I joined this community in April ‘09 when I started to research consumer debt solutions available to my girlfriend to manage her bills following a cut back by her employer (a school district). This cut back reduced her income to a level that only allows her to pay her mortgage, utilities, food and gas. So it comes down to eating, or paying her credit cards.

First, I would like to thank the countless folks who have posted and shared their experiences and to the board moderators who have guided and advised, to the best of their ability, the people who have found themselves in these disastrous financial situations.

She had enough savings to continue to pay the minimums while we researched and learned what options there were to assist her with this new reality. During this period, she also communicated with her credit card companies, letting them know that she was in trouble and how could they help. As many of you know, this is also the period that credit card companies began to indiscriminately, raise the interest rates on her cards, which has only further compromised her ability to keep these accounts current. Our conversations with the credit card companies has been fruitless, with only two having been willing to reduce interest rates.

Our research has included talking to numerous credit counselors, organizations that offer debt solutions, about a dozen settlement companies, as well as reading nearly every post on this forum and several others.

Now, it is our turn, and I intend to update this thread as our efforts to resolve this debt unfold. We are also asking for any and all advice from others who have dealt, and are dealing with these companies. It appears that my girlfriend at this point has one of two options…bankruptcy or settlement. Having prayerfully considered the consumer debt solutions, it seems that she should first attempt the debt settlement route. Below is her current credit card situation, and followed by several specific questions that we would appreciate any input on.

CC..................Bal...Limit...............Mini mum Payment (editor won't let me space this out, so using periods)
BofA 1...........2937 3000 13.90%.....63 Last Payment 12/02/09
BofA 2...........1180 1100 26.74%....109 Last Payment 11/10/09
Sams Club.....1647 1600 20.87%.....55 Last Payment 11/10/09
Chase...........4523 5000 27.24%...150 Last Payment 11/10/09
Citi Bank 1.....1959 2100 29.73%.....50 Last Payment 11/10/09
Citi Bank 2.....5131 5000 29.90%....152 Last Payment 11/04/09
Capital One...5383 5000 29.40%....150 Last Payment 11/11/09
Discover........7845 8000 12.24%....155 Last Payment 12/20/09

Credit Union...7565 7500 10.90%....150 Last Payment 11/07/09

Orchard Bank...145 300 16.00%.......15 Last Payment 12/17/09 (will pay this off and keep open for emergencies, since other cards will likely be canceled)

CFNA.............660 1000 21.84%......27 Last Payment 01/03/10 (for auto repairs)
TOTAL 38975

Currently, to bring all the accounts current would require $2531, which she doesn’t have. If all the credit card companies were to close the accounts, apply a 0% interest rate and allow her to pay off the balances over 5 years (which I understand some are now), her payments would be $650 per month, which she doesn’t have either. So it seems the only option left is to allow the accounts to go into default and hope that the settlement process offers her debt solutions, which I will be helping her to fund.

There are a couple of specific questions that we have.

1)She would like to keep the Credit Union Visa, since the credit union is her primary banking relationship. If she continues to pay the minimum on this Visa account, will that jeopardize the settlement process with the other credit cards? The other option we will look into is converting this debt to a second on her home is the credit union will approve that. If we pay this credit card off, could that also jeopardize the settlement process?

2)She will need to keep the CFNA account for possible car repairs. So the same question as above, if she continues to make the minimum payment on that account, can that also jeopardize the settlement process?

hello and welcome to the club! LOL i know not funny but here is my advice i would NOT take out a second mortage. you are taking unsecured bill and wrapping it into her home and if she gets laid off that unsecured bill is now secured by her home and she may loose it.

Now she can keep certain cards if she wishes but here is what happens alot of cards use what they call a universal code. once you default on one card all the cards apr is most likely going to go up. it wont effect your deals during settlement process unless you are say you want to keep one citi and settle the other citi, if they are with the same bank or institution that may become a problem. but your credit union card instead of being a 10% will most likely become say a 30% once you really start to default on the others.

hopefully from being on the forum you have advised her how to go about settlement and she has began saving.

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my blog about saving money during a recession, And my personal story about Provanta's debt settlement program and how it worked for my family

Love My Things...

Thank you for your thoughts. The good news regarding the credit union visa is that she received a notice from them that under the new legislation, her existing balance APR is being frozen and only new purchases could be affected by a higher APR should they decide that her risk to them has increased due to the other delinquent CC's.

Also, yes, she has begun saving so that when/if we get settlement offers, she will be able to act on them. Also, I will be helping her fund these offers, so between the two of us, we should be able to act.

The daily calls from Chase, Citi, and Capital One have started. She will be calling all of them this week to let them know her status and begin the dialog. I figure its better to stay in touch with them than let their calls go unanswered.

Thanks again,

Don

well it sounds like you got a plan and stick to it. thats very important to keep the line of communication open. usually when that stops is when you end up in court. i have no doubt that between the two of yous you should be able to get it done and quickly obviously you have been using the info here to your advantage an remember if you get stuck to come back! im sure what ever comes up you will be able to find the answers here! keep us posted!

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my blog about saving money during a recession, And my personal story about Provanta's debt settlement program and how it worked for my family

Since my last post, the phone continues to ring, but its not overwhelming. Seems like we get several calls a day from each creditor.

Then today, UPS delivers a letter from Citibank regarding the account Citibank 2, whose balance has grown now to $5311. The letter says that this account has been pre-selected for a settlement offer of $3452, which represents a 65% settlement. Additionally, it suggests that if we accept this offer and setup a payment schedule, that they will stop charging interest, as long as all scheduled payments are made when due. They also provided the following phone number to discuss this, and other options: 866-680-8627.

Now I know that many have received better offers as time has progressed, but I am just going to do a little math here. The account balance is growing due to late charges, over balance charges and interest, by about $180/m. So if another, say 4 months goes by, and another $800 gets added onto the balance, it will be about $6100 when hopefully we get the better offers of say 30%-40%. 40% of $6100 is $2400, so it would seem that this offer, while tempting, may not be the best offer. I just think its interesting that after only 2 months, and no contact from us, we are getting this correspondence.

Our plan is to call all the CC's this week, to let them know of the hardship and see where those conversations go. Ideally, I would like to findout about setting up all the accounts in BLP's to stop the late charges and interest. The question I will have for them is that if a BLP is setup, and we continue to make no payments, do they cancel the BLP and revert back to the late charges and higher interest payments. I will update this thread with the results of those conversations.

I have been following your progress. I have been very impressed with your follow up and really appreciate your posts. I am still current on all of our cards but think this is the month (Feb) that we will stop paying and start saving the payments and hope for settlements in a few months. My question before we started (you have responded to another post I had) do I just simply quit paying or do I call my creditors and kind of warn them this is what my plan is? We called them a few months ago and tried to negotiate interest rates down etc and none of them except Amex Exp worked with us. We have just NEVER not paid our bills..so this is really foreign to us. I am really scared to death, but at the same time just fed up and want to get out of debt. I get the general idea of what we do but I guess the very first step of what to do..I need total guidance on. I am all for open communication as long as they are going to be reasonable and when we called them a few months ago..not reasonable. Anyways thanks again for any insight...and good luck on your continued adventure.