Advice on 110K CC Debt

Have you fallen behind on your credit cards yet?
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No, I am current on all items no late payments. BOFA 4 cards 19k@9.9, 12k@16.5, 6.5k@12, 9k@8.9 acct closed by me. Amex 12k@15, Citi just sold to BOFA 19.5K@18. CITI 7k@20, Cap1 6@13, Discover 7k@ 16% closed by me. The balance on 5 asst store/HD/lowes. Recent FICO 660,658 for my wife and I. No past judgements, my scores have been hammered by high DTI and a recent wave of credit line cuts. Amex lowers my limit monthly, Bofa slashed all our limits to within $500 of our balances. My usage went from 50% to nearly 100% in less than 2 months. My min payments are $2650 per month and rising quickly. I want to make good on my debts but my lenders are killing me through rate hikes and limit cuts. House values in our area continue to fall so what equity I had evaporates with every new sale. Thanks for your help.

I know what you mean about house values.?? I work in the mortgage industry.
If you have a lump sum of cash on hand then I would try to settle.?? The thing with settleing is most of the time you have to go at least 90 to 120 days late.?? It will impact your credit but you will recover from that quicker than you will bankruptcy.
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Thanks for the reply, if I can't settle some acconts due to lack of funds how bad would judgements be compared to Chapter 7. I live in a no garnishment state, I am also very worrid about the thousands of calls but I really can't continue to bleed out slowly and still keep my house.

First...you are not bankrupt! per Dave Ramsey...
If you have 60k in a retirement account you should pay off debt with that money....yes you'll be taxed but you'll have to go through ch. 13 bankruptcy considering your income and they will make you pay most of your debt off over 5 years.
If I were you....I would begin the settlement process if you can't handle debt load.....negotiate reduce interest/payments or just plain settlements...shoot for 35-45 % settlements

The best advice I have heard is from the last guest, If you have 60k in a 401k find a way to make arrangements through a non profit credit settlement company. Just because you live in a state like Florida which cannot garnish the salary of a head of household your 401K is not protected against a lien. You may ge able to take a loan against it without penalty and get your debt down. Pay off the smaller ones first and the use the money towards the next largest and so on.

will look into hardship withdrawl of 401k money tommorrow. Will stop paying the 7,5K@20 sears/citi and the 20K@20% citi/bofa. I'll keep everyone posted on what develops. Thanks for all you counsel my wife is very nrervous as am I.

Best of Luck to you!

I would love to hear what happens

Just remember if you take a hardship withdrawl you will still have to claim that on your taxes. Try to see if your company allows loans to be taken from your 401. This way you can get the loan at a very low interest rate.

Hi Cheeseater,
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Welcome to the Community!
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I am a cheese lover myself, what is your favorite kind? I can eat Jarlsberg and Havarti with caraway seeds by the block, especially with some good basil pesto. But for a complete surrender to an Epicurean swoon, I find Cahill's Irish Porter Cheddar to be nothing less than the gift of the gods! [Of course, I am assuming you meant Cheese eater, and not Cheese 'ater!]
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You would in all likelihood not qualify for Chapter 7. I would recommend Chapter 13 before you get behind on your payments. With your financial situation, it is almost a sure thing that you will get sued more than once while you wait the time for a settlement. Since you are on time with your payments, you could also try to find out about their hardship programs. Frankly, if you stop paying on them, they will go up to as high as 30% and you will see that $110,000 balloon out of proportion so fast it'll be like watching the dough rise!
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Under normal times, settlement would be preferred over B/K. However, we are in the worst economy in decades and B/K is completely understandable in these trying times. In fact, it is probably better because as you can read in this Forum, many creditors and collection agencies are getting really hungry and are attempting to devour whatever they can get their paws on.
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Obviously, ultimately it is your decision. But the idea of getting rid of retirment funds in order to pay debt is both ludicrous and dangerous, especially when they are most likely untouchable by your creditors, even in a bankruptcy. "http://www.bankruptcylawnetwork.com/2008/09/14/will-my-retirement-account-be-taken-in-bankruptcy/"
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Hope this helps,
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chrys

