Is debt settlement right for me? Advise???

Your story sounds like mine, the only difference is you are doing something about it now. I continued to pay and juggle to the point where I had no choice, I had to stop paying. I am in the process of DIY settlement and am about 3-4 months late. If you can handle the phone calls and credit score taking a nosedive then it might be good for you. There is a lot of good advice on this site and you do have other options if you want to save your credit. The problem with these banks is greed when they see you in a bind they put the screws to you. When you stop paying then they will give you a lot of payment options and they are more than happy to lower the interest rate that they couldn't lower when you were paying on time.

Don't take the equity line. It's best not to take out equity loans to pay off credit cards.

If I were you, i'd do the settlement myself and see if you can settle for 40-50% of what you owe.

Your credit will suffer, however, it will improve in a few years.

You won't be able to settle right away. It will take at least 120-180 days before any of your creditors will even think of a settlement.

It won't be easy, but it can be done. Just remember any amount over $600 that is "forgiven" by your creditor is subject to a 1099 that must be reported to the IRS, unless you were insolvent at the time.

To properly asses your situation, we would need to know more information. As far as using your home equity, that depends on a number of factors. Sometimes it make sense, sometimes not. What are your plans for this home? What would the equity line bring your total loan to value up to? How shaky is your job? Do you have adequate cash reserves? If you have no savings at all, and a shaky job, then you might actually seriously consider taking the home equity line now, if nothing else but to have a cushion in the bank for the unforeseen circumstances. Settling your debt is not as important as taking care of your family. So you need to plan for the worst, but still proceed with being responsible and taking care of the debt if the worse doesn't happen.

In this economy I would probably go ahead and take the home equity line, you don't have to decide now whether or not you are going to use the money for settling your debt. The money sitting in your bank account won't have an effect on eventual settlements as long as you are not trying to settle with the CU that loaned you the money, or have the money in an account with a creditor that you owe money to. However, they can look at your credit, so they will be able to see that you received the home equity loan. But you can't worry about that because, if you don't take it then you don't have it available anyway. Easier to have the money and explain away its use, than to not have the money available if needed.

In these times, cash is king, circle the wagons, make sure you and your family are protected with a cash cushion and then worry about the debts. You have to make this decision quickly though because you may not qualify for this loan for very long, especially if your creditors start lowering your credit available.

hope that helps

Unfortunately, no one here can really answer that question without a lot more information. You say you can get $40K and you have $60K in debt. That sounds like it could work; however, it is generally a bad idea to take out new debt to pay old debt. There are many factors to consider. What will your new mortgage payment be with this new line of credit? How long do you plan on living in this home? Can you make this new payment and still be able to pay down the rest of the $20K using a debt stacking / snowball approach?

I recommend doing a lot of research on all the available options out there and weighing each one. In the end, only you can make the decision that is right for you.

Thanks for the replies. I will try to answer all of the questions. 1. My job is stable.
2. I plan on living in my home for a long time.
3. My loan to value will be 80%.
4. I don't have a cash reserve other than the above mentioned money.
5. The addtional equity line is about $375/month.
6. My total CC debt is about $1100/month.
7. It would still be a struggle to continue to pay on the $20K+ remaining debt if I use all of the cash up front.

Thank you again for your comments and thoughts.

It is almost a toss up. $1100 - $375 = $725. You said your over extended every month. By how much? I would think with $725 freed up every month, you could pay down the $20K fairly quickly. You could also just use the $35K now and keep the $5K for reserve / emergency. I am assuming the extra $5K is savings or maybe a loan from a family member?

If you are concerned about your credit score then Debt Settlement is not the way to go. However, you own a home you plan on being in for a long time and your job is stable. If you have a reliable car, then I am not sure what you would need credit for. With $40K you could settle $60K almost immediately (i.e. at the 120 day mark as you will have to stop paying) and then work to rebuild your credit after that. Plus you would have 6 months of not paying $1100 a month. That's another $6600 you could sock away.

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If you choose to use the equity line to settle with, make sure you pull those funds before you stop paying the cc's. Also, I think that Texas is a non-wage garnishment state. So, if you were to get sued, they could not garnish wages...another plus in favor of settlement.

If I were going this route, I would try to use as little of the line as possible. Save what you have been paying, and sell as much junk as you can...then in 4 or 5 months go for settlements. The other good news is that your 2 largest creditors, boa and chase, often settle for under 35%.

Whatever you decide, make sure you factor in the tax implications of settlement, insolvency and 1099's.

God Bless!