End of The Road - Need a Strategy / Advice
Date: Tue, 03/27/2012 - 15:11
I'm going to try to get to the point and then go more into my larger history in case anyone is interested.
I fear I'm running out of options to prevent myself from literally running out of money due to paying all my debt payments on time. I can't assume my income is going to increase in the short-term and don't really have any significant room for further cutting of my budget. So I'm about to waive the white flag and say goodbye to my credit rating in order to save my sanity.
Bankruptcy I believe is not an option (read below) based on my conversation with a bankruptcy attorney. I realize you need to be careful choosing a credit counseling service (make sure they are highly rates, and don't charge anything more than a very small monthly fee processing fee.) I understand how the debt consolidation differs from a debt settlement service. But frankly I'm having trouble deciding which will give me the best balance between getting out from under the debt ASAP while minimizing my longer term credit hit. I won't be buying a car or a house anytime soon so my credit isn't a big issue in the short-mid term, but I also don't want my phone ringing off the hook.
After many users I finally, accidentally missed a payment on one of my business credit cards a few months ago. My phone started ringing off the hook and they raised the interest rate to 21%. BUT, they offered me a lower rate depending on how large of a balloon payment I would make. The payment was normally about $250. If I paid them $500+, they would take it down to 15% (which I did). If I paid them about $1000 they would take it to around 10%. If I paid them $1500 it went down to around 6% and if I gave them $2K they would take it to 0%!
Now I also had a credit counseling service see what kind of rate reduction I could get. Some cards there was a significant reduction (from like 14% to 6%), others there wasn't much of a reduction. If I stopped paying, I could probably get a settlement for less than I owe but I'm really not the type of person that wants to weasel out (even though the banks have made tons of me in interest.) The other thing about debt consolidation is that I won't be able to use the accounts anymore. I've only been able to stay afloat by continuing to re-use the principal I pay down each month to pay bills (so my balance doesn't go down, but, I never have a late payment and my credit is still good - at least for someone with a lot of debt but obviously I can't continue like this forever.)
So I'm trying to decide what to do.
a) Consolidate a couple of the highest interest accounts to get a lower rate and save a couple hundred bucks a month and try to limp along hoping my income will increase.
b) Purposely stop paying some or all accounts so I can negotiate directly with all my creditors and compare the rates they'll give me to that the consolidator will get. Problem is, my balances still stay high, and now I've wrecked my credit.
c) Stop paying some or all accounts (maybe the ones with the highest balance+interest) and enlist a debt settlement service to get the balance down, the payments down, and get out of debt ASAP and say good bye to my credit for 5-7 years?
The main thing I'm worried about is legal hassles involving the banks putting liens on my house. If all I have left is the $200K equity in my house, as long as I don't sell, can I do debt settlement and wait until everything is paid off to sell my house so they can't touch the equity, or are they smart enough to find out I have that much equity and not negotiate?
My background:
Self employed freelancer running two businesses (one service one product sales related). Variable monthly income. Made good money and like most spent most of what I earned. Starting 5 years ago income started to decline, spending didn't. Was literally banking that income would recover and then late 2008 WHAMO (along with many others.) Smart and resourceful so thought I could weather the storm (guess not that smart for ending up in this situation.)
Got about 5 cards with total $120K debt. One business card with $50K on it. Talked to a few credit counselors a year ago and met with bankruptcy attorney. Can't file for bankruptcy because I have about $200K+ equity in my home $600K home (use to be worth $900K in 2007) (yes one of the few homeowners under 45 years-old that has equity - only silver lining in all this) Selling my home is very very very last resort as there's a least a hundred hours or work and/or $20K+ in maintenance and repairs that needs to be done to get it in what I would consider 'good selling condition'. A distress sale would not be wise.
Got two kids (10 and 12), my own business, a 4,500 sq foot 5-bedroom house ( not my choice to live here) to maintain and I'm so stressed I can understand why some people choose to end their life (not there yet and don't plan to be.) Totally cut back in spending to virtually bare essentials with exception of maybe a conveyor-belt sushi dinner or pair of Nike's for my son for his birthday. Wife is working 0.8 for school district bringing in $45K and I'm bringing in about $65K (about half what I used to) We need to gross about $9-10K+ just to stay afloat break even each month with a large portion of that being credit card payments and morgage. Don't have the income to get any more equity out of the house.