lol Chrys! I am beginning to hate certain cheese because I work with it everyday. The smell of parm and blue cheese just makes me sick lol
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I agree with what you have said about the retirement funds. Except if it is a??absolute emergency. And then in most cases it can take up to 2 weeks to get the check.????
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HAHAHA. Yes, by themselves they are too much for the tastebuds, that's for sure. But grated parm (with romano) is almost necessary to top that wiggly mountain of spaghetti, and blue cheese dressing tastes darn good on a salad! And what about hot wings and celery sticks? Ranch? Bah! lolz
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I hate to see someone give up their retirement account, especially when so few Americans save - yet when they retire, most will wish they did. Life is really tough as an elderly person as it is (SS & Medicare benefits are rather insultingly paltry) and those years should be as wonderful as possible - that's why they call them the golden years.

you guys are making my hungry, i got some chedder with my name on it in a few minutes!
anyhow, its great that you realize that you have a issue and are looking into correcting it.?? Frankly first i would call your creditors and see what they can do for you alot of people are getting into some great hardship programs.?? If that dont pan out, see if you can swing a consolidation payment through a company like this site has or another one that offers management and may be able to reduce % and fees and wrap it up into one big payment.?? If you know you are not going to be able to do that, then consider settlement. Its not fun i promise you will need to buy a good answering machine!??
If you wish to do this yourself know the facts about settlement and how to go about it.?? There are some great posts on this forum to brush up on your skills if you are not sure how to go about it.
Good luck to you i wish you all the best!

I would vote for taking out a loan on the 401K. Not only do you normally get a low interest rate but a lot of companies put that interest right back into your 401K. You'll have to check with your employer.
The fact is that unless you can get your debts under control, all that money in your 401K will do nothing but to help you pay off all of the debt you've accumulated over your life. What good will that do you? Just think about how quickly you could build your retirement back up with an extra $2650/month in your hands.
That's just my thoughts though. There are many good ideas here to ponder. I wish you and your wife the best of luck!

Thank you to everyone for all the advice and kind words, also the reviews of various cheeses. Good news I won the lottery and will be paying all my creditors in ..LOL. Spoke with my wife and chapter 13 is probably not an option due to her job. I fear the times will be more difficult than I'll be able to deal with. I owe BOFA alone 66k with their buying my Citi account, the fact that 3 of my neighbors work in the corporate CC division should make life interesting to say the least. Pass the 66k along with salt. Thanks again.

Wow, that is a challenging position to be in, for sure. I do not envy you.
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BofA will likely sue on an amount that large, so if you need to go the debt settlement route, be prepared for that. Be also prepared for your debt amount to skyrocket as your interest rate triples and late fees, over the limit charges, etc., add on and balloon your debt to even more frightening proportions. Not to mention, the phone calls.
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First, just make sure that you do not have to go through all that trauma. Contact them and let them know your situation and ask about hardship programs. That may buy you some time. There's no way you can do a Chapter 13 on the business?
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Personally, I am getting quite steamed up over these greedy financial behemoths and their business practices that increase chances of people not being able to pay. Because of those credit limit cutbacks, your score has already taken a hit. That's really terrible. These people have a stranglehold on us and we are nothing but chattel to them and I would love to see them dismantled brick by brick..... None of this behavior surprises me, though. They have been punishing people who pay the entire bill every month, for some years now, by adding service fees, dropping the limit, etc.
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Check out the Federal Trade Commission's new Money Matters website. There is all kinds of info and advice there.
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I wish you both all the best and the sincere hope that everything works out for you both. These are trying times for sure. I am concerned about your wife, though. You mentioned that she is employed and that you cannot file for B/K because it would affect her job. Saving for settlements is likely to knock your credit score down by around 200 points. Will that affect her? What state do you live in? You did mention that it is a no-garnishment state, but there are also states where everything is common and your creditors will likely go after her at work to collect, by requesting a wage assignment (they are voluntary - garnishment is by court order). Not saying they'll get it, but if they try to ask for it that would be bad, no?
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You need to weigh out all options and plot out the best course of action to get you through these rough waters, if you make the wrong move it could hurt you even more. I don't want to see you loose your home, nor have your wife's job put in jeopardy so great care is required. And the other reason is since you are on time and have great interest, your options are much wider. Another thing you could do is look into downgrading your home, i.e. get a foreclosed house with some fixer-upper potential (quick increase in equity) and that may get you some leverage to pay down (or off) some of these bills, depending on if you could actually sell your home in this market.
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Very challenging, indeed.
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But *DON'T* get rid of your retirement funds, it's better to borrow against them than do that. You might try checking out the Small Business Administration website (and the Financial Assistance subection). You might be able to get a business loan or grant to knock down some of this debt and see you through this present crisis.
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Well, that's all I can think of right now.....

