Aftermath of Settlement - Examples Please

Great question! I'm in the process now, so I'm really interested in the answers. The only thing I can offer is that after 4 settlements, a short sale and a foreclosure, none of the credit cards that I am paying on time have lowered my available credit, which I thought would happen given my much lower credit score.

Hopefully more experienced users on this cite will offer their long-term experiences.

I know this is not the answer your looking for but for me, I'll deal with the crappy credit report in return for some peace of mind.

Right now not being able to sleep, I keep working figures in my mind almost every waking hour, the pressure of the phone calls, the fear of lawsuits or worse, judgements is really taking its toll.

When I am finished and debt free I will tell people I have a 500 FICO score with a smile.:D

My husband and I settled about $80k of credit card debt in Dec 2010/Jan 2011. We defaulted and settled on all of our credit card debt except for a $500 limit card in my name (had been $17000) limit but was dropped down by Citi about 6 months before we stopped paying on everything. We settled another Citi card in my name so I thought for sure they would cancel the card but they didn't. I didn't touch it until after settlement was done and now I just use it a little each month to help me build up my credit. The other debt we has when we settled was out mortgage which has always been current and our car loan 3 years into a 5 year loan always been current.

Our credit was in the mid 700s when we started this. I don't know what it dropped to or where it is now but my husband was offered a non secured card 6 months after settlement so he took it but we are not using it. The offer came by mail and we decided to see if we would really get approved. 8 months after settlement we get credit card offers everyday in the mail again.

Not a lot of info but I figured I would share. Good luck. I was willing to deal with whatever the effect was on our credit. We had no choice. I only wish I had started this process earlier.

Thank you for your inspiring story. We are @ the same boat. 80K debt in credit cards. Both full time working but can not keep up with the bills. Was never late with the payments. Can you please advise how you was able to settled such a huge amount? As of now we are paying the minimum on each c/c. Thank you very much

My spouse and I had a combined cc debt of 100k. Without getting into details, we had a tremendous loss of income so something had to give.

We stopped paying our credit cards and spoke to the creditors early on to explain our financial situation, answered the phone about once a month to give them an update, then at 90 days late (120 days from last payment) we began to inquire about a lump sum settlement as we still have no capacity to resume payments, we never caved into any small "good faith" payments either.

Of the 4 cards we bagan with totaling 57k, we have settled 3 for approx 35% of the new balance (with interest and fees).

The last one of the 4 is Cap 1 which I dont know what will happen, they are not the negotiating type.

We still have 40k to go and like I said earlier, we dont care what our credit looks like afterwards. We dont plan on applying for a mortgage or car loan within the next 5 years, but I keep seeing everyone gets out of the credit score mess withing a few years, may be "very" different if you need a mortgage though.

Good Luck, ask questions and report your results

Settled $250k CC and $400k Foreclosure.

Started out at 730. Dropped to about 500. One year in and credit score is about 580. Very slow to improve.

I had no choice and was ok with trading off my credit score for no debt.

Great story. Thanks. Can you advise. We have 4 cards with big amounts but special offers with 0% interest till December 2011. When ( I mean before 0% expired) and who you recommend to settled first (bigger amount or smaller). Here is my example:
AT&T Universal - Citi $20K
Citi Visa -$9K
Capital One - 15K
Chase - 8K

Do I have to stop pay all of them for 120 days in order for c/c to agree on the settled amount? Lets say I stop with all of them. This will help me to save approximately $3,500.00 in 120 days . I can try to negotiate with this amount to pay one of them.... please correct me if I am wrong.

with my experience with those banks... chase will be the easiest... so i would save it for last...
citi will likely be the most difficult and will probably highball you when you start trying to settle the account... but you never know til you ask...

you can call them, even while under hardship plans and ask about possibly settling the accounts- some will allow settlement, some wont...

we have one account with another bank that is under the hardship plan, and they will not settle at all. the only way that would even be a chance, is if we cancel the hardship plan, and take a risk of what the outcome might be, which may put us in a worse condition....

here is the issue... if you stop paying all 4 of them in order to save up $3500 in 120 days, you would only be able to settle with one of them. then that leaves you a maximum of 60 days to gather funds to settle the other 3, which by your figures would only allow you to save up another $1750.. that will not be enough to settle any of the remaining 3 accounts.

that said, if you cancel the current hardship plans, and go 6 months without payments to the 3, they most likely will NOT allow you to get into another hardship plan. but even if they did, the payments would be higher than they are now, and you would most likely have to pay the full balance over a long time period.... and lets say you were able to do that, if you miss one payment on the new plan, they will immediately send it to an atty or ca and if you tried to settle then, they would most likely want a much larger settlement amount..

