Strategy Help Please

I found myself in the same position as you are. I could still make the majority of my household obligations and even some of my lower credit bills, but my big ones I had to let go. Your strategy sounds good, but there is no real way of predicting the outcome. Make no mistake about it, your credit will take a hit, your going to get phone calls, (lots of them) and you may get sued. Generally you cannot make a deal with the original creditor to settle until about 3 to 6 months after you stop paying them. This does give you some time to save for a settlement amount. The strategy I used was to field my first call and tell them I had a reduction in income, experienced sporatic layoffs, and I'm trying to stay out of bankruptcy (basically your reasons behind your financial hardship). Tell them you just don't have the money right now. If you tell them you want to settle right away, that is NOT a good idea. Don't mention doing a settlement, let them bring it up to you. Also, believe it or not, I only answered calls between 2PM and 5PM on any given day and basically trained them to call only during those times. Of course they called at all times at first but then it slowed to pretty much that time frame. So for the first three months it was pretty much them hassling me for the money and me giving them my sob story. At the 3 1/2 month mark I got my first offer of 40% of the original bill, plus all late fees and charges. I held off for another month and a half and the next offer was 30% which I had enough saved in my shoe box, not my bank account, and paid them off. They sent me a 1099 for the diffrence of what I owed and I had to pay income taxes on it at tax time as if it was earned income. During this time I should add, I took massive detailed notes of every contact I had with them. I even recorded the telephone conversations so I could go back and add to my notes. Make copies of anything you send them and only send things registered mail / return receipt. Keep all this stuff in a folder or binder so when they call you are ready. If things get real thick and you have any questions, come back to this forum, there is so much good advice and experienced people here. This is where I learned to handle all of this. You'll get a little lift when you need it just knowing there is a place to go to with plenty of help. Good Luck! PEACE

Thank you for the advice. My plan would be to come back and pay the debt in full. Do you know if while I am choosing to not pay Bank of America, if Discover, Capital One etc will know about this and increase their fees even though I am paying them on time and then some? Another General question....is it worth taking a 700 where i have NEVER had a late payment and choosing to not pay one bill thereby demolishing that score but overpay every other billl I have until they are gone one by one? Will this one credit card be more damaging to me by not paying it than barely treading water and getting nowhere just to potect a credit rating? Once again 6 other cards will be paid off within 18 months and never used again. What does that look like on a credit score? Making payments on all but 1 bill? Thank you again.

Hi there.
I have read your post and understand exactly what you are going through. I owe bofa about $40K, which is my biggest account. I stopped paying them about 4 months ago, along with all of my other creditors. They (bofa) are now talking settlement. Before they even mentioned settlement they wanted a total breakdown of all of my expenses, to verify that I was having a hard time paying everyone. Believe me they had my credit report pulled up when they were asking me all of these questions and probably were comparing my answers to many of the things on the credit report. They even went over things like utilities, groceries, gas, etc. etc. They offered me a 30% settlement, payable in 3 installments. I am hoping they may come down from the 30% settlement figure, but I'm gambling at this point. They told me that the banking policies have changed as of Feb1st, and they can no longer offer 6 months to pay. This is what is killing me. I was really hoping and planning on being able to stretch out paying them for 6 months. Now my settlement plan will need to be re-worked.

My advice to you is be prepared to be sued by Bank of America if you cannot pay them in a relatively short time. Also just a thought, before they even mentioned settlement with me they spoke about revamping my account, so that the minimum payment would be about half of what is was. Depending on what type of account you have with them, maybe that would be an option for you...then you could use that money saved to pay down your other creditors.

Oh and btw, my credit score before I decided to stop paying my creditors was about a 680. Recently it was checked and it is now a 520....ouch!!! To me though, I really don't care what my score is if I have all of this debt. I need to get rid of it once and for all so I am willing to take the hit.

Good luck to you!

