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catoismymotor (35.54)

Assistance Please: Negotiating Credit Card Debt Question.

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June 02, 2011 – Comments (24)

We have some close friends that may be six months away from filing for bankruptcy. One of them is on disability from work, not bringing in enough to pay all the bills. I'm trying to help them find some (free) resources that may be able to help steer them in the direction of negotiating a settlement with the creditors (Visa/Amex/MC). I keep reading that they should be able to do it on their own and yadda-yadda-yadda. But what I have yet to find is a list of steps they need to take in order to do it successfully. Correction: I have found a couple of lists but not from reputable sources, unless you count eHow.com as such.

I have looked on Clark Howard's site and found a literal mess of code where his recommendations should be. I have looked at Dave Ramsey's site and all my entries into his search bar take me to his online store. I have looked at Suze Orman's site. I have rarely seen someone so in love with herself as that lady. After pushing past all the promotional material I found nothing useful. I have even tried to find past articles on TMF with no luck.

If any of you out there in TMF-land have walked this path before or can comment with a link to a site that may help I know they would appreciate it.

-Cato

 

24 Comments – Post Your Own

#1) On June 02, 2011 at 9:27 AM, lemoneater (80.03) wrote:

I don't know the answer, Cato, but I'm giving you a rec.

I wonder if either outoffocus or Mary953 might have some pointers. Both of them have down to earth approach to personal finance that I find downright refreshing.

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#2) On June 02, 2011 at 9:32 AM, DaveMarcus82 (30.52) wrote:

I'll give you a rec as well - sorry I don't have any great answers for you but I'll keep it in mind over the next few weeks and follow up if I hear of anything. There seem to be an infinite amount of generic information sites out there but it sounds like your friends can use some personalized attention. 

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#3) On June 02, 2011 at 9:55 AM, Jbay76 (< 20) wrote:

Give me 8 hrs and I'll be back with some info.  A friend/co-worker just got his cc debt fixed with help from some outside group that brokered a deal with his cc company to drop interest to 1% and have fixed payments.....what a killer deal..in any case, I'll go pick his brain and report back later sarge..

 J

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#4) On June 02, 2011 at 10:06 AM, Jbay76 (< 20) wrote:

Cato,

check these guys out It worked for my co-worker...

J

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#5) On June 02, 2011 at 10:34 AM, L0RDZ (82.42) wrote:

Many may not wish to hear from me... but if they are heading towards bankruptcy why even bother trying to settle with  their credit cards ???

A settlement will hurt them just as much as  a default...   some of those in charge  will  likely  take the money and than write some messed up comments on the  reporting section... they will still report  them  as   deficient...

From my bs exp  where I refused to pay a 50 dollar charge that was  bogus  and I cancelled my card without paying the  50 dollars...  they jacked up  my  so called balance to over 1,000  in under one year...  and than  I settled when I shouldn't have for like  250  on a  bogus  50 dollars   and they wrote some  bs  and still reported me like I was some dead beat...

My advice would be to not settle.... or get in writing that they will not  report anything....   on my credit they wrote it like I screwed them out of  750....   

The credit card  company was CHASE  by  JPM...

bunch of blook  sOOKERS>>>>>>>>>>

AS much AS  Jamie tries to come across as  a honorable person, the company he oversees  is anything but dishonorable...

LORDZ...

Tell them  to not pay.... or settle.... keep that money....

Credit is over rated....    I   no longer care about my credit..

I don't need credit...

Ask  Warren Buffet about his credit ? see what he'll say..

 

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#6) On June 02, 2011 at 11:21 AM, catoismymotor (35.54) wrote:

LordZ,

Many may not wish to hear from me... but if they are heading towards bankruptcy why even bother trying to settle with  their credit cards ???

I understand your POV. The CC payments are the back breakers. If they did not have the balances the disability payments plus the wife's income would be enough to get by. Their aim is to do the right thing by honoring the agreement with the CC companies to the best of their ability under the present circumstances. I can't fault them for that. I hope my bud is able to fully recover and get back to work soon and put this ordeal in the past.

