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Like everyone here I need help reducing debt. First timer here posting a topic but have gone through a lot of posts and a student of this forum needs help!
I am a 28 yr old male migrated to USA in 2001. I make about 65k/year( $4300/month) and my wife about $40k/year (2500/month), married with 1 kid. and in the recent past I have accumulated debt which has sky rocketed and some because of personal emergencies and unexpected bills. Summary of debt ( All credit cards maxed out on limits):

Amex: 18.5k
Citi Prof: 3k
Citi Premier pass:6k
Citi business: 5k
USBank:19k
Penfed personal loan: 10k remaining out of 25k
chase platinum: 12k
chase sony: 4k

Car loans of 7k and 8k
rent apt $800

Our payment is about $3k/month.

We could afford it till my Wife had to quit her job. Now we can barely make it. We have not missed one payment till now and have a clean history. I am still in good standing with all the creditors. I would like to know what are my options to reduce debt. Please advise.

Appreciate the help!! Thanks

Posted: Mon Jul 28, 2008 12:19 pm Subject:

Does your wife plan on starting work again soon, or was there a medical reason or something similar that she had to quit working because of? That might help determine if there needs to be a temporary solution or one more immediate.

Posted: Mon Jul 28, 2008 12:23 pm Subject:

My Wife had to quit her job to take care of our 6month old son who had to undergo surgery. She is not planning to go back to work for atleast another year. I would more tend towards a permenant solution.

Posted: Mon Jul 28, 2008 2:28 pm Subject:

You might want to look into a debt management program. One I can think of right now is Greenpath. They can get the interest reduced and work out a budget to pay your creditors.

It's free for the consultation. They have a good reputation and listing with the BBB.

Once you finish the plan, it doesn't hurt your credit. Since your credit is good right now, you should try and keep it that way. When you do a DMP program, it will report on your credit that you are in a program, but since payments are continued to be made, when you finish the program, it is removed. Therefore, no foul, no penalty.

Good luck.

Posted: Tue Jul 29, 2008 7:10 am Subject:

What are their charges after initial free consultation? Also on the other hand if I dont care about my credit history whats the option?

Posted: Tue Jul 29, 2008 3:13 pm Subject:

Charges were $50 enrollment and up to $50/mo.

If you don't care about your credit history, debt settlement (if you have the money) or bankruptcy if you don't.

Posted: Wed Jul 30, 2008 4:31 am Subject:

What are the steps for debt settlement? Do I just stop paying the bills and then see for offers that I get from creditors? If I do it for 4 months and not pay the bills I will have about $15k + I might have about 7k in Stocks which I will get out of.
So a total of about $22k. What would be the advisable steps?

Posted: Wed Jul 30, 2008 7:27 am Subject:

I don't know much about settlement. Try the search box to the upper right. There have been many threads about settlement, and if you do go with a settlement company, PLEASE do your research, because there are many scam companies out there!

Guest · Posted: Thu Jul 31, 2008 10:17 am Subject:

What you can do is stop paying till you start getting calls from the creditors and talk to them and explain whats going on and they might counter offer your a reduced amount to settle the debt

Posted: Fri Aug 01, 2008 6:01 am Subject:

If I do that then can they file a lawsuit against me? How will it work? Any one here has any thoughts?

Guest · Posted: Fri Aug 01, 2008 9:15 am Subject:

Your credit score is going to take a hit, making it hard to get approved for future loans if you decide to settle your debts. you will have to pay upfront money to the debt settlement program you do not have, that does not make any sense.

yes, your creditors can file law suits, they have a right to try to collect their money. when and who will file law suits, that is very difficult to predict.

Have you spoken to your creditors and expalined your hardship? let them know why you are having difficulties paying them.

Also, another avenue to explore is to negotiate settlements personally and avoid the extra fees you will have to pay a debt setlement company. based on your total debt you are looking at at aretainer fee of about 4 to 5 thousand dollars up front, preferably the first three months you are in a debt settlement program. Add to that about 20 to 25% commission on every settlement you reach. Do the math on 50% savings, plus the 4 or 5k in retainer fee.

