, you may be a settlement candidate. Some banks are harder than others, and would rather sell off your account or sue, before they offer less than 70% settlement. If you can't come up with that much, you can do a hybrid. Plan on settling the first 2 or 3 best offers, late in the game, then when you run out of cash, start working on a payment plan with the last 1-2 creditors. You really need to sit down and do the math, and come up with your plan.

For $25k in cards, I'd think you could settle for $5000-10,000 total. From what you said, you pay $1000/mo on the cards. In 5 months, you will have saved up $5k in settlement funds. Worse case scenario, you got a couple hardasses, and they won't offer reasonable settlements. Concentrate on the ones you can settle for the cheapest.

Also, there are a lot of cc settlement strategists out there. Some say to completely ignore them for 5 months, then talk to them, some say to talk to them once a month, etc. There are a lot of strategy out there. However, I would caution you about the complete stiff, I.e. not even talking to them. Recently, I've seen a few people being sued when only 60-90 days late. They didn't talk to the creditors once, taking the aggressive route. That is unheard of! Unless the banks knew they had money or assets, not sure. If you decide to pull the plug, I personally would recommend answering the first call, and explain your hardship, whether it be true or false. They will act like they feel sorry for you, and "update your account". They may ask for financials, don't give them anything. Ignore their calls and answer once every 3-4 weeks, only tell them nothing has changed. (Keeping the lines of communication open). After about 90 days, they may offer a settlement, or you can inquire about one...so on and so forth until 120-150 days late. This is when you'll have a pretty good idea where they stand. Did they lower their offer 5% or 20% from the last time you talked to them? Now you will know if they are aggressively trying to settle, or if they are sitting tight. Now you can decide which ones you can settle, or want to settle, and move forward.

Of course, all of this is moot if you decide to go another direction.

Listen to ioalot's advice. He has experience. He wanted to settle everything and not file bk, kinda like you.

Of course you could go scorched earth on them, and blow them all off....but you will need to do a lot of reading and research to prepare yourself for the lawsuits that will inevitably happen.

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as liquidity is better than credit score. The thing about treading water is you are one big wave away from potentially drowning.

If you stop all payments you can buy a used car. also the house is underwater but some paint raises the value( curb appeal). also the calls are not a problem as most phones have caller id. With that money you save you can buy a nice phone that records also with built in Caller ID.

The whole entire nation is going through these exact same things so you are worried about getting sued, well there is a chance theywill not pursue it because they cannot win due to evidence problems.

If you keep going the same way you are going you will one day not be able to pay and that will start a chain reaction.

If you are walking a tight rope know this BK option is always there.

If the cards are in your name put the business in your wifes name. This may help with minimizing damage to the business also there are many SBA and other loans for woman owned business including potential govt contracts

Vice versa if it is the reverse.

take half of the saved money and make a legal defense fund for any potential battle. after a year you will have a good amount of money, If you get sued have the lawyer hold onto it if they get a judgment.

you say it is 1000 a month to service all those cards well 500 a month is 6000 dollars a year. so if you build up a settlement warchest then you grind them into a bad legal position you can make the take 20% of the debt for settlement.

You can not get out of debt paying minimums I bet even though you are paying and not charging that the balances are increasing. You are in an unwinnable position that way.

also there is another way.

Find out which cards sue right away pay those and stop the rest

It may take 2-3 years for the debt to filter down to a lawsuit the weak point for any JDB is the Bills of sale if they sell it the case for collection gets weaker.

Just trying to give you options but have been in your situation before and it always ends up with the phone ringing off the hook.

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Had to make similar decisions close to a decade ago.

In your case I would definitely talk to an attorney just to double check all your options.

is the debt more business related or personal personal also can make a big difference on your options BTW.

their are also bunch odd BK options out their you may want to double check to make sure that is going to goof you up.

Edited by Chriss

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Have we learned our lesson? Yes! We haven't used the cards since 2008. I can deal will calls from creditors, letters, etc. Freeing up the $1,000 a month in payments will give us such peace of mind financially that (if I know what to expect) I won't be stressed by phone calls. In my business, I've developed a thick skin so empty threats and lies won't phase me.

Yes, there may be deception and empty threats. In fact, there probably will be. But a time will come when the threats aren't empty, they are just veiled. You'll know it when you see it, because the letter will say something like "Douche & Baggins Attorneys At Law" at the top. It probably won't directly threaten to sue, but it damned sure will imply it, and it won't be an empty threat. Now you're talking a whole other world.

I'm not discouraging you from doing this, but I do feel that you need to be informed that, except for the few lucky who slip through the cracks, the banks will do one of two things: Sue or sell. If they sell the debt to a JDB, they like to sue too.

I despise the large banks. They played an integral role in flushing our economy, got bailed out, then turned around and snatched everything they could and sued everything that walks, runs or crawls. So don't think that I'll be judging you as a deadbeat or anything of the sort. You have been paying since 2008 without using the card. I bet you've paid over $15k in interest alone since then.

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Thank you everyone for your input and advice. I have some more learning to do before I decide anything. This month, I'll continue to make payments as I assess the options and alternatives.

This is a great site with wonderful people. THANK YOU ALL!

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