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using a secured card to make ettlements with debtors and build credit at the same time?

Date: Mon, 02/25/2013 - 06:32
Submitted by on Mon, 02/25/2013 - 06:32
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So let me run this past you... My husband and I both have been through quite a few rough years financially. Several layoffs, the economy tanking and multiple hospitalizations later and our credit is in a shambles. We just pulled our credit reports though and found that because of time, many old debts have expired and we are left with a handful of small debts and 2 large debts from repossessions. We are finally to a point in our lives where we are not just scraping the bottom of the barrel to live and we would prefer to settle these debts on our own. Our goal is to be debt free in one year and to be able to buy a small home in 2. In order to do that we need to build the credit as well. Here are my thoughts:

- I have a small amount of money now that should pay the majority of our smaller debts if I were to negotiate each debt. If I simply pay the debts, the debts are gone, but so is that money.

-Alternatively I could use that money to set up a small secured credit card, pay off a few of the debts each month over the course of 3 months so as not to use more than 30% of the available credit, and pay the card in full each month.

-Once those small debts are paid, we would use the card simply for auto payments that normally come out of our checking account and pay it off each month, while saving chunks of cash to offer settlements on the larger amounts for the repos.

Any thoughts about viability? Has anyone else done this? Any problems getting creditors to settle using a credit card?


The secured card is a great idea. However, you should settle the 2 large accounts before you settle the small ones.

The reason why, is when you settle them, they will be reported as settled. So when you try to negotiate the the larger ones, they will see that you have already settled some of your accounts and they will be less negotiable because they will know you want to pay.

So great plan, just do it in reverse. Please feel free to follow-up with any questions. Good luck.


Submitted by Jared Strauss on Wed, 02/27/2013 - 12:06

Jared Strauss

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You would not having trouble with creditors accepting credit cards. Repaying your debts while rebuilding your positive credit history seems like a pretty neat idea. I believe it is completely viable as long as you have your debts validated properly before repaying them.


Submitted by Steve Barris on Mon, 02/25/2013 - 19:08

Steve Barris

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Hi Otaamp,

How much are the judgments? How are you going to generate the funds to settle them? Have you guys met with a bankruptcy attorney?


Submitted by Jared Strauss on Fri, 03/01/2013 - 12:55

Jared Strauss

( Posts: 74 | Credits: )


I should mention that the repo accounts already have judgements. I don't want to wait for this debt to just cycle off of our report though. My husband will very likely have an opportunity to buy his company in 4 years and we need squeaky clean credit to be able to manage the business loans he will need to operate it.


Submitted by otaamp on Wed, 02/27/2013 - 20:27

otaamp

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We owe 8900 on one judgement, but they garnished my wages for a time, even though they aren't reporting it. (I will tackle that issue first since it should bring our balance down by over 4k) We owe about 5300 on the other. I have met with an attorney and he is willing to help me strongarm negotiate the first repo if necessary. They are a terribly shady company. The other repo I'm 99% certain will work with us. They have been really great to deal with and even voluntarily forgave a portion of our debt.

The plan is to save up a good chunk of money and settle the big ones first. then take on the smaller ones in the month following the big settlements. Like I said, bankruptcy really isn't an option.If we buy this company, we will need lines of credit from companies that will automatically deny if you have a bankruptcy on your record.


Submitted by otaamp on Fri, 03/01/2013 - 17:10

otaamp

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Excellent. I love your plan. Yeah, it sounds like you can resolve these debts for less than 10k. Good call on avoiding the bankruptcy.

Something you may want to consider is negotiating a term settlement with the cooperative one. If they've been good to work with, they may be able to settle over payments. I suggest calling them when you're financially able and discussing this option with them.

Offer them $2,000 to be paid over 6 - 12 months. If you can afford to pay it off more quickly, you could just pay it off sooner.

And the settlement won't be reported to your credit until you make the last payment. So it won't jeopardize your negotiations with the ruthless one. :)

This way you can lock it in and have that arrangement set in stone. Collections is a high turn over industry, so the people you work with today may be different than the ones you work with tomorrow. By doing this you will eliminate those uncertainties.

Good luck and keep us updated. You're on a great track.


Submitted by Jared Strauss on Sat, 03/02/2013 - 10:21

Jared Strauss

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