Owned outright both my cars, sold one car for $20K and financed a different used car in order to raise cash two years ago. That has helped make up monthly shortfalls but has run out (and frankly probably just made it easier to downplay the severity of my situation.) Running out of assets to sell. Liquidated what little we had in 401Ks long time ago. Exhausted from the stress of watching my account balance swing lower and lower.
** Have been late only once or twice on a credit card payment (well maybe late on one or two) in probably avg 5 accts X 12 months x 15+ years = 900 payments over 15 years (probably much longer). Never missed or been late on a mortgage payment.
The interest is killing me and there is no light at the end of the tunnel as far as income bouncing back (at least not in the next 2-3 months.) Have done barter service trade with a $160/hr Career/Life Goal/Interview Strategist. Got lots of good skills/strategies for re-igniting my career (whether it be stay freelance or go back to corporate grind.) I'm just too expended trying to use every hour I'm awake to make money to pay the bills, take care of kids, and maintain my house let alone job search. I'm not unemployed! I'm actually slammed for short periods!
The stress is not worth it anymore as I fear my marriage and eventually my physical health is going to pay too high of a price to try to grind through this. I need a strategy to get some relief so I can "reset my life" This is in part why bankruptcy exists but like I said with $200K of inacessible equity in my house and the fact I'd virtually prefer to die than move (well maybe not that bad but there are other details I won't go into causing the house sale to be only a very very very last resort.)
Please spare me on the criticism. Although I've made some bad choices to get here I know what they were and how to avoid them in the future. I just need to move forward. I'll tell you one thing, it sure has made me see/view the consumerism in the country in a new light (which I got caught up in about like everyone else I know in this mid-upper class suberb I live in.)
There's a lot of underlying stuff I haven't gone into and anyone in a similar situation can probably understand some of those things but I've already written a novel here.
I fear I'm running out of options to prevent myself from literally running out of money due to paying all my debt payments on time. I can't assume my income is going to increase in the short-term and don't really have any significant room for further cutting of my budget. So I'm about to waive the white flag and say goodbye to my credit rating in order to save my sanity.
Bankruptcy I believe is not an option (read below) based on my conversation with a bankruptcy attorney. I realize you need to be careful choosing a credit counseling service (make sure they are highly rates, and don't charge anything more than a very small monthly fee processing fee.) I understand how the debt consolidation differs from a debt settlement service. But frankly I'm having trouble deciding which will give me the best balance between getting out from under the debt ASAP while minimizing my longer term credit hit. I won't be buying a car or a house anytime soon so my credit isn't a big issue in the short-mid term, but I also don't want my phone ringing off the hook.
After many users I finally, accidentally missed a payment on one of my business credit cards a few months ago. My phone started ringing off the hook and they raised the interest rate to 21%. BUT, they offered me a lower rate depending on how large of a balloon payment I would make. The payment was normally about $250. If I paid them $500+, they would take it down to 15% (which I did). If I paid them about $1000 they would take it to around 10%. If I paid them $1500 it went down to around 6% and if I gave them $2K they would take it to 0%!
Now I also had a credit counseling service see what kind of rate reduction I could get. Some cards there was a significant reduction (from like 14% to 6%), others there wasn't much of a reduction. If I stopped paying, I could probably get a settlement for less than I owe but I'm really not the type of person that wants to weasel out (even though the banks have made tons of me in interest.) The other thing about debt consolidation is that I won't be able to use the accounts anymore. I've only been able to stay afloat by continuing to re-use the principal I pay down each month to pay bills (so my balance doesn't go down, but, I never have a late payment and my credit is still good - at least for someone with a lot of debt but obviously I can't continue like this forever.)
