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Credit Counseling or Debt Settlement...long post...

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My wife and I are currently struggling due to high interest rates and fees. Ultimately we started going down hill when my wife decided to have braces put on two kids last year which costs us about $500 per month that we really didn't have. I'm not saying we're perfect but most of our cards have raised the rates to 29% based on a late payment on one card.

For the last 6-8 months we've been struggling to make payments so we WERE current on most of our cards up until 1 or 2 months ago when we finally decided that having food in the house and paying all the other bills on time was more important then the CC bills. Right now we're currently behind on probably all of the cards and getting killed with late fees, over the limit fees (two of our cards currently have payments due of $1200 each! - the 2 Citi cards which are 2 (almost 3) months behind.

We currently owe $23,200 on 8 cards and have been talking with Money Management International (MMI) and here's what they've come up with...

Creditor Balance Proposed Payment
CAP ONE $266.00 $6.00
CAP ONE $543.00 $15.00
HSBC BANK $836.00 $190.00
BANK OF AMERICA $1,874.00 $34.00
HSBC BANK $2,025.00 $47.00
WFF CARDS $2,217.00 $40.00
CITI $6,380.00 $113.00
CITI $9,050.00 $160.00
Total $23,191.00 $605.00 (+ their $40 fee + 10 "Payment Flex Fund") $655 a month total for 39 months - or $25,545.00!

The other option is obviously Debt Settlement. I figure if we stopped paying the CC's totally we could come up with anywhere from $500 to $800 per month (depending on the month - I have 3 teenagers getting ready to drive AND start school!). If we take even a 60% avg. payoff that would be about $14,000.00 which I could probably get taken care of in 18 to 24 months.

I fully understand that my wife and I have maxed these cards out and put ourselves in this situation however - I CANNOT STAND to sit here and watch all the CC companies raise their rates under the circumstances. At this point I'm 99% sure I have fully paid for my purchases and them some and that my current balances are ALL interest and fees at this point.

As you can tell I'm really struggling with which direction to go at this point. I could probably handle the calls from the creditors (I get 3-4 a day already) and would love nothing more than to pay them as little as possible but I'm not sure my wife could. If it was up to her she would have already signed the papers for MMI but for me it's not that simple - so I have a few questions...

How does each truely effect your credit score/rating? According to what I've read and heard (I know someone who is going to make their last MMI payment this Friday after 5 years!) your credit score goes down at first with the MMI but then begins to go up within a few months because your accounts are "re-aged" and are no longer reported late? When my friends started they had a low 500 rating and they're currently at 720?

When doing debt settlement I would probably start with the smallest card first (ultimately I could pay the 2 small ones with one payment?) then go from there but by the time I would get to the last one on the list it would be well over a year! How do you keep them from sending you to collections?

How does debt settlement effect your score since it could take so long to pay them off?

FYI - our current credit score is around 620 which in my opinion is not that bad. On top of all this I plan on moving as soon as my youngest is out of high school (4 years), if not sooner, so my credit score will come into play relatively soon. I'm afraid if I do DS then I wouldn't be able to get a loan - if it takes 2 years to pay everything then it would only be a year or two before I was trying to finance a house - on the flip side I've heard good things about CCCS and what it does to your score - I'm also confident that my wife and I could stick to the plan and make the payments for 39 months but I also don't want to pay the CC companies any more money!!!!!

I'll take any thoughts, ideas, experiences, data, ANYTHING to help me make this decision.




Have you considered bankruptcy? I know that its scary sometimes to think about it but its happens alot more than you think...the only reason i suggested it is because you stated that you dont want to give the cc companies any more money. Howver, if you want to do a program like the one you talked about you should know that your credit score will be affected. I tried a debt management company before i decided to file my bk and it never got any higher because unexpected expenses came up and i fell behind on those payments and the cc kept reporting me deliquent on my credit report. My attorney explained to me that when you file a chapter 7 bk, you can immediatley begin to rebuild your credit and qualify for a home loan after 2 years of your debts being discharged as long as you maintain good credit(which would be easy if you own a home now, because you can reaffirm your mortgage and keep making payments to keep your home and rebuikd your credit) again, i am not advising you one way or the other, but i just want to share my personal expriences with debt management/settlement vs. bk because like you, i looked over my payments and realized that i had paid these people back what i spent and them some. However, it will be up to u and your wife as to what you feel is best for you and your family.. good luck.