Thank you for the words, it does help alot. So how is my scenraio different in that ALL creditors will be getting their money except one? Will that make my score better? Does it matter? If they sue, what can they do, garnish wages? Attach a lien on my house? What is better: a low score due to a creditor not getting their money but digging out of debt aggressively and successfully or keep swimming barely able to keep up just to manitain current status while interest charges are causing a drowning, slow death? Thank you all for your insight.

My guess is that the creditor you stop paying is going to make trouble for you (but I'm new to this like you).; They are going to pull your credit report and see that you are making payments to other creditors... only not to them. They WILL see that, so you're going to likely have to explain why they have been singled out for non-payment. And probably they will not like whatever you tell them.

Also, most creditors don't retain the debt for a year or year and a half after payments stop. I guess some will, but most will not, and likely it's sold to a collection agency. It would be unusual to let the account go for that period of time, then just start making payments again, and they won't sit around and wait for that to happen.

Have you considered negotiating with that creditor for a lower monthly payment? Many creditors are doing that, as you will read in the forum. So you still make a payment (lower than the $900/month), and can still focus on the other debt, just not as much as you may want to.

Or you sound like a good candidate for debt consolidation. Have you investigated that option?

I think it is a personal preference as to which is better...to keep plugging along, making the payments and not really being able to bring your debt down significantly....or to take the hit on your credit and get rid of the damn debt. For me it was a no brainer. My situation was either pay just over the minimum payments and hope to be out of debt in 8-10 years, or let my credit score plummet and be out of debt in about a year and a half by going the debt settlement route. I guess I just look at it as when I get out of this debt I really don't want to apply for any more credit related stuff anyway, so who cares what my FICO score is! Life is too short, and who knows what the next year may bring let alone the next 8. I really think it is a personal preference.

I spoke with BOA per your advice. They said until I move into that default situation by missing a payment or paying less, they are not prepared to make any changes. So knowing this, do I now just pay let's say $400 instead of $900, start applying that money toward other debt? Should I call BOA and keep them informed that the household budget will not let me make a full payment to them and what can they do? Or do i await their inevitable call? By doing this, I am wrecking my credit, right? But doesnt paying off other debt give me good points as well? Also, since this has changed my entire irresponsible attitude that got me into this, I now only care about what i can afford to pay with cash. But the inevitable home purchase is going to come around again within 3-5 years. How badly will this linger from a mortgage underwriting standpoint? Thank you.

Yes you definitely have to be past due...and more than 60 days for sure in order for any creditor, (definitely BofA) to offer a lower payment option. Some creditors will offer a lower payment plan for 6 months to a year, and others may only offer a lower payment for 2 or 3 months. In regards to a home purchase, for sure this will effect your credit but I'm not sure that it would be enough to stop you from purchasing a home. Yes you still get good points for paying other bills on time but defaulting on the $900 bill will for sure mark your credit with a red flag. HOWEVER, it all depends on what you need to do within the mortgage industry. Are you talking about refinancing or purchasing? Right now all the rules are changing too. I believe it is March 3rd that new policies will be in place for the mortgage industry due to Obama's recovery plans.

On a side note, I just spoke with a debt settlement "coach" who has been in the industry for quite some time. He verified that the FTC has enforced new policies (as of Feb 1st) that only allow debt settlement companies to stretch settlement payments out for 3 months. This is a big change for many of the banks, like BofA, who were accustomed to offering people 6 months to pay off their settled debt amount. Just thought I would mention that.

I think if I were you at this point I would look into a debt management plan. It doesn't hurt your credit, and they can negotiate lower interest rates and payments with all of your creditors. I don't know what state you are in but a really good nationally know debt mgmt company that is non profit (and personal choice of Suze Orman in case that matters to you) is called Greenpath. If you google their name you can see if they have a location in your area. Talk to them and see what they can do for you, they help a ton of people get out of debt and restructure their income so that they can budget everything including savings.
Hope this helps!