So I'm trying to decide what to do.
a) Consolidate a couple of the highest interest accounts to get a lower rate and save a couple hundred bucks a month and try to limp along hoping my income will increase.
b) Purposely stop paying some or all accounts so I can negotiate directly with all my creditors and compare the rates they'll give me to that the consolidator will get. Problem is, my balances still stay high, and now I've wrecked my credit.
c) Stop paying some or all accounts (maybe the ones with the highest balance+interest) and enlist a debt settlement service to get the balance down, the payments down, and get out of debt ASAP and say good bye to my credit for 5-7 years?
The main thing I'm worried about is legal hassles involving the banks putting liens on my house. If all I have left is the $200K equity in my house, as long as I don't sell, can I do debt settlement and wait until everything is paid off to sell my house so they can't touch the equity, or are they smart enough to find out I have that much equity and not negotiate?
My background:
Self employed freelancer running two businesses (one service one product sales related). Variable monthly income. Made good money and like most spent most of what I earned. Starting 5 years ago income started to decline, spending didn't. Was literally banking that income would recover and then late 2008 WHAMO (along with many others.) Smart and resourceful so thought I could weather the storm (guess not that smart for ending up in this situation.)
Got about 5 cards with total $120K debt. One business card with $50K on it. Talked to a few credit counselors a year ago and met with bankruptcy attorney. Can't file for bankruptcy because I have about $200K+ equity in my home $600K home (use to be worth $900K in 2007) (yes one of the few homeowners under 45 years-old that has equity - only silver lining in all this) Selling my home is very very very last resort as there's a least a hundred hours or work and/or $20K+ in maintenance and repairs that needs to be done to get it in what I would consider 'good selling condition'. A distress sale would not be wise.
Got two kids (10 and 12), my own business, a 4,500 sq foot 5-bedroom house ( not my choice to live here) to maintain and I'm so stressed I can understand why some people choose to end their life (not there yet and don't plan to be.) Totally cut back in spending to virtually bare essentials with exception of maybe a conveyor-belt sushi dinner or pair of Nike's for my son for his birthday. Wife is working 0.8 for school district bringing in $45K and I'm bringing in about $65K (about half what I used to) We need to gross about $9-10K+ just to stay afloat break even each month with a large portion of that being credit card payments and morgage. Don't have the income to get any more equity out of the house.
Owned outright both my cars, sold one car for $20K and financed a different used car in order to raise cash two years ago. That has helped make up monthly shortfalls but has run out (and frankly probably just made it easier to downplay the severity of my situation.) Running out of assets to sell. Liquidated what little we had in 401Ks long time ago. Exhausted from the stress of watching my account balance swing lower and lower.
** Have been late only once or twice on a credit card payment (well maybe late on one or two) in probably avg 5 accts X 12 months x 15+ years = 900 payments over 15 years (probably much longer). Never missed or been late on a mortgage payment.
The interest is killing me and there is no light at the end of the tunnel as far as income bouncing back (at least not in the next 2-3 months.) Have done barter service trade with a $160/hr Career/Life Goal/Interview Strategist. Got lots of good skills/strategies for re-igniting my career (whether it be stay freelance or go back to corporate grind.) I'm just too expended trying to use every hour I'm awake to make money to pay the bills, take care of kids, and maintain my house let alone job search. I'm not unemployed! I'm actually slammed for short periods!
The stress is not worth it anymore as I fear my marriage and eventually my physical health is going to pay too high of a price to try to grind through this. I need a strategy to get some relief so I can "reset my life" This is in part why bankruptcy exists but like I said with $200K of inacessible equity in my house and the fact I'd virtually prefer to die than move (well maybe not that bad but there are other details I won't go into causing the house sale to be only a very very very last resort.)
Please spare me on the criticism. Although I've made some bad choices to get here I know what they were and how to avoid them in the future. I just need to move forward. I'll tell you one thing, it sure has made me see/view the consumerism in the country in a new light (which I got caught up in about like everyone else I know in this mid-upper class suberb I live in.)
There's a lot of underlying stuff I haven't gone into and anyone in a similar situation can probably understand some of those things but I've already written a novel here.
I hear ya, but you're not making it easier for us to help you wh
I hear ya, but you're not making it easier for us to help you when you're writing a novel-length post. May I suggest that you post an "executive summary" of the above; specifically, listing each credit account, APR, balance due, and min payment due. Then listing each source of available income that can be used toward paying them. Depending on how big the disparity between income and debt, we can start thinking about addressing the situation.