The bottom line is, you have about $51,000 of credit card debt. Very rarely do our clients stop paying one account at a time; they usually discontinue making all of their payments, and one or two accounts are settled at one time, depending on what funds are available.

So, here's a good breakdown for you. Based on your figures, it looks like you'll be able to set aside $875.00 per month to go toward settlements if you're not making your monthly payments. It can be up to six months before you settle one account (with the exception of Citibank, who once in awhile will settle as early as 90 days and for as low as 30% of the balance - and this isn't every account, but it does occasionally occur - if you're lucky). So, let's assume that you're not going to be lucky, and you'll be waiting 6 or 7 months to settle your first account (remember, charge off is at 180 days delinquent - some accounts are better to settle pre-charge-off, and others are better to settle post-charge-off). If you made your last payments in September, your payments aren't going to be 30 days delinquent until November, meaning that you won't be settling until March, April or May (depending on the creditors). This means you will have saved $875.00 per month from October through April (assuming you settle your first account in April). You will have a total of $6,125.00 at that time.

If you settle one or two accounts in April, you can continue accumulating funds to settle your remaining accounts, one at a time. If you have $51,000.00 in credit card debt, and you save $875.00 per month, it will probably take you anywhere from 20-30 months to settle all of your accounts, depending on what settlement amounts to which you agree.

Hopefully you can throw in a tax return or Christmas bonus, as well, to help you accelerate the process. But, it's important to have a solid plan down before jumping into the process of debt settlement. And, stick to that plan; don't let a family vacation take precedence over getting your debts paid.

Best of luck to you!

I've only stopped paying some of the cards, because I couldn't see how we could settle on all of them within 2 years, even at 20%!. So I stopped the ones with the biggest payments. To me, the benefits are 1) fewer annoying collection calls, 2) more time to accumulate settlement funds and 3) a chance to rebuild our credit score since we still have current payments. Apparently, the collectors do not know that we are still current on some accounts, since our score has tanked.

What are the benefits to stopping all payments, besides being done sooner?

Greetings,

The aftermath is a state of mind.

You've gotta look in the mirror and acknowledge that it was you that got you to this point.

Then you've gotta think on how you're going to gain your freedom from the plastic masters.

Ask yourself if you are going to pay these debts off over many years OR get really agressive and attack the plastic masters though the settlement process.

I had no trouble going the settlement route as the plastic masters had made plenty of $ from my stupidity.

1. If you are caught on the credit score treadmill....then that's one mindset. You feel as if you need to rebuild the old score by aquiring new credit.....etc. A viable credit score means everything to you. I used to be that way. No negative vibes on you....it's just the way you are wired.

2. Then there's the other bunch who really doesn't care what the old credit score is because we have gone to pay as you go. If you ain't got the cash then it doesn't get purchased. I am now a member of this group.

When you are free from debt then you are truly free.
I'm talking everything from day to day expenses to home mortgages.
(Still paying off mine)

Regarding the aftermath, it's really just dealing with the IRS.
Forgiven debt is counted as earned income in their eyeballs, unless you chase the insolvency route.

All in all, it was no big deal to do the settlement route.
In fact I used the information gained here to actually have some fun with the plastic masters.

I had a lot of help from this forum.

And now all I carry are two debit cards.
Life is good.

Regards,
King "Kash" Jabba Labba
:):):)

when you aren't buried up to your neck in bills, it's alot easy to participate in programs or plans that build your credit. Nothing in this world is free but the cost of such is usually manageable after the settlement process

To answer your question, as far as what is the benefit of discontinuing all payments as opposed to just a few, I'd rather focus on the potential downfall of discontinuing just a few payments, and attempting to negotiate with those few creditors.

You may encounter a creditor who pulls a copy of your credit report (Bank of America, for instance), and questions why it is that you "decided" to discontinue paying them, but remain current with other creditors. This makes your hardship less believable. Also, if you're still paying some creditors, this means that you will have less money available to set aside each month.

Of course, this is a tough decision, and if you're more comfortable discontinuing payments on just a few accounts, the choice is yours. I just wanted to point out some possible issues you may encounter by going this route.

Again, best of luck to you!

I typically have agreed with generalee on things. But in this case, I would settle Chase FIRST...because they are so easy to settle with. In my experience, it was a huge boost settling the first. They will all come around eventually and may be easier to approach once they see you have a settlement on your credit report. That way, they know they had better talk business or maybe they get nothing.