OT-Debt consolidation

[cuwinbs]

Looking for someone who's had experience with it, good or bad.Wife lost her job 1.5 years ago(she's the bread winner) took 2 months to find a new one at 50% less money. We just payed the mortgage,utilities,food and stoped paying the credit cards. She just started a new job making the same amount as her original job.Were now so far behind on the CC we've been turned over to collection agency.We owe about 40k in CC debt(don't ask) so were looking at debt consolidation.We have equity but can't qualify now with our bad credit. THANKS

[Ken Robb]

It won't help your credit rating right away but I think you can probably negotiate with the collection agency to reduce to amount owed. They bought the paper from the original creditor at a significant discount. Could you borrow $20,000 from family to make the agency a "bird in hand" deal?

[MattTuck]

Only know this from reading others' stories about it. Ask for a "Debt Verification Letter', which they are legally obligated to send you within a specified time frame.

This shows whether they have proof that you owe the money.

It sounds like the debt is legit, but I might still go through this step.

After that, yes, try to negotiate for a settlement to pay it off.

[weaponsgrade]

I don't have anything to add, but just want to say I'm glad you rounded a corner and things are looking up.

[fa63]

Another vote for negotiating a settlement if you can. I did this for my parents with some medical bills they had, and the difference between amount owed vs. the settled amount was huge.

[C40_guy]

And separately, if you haven't already, cut your discretionary spending to the bone. No gym memberships, race entries, magazine subscriptions, etc. Money trickles out in so many directions...it won't feel like much individually, but it will add up.

Sucks to have to let some of these things go, but every little bit does help, and when you're back on stable ground, you'll be less likely to continue that discretionary spending. Instead, you can put more money into debt reduction and eventually savings...

[seanile]

Only know this from reading others' stories about it. Ask for a "Debt Verification Letter', which they are legally obligated to send you within a specified time frame.

This shows whether they have proof that you owe the money.

It sounds like the debt is legit, but I might still go through this step.

After that, yes, try to negotiate for a settlement to pay it off.

This should be your first step. Dont let them give you a balance onfirmation letter, but a specifcally titled Debt Verification Letter. That will tell you what theyre seeking, and have the legally supporting backup documentation to seek.
Thennnyou negotiate once you know their starting point

[Ken Robb]

I suppose if you get to negotiation it may be a good idea to let them think you are weighing a settlement vs. filing bankruptcy because if you go that way they get nothing.

[cuwinbs]

I suppose if you get to negotiation it may be a good idea to let them think you are weighing a settlement vs. filing bankruptcy because if you go that way they get nothing.

That"s what i had planed on doing if we got a home equity loan. Call each CC and tell them i was going to file BK if they wouldn't settle on a lower amount and try to get the total amount to around 20k.

[cuwinbs]

Only know this from reading others' stories about it. Ask for a "Debt Verification Letter', which they are legally obligated to send you within a specified time frame.

This shows whether they have proof that you owe the money.

It sounds like the debt is legit, but I might still go through this step.

After that, yes, try to negotiate for a settlement to pay it off.

I've seen some you tube videos on this but seemed to good to be true.

[jruhlen1980]

Caveat: This is not legal advice.

But in general -- creditors *might* be willing to negotiate, but there's nothing that says they *have* to. And just because they are willing to negotiate doesn't necessarily mean it's the best option.

Second -- most of the "we'll negotiate with the creditors on your behalf if you send us monthly payments" outfits are straight up scams, but at best disingenuous. Again, they don't have any legal power to force creditors to do anything they don't want to. (Hint: Discover Card and Ford Motor Credit are pretty notorious for being hardasses.)

Third - Don't discount bankruptcy. It's not the "end of the world" most people seem to think it is, and if most of your debts are unsecured (i.e., credit card) that's pretty much exactly the type of situation bankruptcy is for. But again, this is not legal advice and you should talk to an attorney who specializes in bankruptcy about your options.

[huck*this]

Congrats on being on the up. That must be a huge relief. Not sure if this is great advice but seeing as you are on the up, why not get a final pay off on what you owe and take out a loan for that amount and have it paid off with monthly payments that you can afford safely? This will raise your credit score back up also, I would think. But $40k seems like a good chunk of change so I probably wouldn't do much without speaking with a lawyer 1st.