Lemon,

Thank you, my friend.

Dave,

Thank you for the help with drawing attention to this posting by kicking in the extra rec.

JBay,

I appreciate it. I will pass the information along. I am happy they were able to assist your friend.

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#7) On June 02, 2011 at 11:39 AM, EnigmaDude (91.78) wrote:

cato,

Hate to admit it but I was in a similar position 7 years ago.  I tried to negotiate with the banks and it only made matters worse (on my CapitalOne card the interest rate went up!).  I ended up declaring Chapter 13 BK with more than $80k in credit card debt and no income (I was unemployed for about 18 months and in a nasty custody dispute with my ex-wife).  It was a painful decision and I felt like dirt for doing it but I really had no choice.

At the time I looked into the companies that "negotiate" for you but they are really doing it to make a buck and it only extends the inevitable. So my suggestion is to tell yuor friends to just pay what they can and avoid trying to negotiate.  And if they have a mortgage, don't miss a payment!

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#8) On June 02, 2011 at 11:49 AM, Melaschasm (54.35) wrote:

While every situation is unique, I can give some general advice.

1.  Don't file for bankruptcy, let your creditors bring you to court.

2.   If you have a credit card with a local bank, bring your financial documents in, and ASK them to work with your on a reduced settlement.  Be nice, and hope they do you a favor.

3.  Then go to the rest of your credit cards and offer to settle for 20% of the debt owed.   Get a written agreement that this is payment in full before sending money.  Do not use your regular checking account, or make an electronic payment, but rather use a cashiers check or money order.  Most of these companies are terrible to work with, however, asking and being polite will go a long ways.

4.  Set up a debt payment list from most important to least important, even if it means you do not give the credit cards a penny.  For example, paying the IRS (or mobsters) is first.

Rather than listen to me, go to the library and rent Dave Ramsey's "Total Money Makeover".  You will probably have to request the book and wait a few weeks, but his book comes highly recommended from several people I know.

Good luck, and I hope your friend recovers from whatever sent him onto disability. 

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#9) On June 02, 2011 at 11:58 AM, CluckChicken (27.68) wrote:

If you feel some help is needed check the local BBB for "Credit and Debt Counseling" services.

 

I do agree that I would pay the IRs first, though it is kind of funny that they are the only creditor that will provide housing and food if you don't pay them.

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#10) On June 02, 2011 at 12:08 PM, anchak (99.84) wrote:

You need to get them in touch with a GOOD Credit and Debt Counseling Service - as mentioned by CluckChicken

(1) Make sure they are Non-Profit

(2) Check with the BBB for their service. Especially if you want to have this in a brick-and-mortar venue face-to-face.

(3) Most will do it for free.

Also touch base with NACA - especially if your friends have a mortgage - they might be able to recommend a Counseling Service.

 

 

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#11) On June 02, 2011 at 1:40 PM, catoismymotor (35.54) wrote:

Thanks to all that responded! I look forward to emailing the link to this post to him. I know he and his wife will appreciate your kind words and guidance. With any luck after this storm has passed I can convince him, or both of them, to join TMF.

Re #7:

Enigma,  I'm sorry you had to deal with all those problems at the same time. That must have been stressful.

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#12) On June 02, 2011 at 2:38 PM, anchak (99.84) wrote:

BTW - Cato - if your friends have a mortgage - have they touch based with their lender for a modification?

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#13) On June 02, 2011 at 2:50 PM, onefinerday (84.80) wrote:

Years ago I was able to negotiate 6 months of payments with no interest and have the late fees waived if I paid on time each month - the principle balance went way down and I was able to stay out of bankruptcy.  It's always better to not file if at all possible. 

Be sure to speak with a supervisior and always keep a record of the date/time and person's name you spoke to whenever you negotiate terms.  Also, be sure to check the bills for adherence to the agreed upon terms.