Hi Drowning, Options suggestion of posting some bank names, bal
Hi Drowning,
Options suggestion of posting some bank names, balances and rates is a good one. It will allow community members to respond with their experiences with their accounts and help you formulate some benchmarks and base expectations.
In response to your core decision concepts:
Quote:
a) Consolidate a couple of the highest interest accounts to get a lower rate and save a couple hundred bucks a month and try to limp along hoping my income will increase. |
What method would you use to consolidate only a few accounts?
Quote:
b) Purposely stop paying some or all accounts so I can negotiate directly with all my creditors and compare the rates they'll give me to that the consolidator will get. Problem is, my balances still stay high, and now I've wrecked my credit. |
Creditors internal hardship plans vary. Depending on the circumstances they will go as low as 0% and amortize your payment over 60 months. Some only offer temporary 6 and 12 month plans. Some will reduce interest to about the same level available through a consumer credit counseling outfit. Some banks wont offer internal hardship plans until you are 30 days late, some 60, some 90. Many banks will reage your account when you enroll in a hardship plan they offer, or in a debt management plan with the nonprofit credit counseling. This has the affect of bringing your account current, removing late fees etc. This reaging would partially address your concern about inflated balance and ruined credit. But, I would encourage you to resign yourself to accessing NO CREDIT products for a couple years regardless. Just take the FICO off the brain. You dont have a credit problem. You have a debt problem.
Quote:
c) Stop paying some or all accounts (maybe the ones with the highest balance+interest) and enlist a debt settlement service to get the balance down, the payments down, and get out of debt ASAP and say good bye to my credit for 5-7 years? |
Settlement is not rocket science, but there is a formula to follow to maximize the benefits and the success of the strategy. All of the little nuances about the process are covered throughout the debtcc community. The more accounts, the more parts to the formula. Here is a brief lab on what you said above:
Stopping payment on only some accounts while staying current with others may not yield maximum results. At settlement time, whether settling with bank recovery personnel prior to charge off, a debt collection agency working on contingency, or a debt buyer, your credit report can be viewed real time. If you are paying and current with others, it will be difficult to overcome objections to this. The objections may not even be vocalized. The computer screen and software used to populate what the collector is seeing may just pigeon hole you as some one not to offer settlement, or set the offer at a higher level (double in some instances) than would be offered to someone who appears as though a grenade blew up all over their credit report trade lines. One or Two small balance accounts maintained could be an exception.
Saying goodbye to your credit for 5 to 7 years is not necessarily an accurate assumption. The impacts to your credit with a settlement strategy will often correlate with how long it takes to resolve the accounts involved. The quicker the accounts are settled, the quicker you bounce back. But again, you don't have a credit problem right now.
Quote:
can I do debt settlement and wait until everything is paid off to sell my house so they can't touch the equity, or are they smart enough to find out I have that much equity and not negotiate? |
Yes, anyone who looks close enough will see the equity. Especially outsourced collectors and debt buyers who subscribe to collection and skip tracing software though lexis or other. This used to mean something to the settlement process during the housing boom. People were tagged for referral to collection law firms who were home owners in a certain zip code. It means a hell of a lot less now. That said, it could still mean something and where you live can affect account placement for different reason other than equity.
In order for a collection event to affect your equity, you would have to be sued, a judgment entered, and a lien filed. There are ways to manage and resolve accounts that go the legal route that will avoid this concern. Even judgement liens can be negotiated.
Additionally:
Quote:
Got about 5 cards with total $120K debt. One business card with $50K on it. |
Larger balance accounts are handled differently by some creditors. In some instances the savings through settlement can be better. Depending on the bank, business accounts are handled very differently than consumer accounts. For example, Wells Fargo business accounts that exceed a certain balance get flown up the flag pole and are reviewed by a VP. This is not a big deal, its just a different process.
Quote:
but I also don't want my phone ringing off the hook. |
Sign up for google voice and use it as a tool through the process.