Solicitation deleted per TOS - ND

Thanks Crys. Selling my house is not a likely option in my case. I owe nearly what I could sell for, there are 4 current foreclosures and several distressed sales right now. I live in NC, home of consumer friendly BOFA. You hit the nail on the head about banks putting the screws to people. Amex started it by dopping my limit to within $100 of my balance. I sent them a $2000 payment and they thanked by dropping my limit another $2000. Today I received the dreaded "change of terms" on my BOFA 20K@8.9 increasing the rate to 15.6%. The joy never ends, I have an appt with a BK attorney tomorrow. Has anyone had any luck with a loan mod? :shock:

Hello, I have 110K unsecured debt, no equity in my house and annual income of about 100k gross. I met an attorney yesterday and he recommended chap 13 said and quoted me a 10% 5 year plan. Does the 10% sound overly optimistic? I have a leased auto and the lease will expire in 18 months, will I be able to purchase the car or will I have to return it and be without a vehicle? Depending on my employers profit I receive a bonus of 10-20% at the holidays will the trustee confiscate this? Thanks in advance for everyone's help. also does the time on the bankruptcy remaining on my credit start when I file or 5 Years later at discharge? I am wondering if it would be on 10 or 15.

Have you checked into the SBA yet?

Chapter 13 SOL is 7 years after the Order of Relief, which is the filing date. (Chapter 7 is 10 years.)

Is Chapter 13 an option considering your wife's employment issue? North Carolina is not a Community property state so it shouldn't affect her credit report (as long as all discharged debts are in your name only).

The US Courts information page on Chapter 13.

10% of your total debt, or 10% OFF your total debt? If the first, that's WAY better than you can expect from settlement - without all the lawsuits.

You do not have to include the car (you shouldn't), you can opt out on that one. Since you don't own it, it shouldn't be a problem - but that is my opinion only. You should consult with a bankruptcy attorney about that one.

Check the special Loan Mod page that was created by the 2009 Stimulus to see if you qualify. That would be your best bet.

Hope this helps.

I met with a different lawyer who seems to think I'll pass the means test for Chapter 7. I hope I do because he told me any bonuses for the next 5 years would go to the Trustee in a 13. I stopped paying 2 cards this month. Next month I'll stop paying the rest. When I mention 10% it was referring to 10% of the 110k over 5 yrs. $183 a month for 60months. I did check the loan mod page and my house mortgage is held by Freedie Mac. Citibank is calling every 30 Minutes, explained I was waiting to see about my wife's job which this is no lie... is undergoing "organizational evaluation" it never ends. The raised my rate 29.99 to help out and threatened me with a $39 late fee. :shock:

Yikes! That is a lot of debt. I would try to settle, since bankruptcy will stay on your credit report for 10 years and darn near ruins your credit for good during that time.