Sub: #1 posted on Wed, 07/22/2009 - 19:01

amyw2003 amyw2003

(Posts: 109 | Credits: )

For $26,000, you should consider debt consolidation, not bankruptcy.

Going through DC, your credit score and report will take a hit in the short-term (perhaps several months) unlike bankruptcy, which stays on your report for 7 years.

Sub: #2 posted on Wed, 07/22/2009 - 20:57

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any deliquencies or late payments reported on your credir report stay there for 7 years too

Sub: #3 posted on Wed, 07/22/2009 - 23:41

Unregistered


So if I go with a CCCS I'll have about 2 or 3 months of late payments on my credit report but if I go the DS route I'd have upwards of 18-24 months worth of late payments?

Sub: #4 posted on Thu, 07/23/2009 - 08:57

Unregistered


why can't you go into some programs with the cc companies citi actually has one right now that is 0% interest x60 months and after 3rd pymt they go back to your original balance.If you can settle on your own(before it is charged off) or go into a program and I think that is best.I think it is a waste of money paying these debt mgmt programs.

Sub: #5 posted on Thu, 07/23/2009 - 09:06

oakrascal7 oakrascal7

(Posts: 46 | Credits: )

That's one of my primary questions; how long do I have before they're "charged off"? If I have 8 cards and I start with the lowest balance first I wouldn't be able to pay the last one for about 12 months (roughly?) - what do I tell them during this time, how do I keep them from charging it off and most importantly how do I keep from getting sued?

Sub: #6 posted on Thu, 07/23/2009 - 10:20

Unregistered


To clarify - I wouldn't necessarily start with the lowest balance first but rather who's going to work with me first but either way I wouldn't get to the end of the line for 12-18 months?

Thanks.

Sub: #7 posted on Thu, 07/23/2009 - 10:22

Unregistered


my two cents.

First, I think to declare BK for only $23K is a little extreme. You also may not qualify for BK 7 which would probably mean a 100% payback with BK 13. I assume you have a steady income if you can manage to come up with $500-$800 a month. Wait until the court tells you what you can afford. You won't like it. Not worth it.

Debt Management does not really hurt your score it just prevents your ability to get credit. While on a DMP, you will not be able to get a loan for anything. Your score will improve as you start to pay down your debts. I will tell you that most people do not complete a DMP. You have to make those payments every month. Period.

In Debt Settlement, most creditors will go to collections around the 180 day mark. That is usually the best time to settle. In the mean time you will continue to accrue late charges, interest charges and over-limit fees. So by the time you are done, your $23K could be $30K or more. Your credit will take a hit, so I think your plans to move in 4 years will be affected.

I would go the Debt Management route IF you are positive you can make the payments for 39 months. I would look into CCCS or another non-profit DM company. Here in Maryland they are not allowed to charge more than $30 a month in fees. I would shop around a little more and see what other DMP offers you can get. $40 + $10 is too much to pay.

Sub: #8 posted on Thu, 07/23/2009 - 10:56

el_suavo el_suavo

(Posts: 103 | Credits: )

I agree on the BK - we will NOT be going that route! After some of the replies here and some other reading I've been doing it looks like we're going to go with a CCCS. Other then the $50 the current option isn't bad and I do feel confident in this company because 1) BofA pointed us to them - which indicates they are somewhat legit and 2) even before BofA recommended them I had a co-worker recommend them also.

Any other recommendations for CCCS's?

Sub: #9 posted on Thu, 07/23/2009 - 11:13

Unregistered


I went back and looked at your balances. What is your monthly minimum payment now minus the late fees?

Sub: #10 posted on Thu, 07/23/2009 - 11:38

el_suavo el_suavo

(Posts: 103 | Credits: )

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