Also, the amount of debt you have will not be settled, I guarantee you this, before one or two of your creditors especially Citi decides to file a lawsuit.

Please speak to an attorney about your situation, a debt settlement program is not the best option for you unless you know you will have about 50% of the total debt to settle all of your accounts anywhere between 24-36 months. Add to that debt settlement compnay fees, late fees and interest fees. I would be careful hooking up with a debt settlemetn company just to cah in on ht eup front fees on your total debt.

Best course of action, speak to attorney or settle your own debt.

Posted: Fri Aug 01, 2008 9:26 am Subject:

Pretty much all of the credit card companies have hardship programs. Some may offer to put you in a program if you call them now and explain that your wife has lost her job. Some won't offer you a program until you start missing payments. The programs vary by creditor, but most last about six months to one year, they will reduce your interest rate to somewhere between 0% and 10%, and they will require you to pay 1% per month of your outstanding balance at the time you enter the program.

I'm not sure about the personal loan and the car loans, but it doesn't hurt to ask. I was able to get put on a hardship program for my mortgage, and it reduced my monthly payment by almost $600 for a period of three years.

If you decide to do debt settlement, as others have said, I would definitely consider doing it yourself. However, you do run the risk of lawsuits. One of our creditors started threatening a lawsuit at about 3 months past due and another one at about 4 months past due. We've now had to file BK, so I don't know whether they would have actually followed through with the lawsuits, or whether they were just threatening.

Posted: Fri Aug 01, 2008 11:44 am Subject:

It looks like you have no assets but your income. These are just a couple options I can think of but they will completely wreck your credit and make it very difficult to get a home in the near future until you clean your credit but it will cost you the least amount of money.

The way I see it you are putting out 3k/4.3k monthly which is 70% of your money and I don't know if that even includes car and rent. If it doesn't include car and rent then that is a huge percentage going to unsecure debt. I think you have 2 options that you might be forced into even if you don't like them.

Option one is to bankrupt it which I rarely recomend. I am not a big fan of BK and the new laws make it worse.

Option two is quit paying it and stash that 3K/month in a shoe box. As you build money start trying to settle with the lower amounts first. I would always offer them 50% of the balance you had due at default. Don't include the BS fees in the offer. If one starts to file a suit then bump them to the top of the list if you can. If it is a large amount of money like a 20k one then you may have no choice but to eat a judgment. The kicker is if any of them get a judgment then the worst they can do is garnish up to 25% of your take home pay which is way way less than that 70% figure. Basically this option will free up your money so you at least have some breathing room to live and work on settlements.

You are going to have to start really concentrating on a strict budget especially since you lost an income. You need to elminate any monthly bills possible. I would consider things like eliminating a car and or downsizing, getting rid of cell phones, cable and other monthly bills that are more luxuries.

Posted: Sat Aug 02, 2008 5:58 am Subject:

Can you please explain me this : " The kicker is if any of them get a judgment then the worst they can do is garnish up to 25% of your take home pay which is way way less than that 70% figure "

Posted: Sat Aug 02, 2008 6:47 am Subject:

If one of your creditors does sue you and does win and get a judgment against you, then they can use that judgment to get a garnishment of your wages. However, the maximum allowable garnishment if 25% of your disposable income (take home pay). I think what Dollars was saying is that the 25% of your take home pay would end up being less than the total amount you are now paying to your creditors, so you would still come out money ahead.

Guest · Posted: Sat Aug 02, 2008 9:47 am Subject:

Maximum garnishment.. is it 25% every month or 25% of the annual salary ? On the other hand I have 2 different chase cards.. would there be 2 different lawsuits or one? If they offer me settlement then would it be on the 16 k I owe or I will have to negotiate for the 12k and the 4k seperately?

Appreciate your feedback!

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