it is your decision, but I can sort of relate to your situation my debt was $165k when I stop paying all at once back in Nov 2008 income around $120k year my first reaction was I have to go with BK ch.13 hired attorney pay first fee start gathering documents, called creditors with info about filling BK providing law firm name and 800 number... meantime I start researching what else can I do, reason why I did not want BK was not onl because it is bad and stays for 10 years, you might have problems with future employement (I know it is inlegal to discriminate someone b/c of BK but some comp. do this they just not teling you about reasons why you did not get job) go back to my story. CH.13 is not an easy thing you are going to be on very tied budget with no spare money, if you get 10% raise at work they will take extra, if you get nice bonus they will get all, so over 5 years you might actually re-pay almost all or all and still have BK on your record. In my case I would pay $1,050 a month for 60 months, this is what my attorney estimated I have left after living expenses/mortgage/car payments etc. so somewhere around $60k over 5 yr. in ch.13 plan
So I start researching this topic, this forum was very helpful since settlement is not something you do on daily basis. I had some 401k funds which would be protected in ch.13 but I decided to use this to settle my accounts since I figured I prefer start over with my 401k savings then file BK and perhaps repay more then I would pay in settlement.
short of long is I was able to negotiate myself with all creditors BoA, citi, chase, beneficial, amex, discover and settle for an avarage 31% at that time 120 days later already $180k debt, yes it went in 120 days from $165k to $180k
lowest settlement I got from amex 20% highest from beneficial 50%
at this point I have chase left only of course still waiting for confirmations from OCs and update to my credit report but since I have all in writing I'm not expecting that they will scam me.
phase no.2 is repairing credit but since I'm not planing to stay in the house I'm and have relativly new cars so not planning to change it either withing 2-3 years I real do not care at this point.
Oh, btw 1099c yes I technically will need to pay taxes on $120k forgiven by creditors, but not exactly since my house is up side down for about $30k and still paying cars so there is no equity either at they time of settlement I'm insolvent s no taxes to pay on this one
good luck

Nice post Joe777 I am in about the same boat. For years we have been just getting by and putting large things we needed/wanted on CC. Finally got to a point we can no longer pay on the house and live while we have CC payments. We finally made our first budget and come out about $300 left over after living exp. So at this point its either settle with them or Chapt 13, with only $300 extra they wont get much over the next 5 years. We owe about 75k with 55k of that to BofA on 3 cards. We plan on talking a loan out on my 401k and about 30% is what we can pay. Next step is to see if my bank will do anything on our house loan to lower payments since we owe about 425k and its dropped to the 350k in this area. We love the house and the area and hope one day they go back up since we are in the city.

It is not easy to choose the settlement option, but the other options aren't easy either.

I have good days and bad days. Mondays and Tuesdays the calls are relentless. Saturday and even Sunday they start at 8 am. By the end of the week they either stop calling or I have had a good day and will pick up the phone and speak with them. Once I speak with them it usually stops the calls for about a week.

I've just found that if I'm having a low day and can't deal with the stress, don't answer the phone.

I've also found that on days when I have strength and do talk to a creditor, that I get through it much better if I keep my demeanor quiet, even depressed. Monotone voice. Keep telling them I'd like to pay but just can't.

It's very hard to say no when they try to wheedle just $100 out of you , but that won't help you get a settlement - you must remember your goal!

I've successfully negotiated 2 settlements out of 8 so far. Stopped paying on half the accounts in January. The other half I'm keeping current enough so that they won't go into collections and I can stagger the settlements. Total debt is over $100K. One account is bouncing around to CAs and attorneys, so it might become critical.

It's just a day by day journey. Like anything else unpleasant you have to face in your life. Patience and persistence pays off.

one correction to my previous post I meant "I'm planning to stay in my house" so will have no need for credit in few years that's why I do not care about my credit rating at this point
in any event some of my cards went pretty quickly to CAs due to the fact I told OC I'm filling for BK at the very begining and wasn't joking or playing games since I hired attorney, you can use BK as part of negotiation but if you playing hard ball they will ask you to provide attorney's name and phone.
downsize of that was that in 2 or 3 cases I had to call back and tell them I changed my mind and let go attorney and no longer filling for BK because they said my cards are in BK department so they cannot negotiate settlement, not the big deal though.