[Ken Robb]

Congrats on being on the up. That must be a huge relief. Not sure if this is great advice but seeing as you are on the up, why not get a final pay off on what you owe and take out a loan for that amount and have it paid off with monthly payments that you can afford safely? This will raise your credit score back up also, I would think. But $40k seems like a good chunk of change so I probably wouldn't do much without speaking with a lawyer 1st.

I think the OP stated that even though they have equity (in real estate?) they can't qualify for a loan due to bad credit scores.

[Gummee]

I think the OP stated that even though they have equity (in real estate?) they can't qualify for a loan due to bad credit scores.

That's what I was trying to tell y'all in the other thread about paying off the mortgage.

'Stuff' happens. Then when you NEED that equity, you can't get it.

Even if you can get a loan with a heinous interest rate big enough to pay off 1 card, take it. Use it to pay off the highest interest rate card 1st, then put the $ you were paying on the 1st card onto the payment you were sending the 2nd, then when that's paid off, use the 1st 2 payments on the 3rd, etc till you've got all the payments paying off the loan. As you're doing this, pay the minimums on all the rest of the cards and concentrate ALL your 'extra' $ onto the 1st then the next, then the next card down the line.

Think snowball gathering more snow as it rolls downhill.

It ain't easy, but that's the best way I know how to deal with that.

M

[EPOJoe]

Talk to a bankruptcy attorney. You may be able to dump all your debt with little downside.

[likebikes]

this is the type of thing i would gladly consult/pay a professional for. there are lots of ins-and-outs and different strategies and approaches for this type of things.

[19wisconsin64]

First, you are in a tough spot, and you are doing the right thing by looking at creative ways to move forward.
After about 20 years of working with clients in the residential mortgage world I'll offer my suggestions that may help you to add to the other advice given already.
For free and without harming your credit scores go to annualcreditreport.com and get a copy of each of your credit reports from the three different credit reporting agencies. Save each of these reports for you and your spouse as a PDF on your computer.
Next, write out (important step) all of your debts, account numbers, how much you owe, minimum monthly payment, interest rate, phone numbers to who you owe money to-basically make a very detailed list if you have not done this already.
Vision-what is it that you wish to accomplish short and long term? Are there other sources of income or funds that will be coming in? What is the value of your house vs. the damage to your credit if you do go into BK?
My 2 cents-possibly negotiate with all of your credit card lenders as these payments are squeezing your debts. You may have a lot of equity in your home, so I'd advise against BK for 40K if you have a CA home with a lot if equity. In a few years after settling your cc balances and getting your credit on track you may be able to get a small equity loan against your home. Until then, get even more detailed on your debts, look to creative income producing activities, and have a long and short term plan. Be careful of anyone or company claiming to clear up everything for free (credit firms or attorneys), some are great, but the majority are are a worse nightmare than you can imagine. It will take work, but you've already on your way to getting there by being honest about the situation and asking how to move on.

[TDot]

Hey, I'm in the biz from from regulatory pov. If you want to chat, pm me. Proposal to creditors is the way to go in short

[sc53]

Do NOT sign up with one of those debt consolidation companies--complete ripoff no matter how many ribbons they say they have from the Better Business Bureau. Find a Chapter 13 bankruptcy attorney or firm and make an appointment with them. This form of bankruptcy leaves your home out of the plan entirely, you continue to pay your mortgage and you pay whatever the calculator says you can afford on your unsecured debt. Payment plans last up to 5 yrs and so long as you have complied with your court-approved payment plan, you are discharged from debt at that time. Your house payment was never in the plan and this type of bankruptcy has no effect on your mortgage or your equity in your home.

[EPOJoe]

This...

Do NOT sign up with one of those debt consolidation companies--complete ripoff no matter how many ribbons they say they have from the Better Business Bureau. Find a Chapter 13 bankruptcy attorney or firm and make an appointment with them. This form of bankruptcy leaves your home out of the plan entirely, you continue to pay your mortgage and you pay whatever the calculator says you can afford on your unsecured debt. Payment plans last up to 5 yrs and so long as you have complied with your court-approved payment plan, you are discharged from debt at that time. Your house payment was never in the plan and this type of bankruptcy has no effect on your mortgage or your equity in your home.

[Alfa111]

Last post seems like the way to go. This has been a super enlightening/helpful read, thanks.