newbie - Have questions on settling & using HEL to pay
Date: Sat, 04/07/2012 - 06:56
My wife and I owe almost $80k in various cards. Without getting into details of how we got there (over several years), I am looking to settle as we pay almost $1,600/month for just the minimum payment. Plus my income is less than all my expenses so its a never ending cycle.
In any case, I read the various members and their experiences with the various banks. Now, I am taking out a home equity line of credit to pay for the settlement. We are lucky that we bought our house at the right time so we have a lot of equity. The question is how much the bank will approve.
Anyhow, I am applying on Monday. I am not in any default at the moment with my credit cards. My question is, will the credit cards pull a credit report and notice that I took out a HEL and not be wiling to settle with me? I can always tell them that I had to use that money to pay for a new roof.
On a different note, I have my Discover and Bank of America cards that are linked to my checking account. If I start defaulting, will they try to take money out of my checking account? Just curious. There is no money in my checking account so if they try, nothing will happen except I would get a fee for excess limit (I have an overdraft protection).
I know that settling will lower your credit score. My friend who went through this process said it took him about 2 years to get back to where he was before. My concern is that my auto lease expires next April. I have to get another car whether leasing or buying used. I assume I will have a hard time getting a loan or lease, correct?
Thanks all. this forum is great.
The point is this: Your credit card companies will only be inter
The point is this: Your credit card companies will only be interest in getting back the money you owe them. They don't care how you pay them back as long as you pay them back. So drawing on a HELOC won't get in the way of settling those CC accounts.
As for the car, yes, you will face some difficulties in acquiring a loan or a lease after your credit score takes a hit. Nonetheless, you will have a year in between to repair your credit score.
If it is BoA, they will close your overdraft when you begin to d
If it is BoA, they will close your overdraft when you begin to default on your cards, they did it to me. They never tried to take money from my BoA checking to cover my BoA credit cards though, although I was prepared and opened a new account elswhere.
Have you looked into BK? Thats a lot of credit card debt. I was in a very similar situation with a good amount of equity in my home but In my state the homestead exemption was too low, so a BK was not an option.
Sorry what does BK mean? Thanks to all for the replies.
Sorry what does BK mean?
Thanks to all for the replies.
BK=bankruptcy What state do you live in? Personally I would n
BK=bankruptcy
What state do you live in?
Personally I would not be replacing unsecured debt with secured debt.
[QUOTE]Why you shouldn???t use a HELOC
The other side of the coin when using a HELOC to consolidate debt is that you???re taking unsecured debt (credit cards) and tying them to your home. This can be a risky bet ??? what happens if you lose your job and can???t pay your HELOC? You risk losing your house, that???s what.
Also, getting a HELOC isn???t necessarily cheap. There are several possible fees associated with it that add to the total cost. Some of the fees you might face include:
- Appraisal fee
- Application fee
- Annual fees (some, not all lenders charge this)
[/QUOTE]
Although I would agree with SoapLady on not replacing unsecured
Although I would agree with SoapLady on not replacing unsecured debt with secured debt...
However, if you are sued and lose, you will possibly be facing wage garnishment and a possible lien on your home and seizure of your bank accounts. The lien on your home will be full balance plus attorneys fees and interest until the lien is satisfied.
If you can settle for 30-50% you are looking at saving 40k.
Yes, you are in a sticky situation and only you can decide which would be best. Some states have generous bankruptcy exemptions which may cover the equity in your home, and most BK attorneys offer a free consultation.
NJ here too, unfortunately NJ uses the federal BK exemption of o
NJ here too, unfortunately NJ uses the federal BK exemption of only 21k or 42k husband and wife for real estate.
That means you are protected for up to 42k hus/wife in equity in your home, not much. NY raised the limit to 150/300k in most counties and from what ive heard FL has NO limit.