Good Luck:)

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#14) On June 02, 2011 at 3:06 PM, Starfirenv (< 20) wrote:

 Click here for more information about settling credit card debts.

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#15) On June 02, 2011 at 3:41 PM, Starfirenv (< 20) wrote:

Struggling with debt Paying off credit card 29% interest rate 

website of the National Foundation for Credit Counseling.
Hope this helps.   Best

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#16) On June 02, 2011 at 3:59 PM, mm5525 (< 20) wrote:

As a former mortgage broker who has looked at thousands of credit reports, I was always taught to NEVER settle your credit card debt, no matter how "good" the terms are, and never use a debt consolidation company, even if they're non-profit. Whatever you don't pay still goes down as charged off bad debt and actually goes down as a new debt on your CBR separate from the existing debt (creating a new tradeline of debt), and even if you pay off the settled debt, the charged-off debt still remains there "unpaid" and hurts your FICO score. Your score also hurts because you violated the terms of the agreement, and if you see the CBR you will see "Paid as Agreeed" except where you settled. If you settle, you violate the term of agreement, and that charged-off debt will remain there for 7 years from the DOLA (date of last activity). So if you do this, never pay the charged off debt, because it will make your DOLA the past month (or whenever they report you paid on it). If the person does file for BK, make sure the atty actually updates on your CBR that all accounts in the Schedule F are included in the BK because, if not, it will still hurt your score.  If the person does not care about their FICO score, that's a different matter, but if they do, never settle a debt. Take the pain, and xfer the balance as soon as possible to a lower rate. Settling credit card debt for less than the balance owed is creating a huge mess. That charged-off debt becomes the property of a collection agency, and they will come after you for the balance. When that happens, never pay them. Never pay them a cent. Your credit report is all about what have you done lately. In the words of Janet Jackson. If 24 months pass with no payment, they will give up, and the FICO score will improve on it's own, as it is measured based on what you do lately.

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#17) On June 02, 2011 at 4:14 PM, mm5525 (< 20) wrote:

Also, if these people are truly stuck at such a high rate, my advice is to advise them to call the creditor RELENTLESSLY. There's an old adage in the collection industry, an industry I spent many years in, "persistence breaks resistance." That works on both sides.... including the customer. I advise you to tell the people to call the creditor CONSTANTLY and try to negotiate a lower rate on the existing debt (don't settle). Advise them to explain they will file BK otherwise. Given the BK law changes in many states, no longer is it so easy to do a BK 7 and just wipe it all away, and instead it's a payment plan (which on a side note is the way it should be IMO), but a creditor would rather lower the rate rather than not get any more capital at all, or wait for it. If the customer is 6 months behind, he is in a serious position of weakness, and will not be able to negotiate a lower rate. However, keep calling and pestering them to no end. Call every day if you have to. Demand to speak to a supervisor. Do it over and over. Eventually you will get a lower rate, but you may have to make a few months of payments on-time in order to get the lower rate. Don't call a creditor and just throw up your hands and give up and admit defeat. Keep calling them. Wear them out! Sooner or later, they'll be tired of hearing from you and will work something out. Keep after it. Persistence breaks resistance. Look at it from their side... they'd rather have you pay something rather than nothing. Call them 3 times a day if you must. Make them sick of you.  

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#18) On June 02, 2011 at 6:23 PM, awallejr (83.86) wrote:

As an attorney I have represented many people struggling with debt.  In some cases the amounts are small enough where a doable deal can be made.  In the majority of cases, bankruptcy is the only viable route.

It is difficult to advise your friends here not knowing the facts.  How much do they owe on all their cards, what is the total monthly household income.  Is his disability long term or short.  Do they rent or own.  What are general monthly expenses, excluding the debt payments.

I will give general advice, but I am URGING your friends to see a local attorney for general consultation.  Most attorneys do not charge for that.

1.  Do not ignore the bill and let it go into litigation if your goal is to settle.  Most creditors will let you settle for 50 cents on the dollar on a short payment plan.  However, you could have negotiated that now before the outstanding debt balloons even more by time a lawsuit is started. If they want to do this first have them tell the credit card company right off the bat that they are contemplating bankruptcy but want to see if they could work out a deal.  Unsecured creditors do not like to hear the "B" word.

Also do be mindful that they could get hit with a 1099 for the balance forgiven which means they would be obligated to list that as income on their income taxes.

2.  Don't bother with those "services" that offer to middleman their debt. 

3.  If the total amount owed is just so high bankruptcy really is the route to take.  Yes their credit rating will be trashed, but it can be rehabilitated over time.

As a general advisement to anyone reading this, generally a cc company has 6 years in which to sue you on an unpaid account.  Some states may have shorter statute of limitation periods.  After that time expires you could use the "statute of limitations" as a defense (you must state this specifically in any legal "answer" to the cc company's "complaint.").  Never fall for a collection agency's ploy of having you just send a few bucks in now and they'll see what they could do.  Once you pay even a penny the statute of limitations defense is lost.

Also if you keep getting harassing phone calls, send a written letter to the agency telling them to stop calling.  Should they ignore that request they could find themselves liable under the Federal Fair Debt Collection Practices Act.

Hope things work out for your friends.

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#19) On June 03, 2011 at 12:17 AM, JakilaTheHun (99.93) wrote:

Negotiating with credit card companies, from what I've heard, is a poor idea.  They might "negotiate" with you, but they're likely to jack up rates and/or report you to credit reporting agencies still.  It's not like you're getting out of anything by "negotiating" with them.

Of course, I could be wrong --- I don't have any first hand experience with this.  That's just what I've read before.

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#20) On June 03, 2011 at 1:32 AM, mm5525 (< 20) wrote:

It can't hurt to negotiate directly with a credit card company, so I disagree it's a "poor idea" because I have done loans for people who could not qualify who later could after doing what I told them to do. In several cases, I had several borrowers who were in this situation of 29% interest rates due to poor payment histories. After 3-6 months of on-time payments and constant calls from the customer to the creditor, the companies do lower those rates, but you definitely have to keep the heat on them to do it because they will take their own, sweet time before lowering the rate if you leave it up to them. So you definitely are getting something by negotiating with them. Also, the poor payment history is already on one's credit report, so the damage is already done. Constantly trying to get a lower rate can only improve your situation, but do it on your own. Do not have a debt consolidation company do it for you. That's what kills your score. A third party entering the mix is what changes your status from paid/paying as agreed. Debt consolidation companies or settling for less than the amount owed is what changes this agreement. Complaining over and over trying to get a lower rate on your own will never hurt you.

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#21) On June 03, 2011 at 1:42 AM, awallejr (83.86) wrote:

Please listen to my advice in #18. I charge people real money for that but it is free to your friends here.  Ignore those who are suppositioning.  Have them talk to a local attorney, end of story.

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#22) On June 03, 2011 at 8:42 AM, catoismymotor (35.54) wrote:

awallejr,

Thank you for the pro bono advice for my friends and others who may find themselves in a similar pickle. It is because of the selfless giving of those like you that make TMF community a precious resource.

I don't have the specifics of how long he'll be on disability. Since he has given the "six months" time frame before he thinks they may have to file I am guessing it will be that long at a minimum. I am also clueless about his monthly mortgage payment, the total of cc debt and other money details. I do what I can to help without asking for potentially touchy details.

Again, thank you for your council.

Cato

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#23) On June 03, 2011 at 9:12 AM, StoneyTerp12 (44.92) wrote:

As follow up to the 1099 piece in post #18, the person will receive a 1099 for the amount forgiven, commonly referred to as cancellation of indebtness, or COD income.  They should be mindful though that COD income isn't always taxable.  COD income is only taxable to the extent that the taxpayer is solvent.  The solvency rules are pretty simple and can be easily researched.

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#24) On June 08, 2011 at 2:35 PM, seansockol (< 20) wrote:

If you are trying to find something for free, keep in mind sometimes you really do get what you pay for. Good luck to them though!

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