Is there any such thing as a "Credit Card Workout"?

[lib2DaBone]

I hear radio ads for companies that will supposedly help you work out credit card debt.. I am very skeptical...

I have managed to catch up on my mortage as well as my car payment. I paid off all but one credit card on which I still owe $15K.

I would have paid off the last $15K, but I had a medical emergency and no insurance, (needless to say) I was laid off and no way could I afford to COBRA at a thousand a month.

After all this work, I hate to declare Bankruptcy for $15K and go through 12 years of hell. Is there any way to re-negotiate this last credit card, or is all this an Urban Legend and a rip-off?

[independentpiney]

1. You might try doing it on your own

My ex went on a credit binge after I went on disablity. I was able to get Citi and BOA to reduce the interest rates on their cards to 6.5% and a couple of the store cards to settle for the balance owed on the actual purchases, no late fees, interest etc.
My credit rating is still shot for another 5 years though because I refused to pay on any cards she took out without my knowledge with me as primary borrower.

[Donnachaidh]

2. Call your local Consumer Credit Counseling office

Every state has them.


There is no way of knowing if the ones advertising are on the up and up. We went to one years ago, and found out later on that they weren't sending our payments, and hadn't negotiated in our favor. We wound up being part of a big class action lawsuit that went after a bunch of them. We -didn't- get our money back. It was a hard-earned lesson.

[BlueCaliDem]

8. Beware! Consumer Credit Counseling is a sham.

They are the same as the now new-improved credit card counseling agencies.

They can only negotiate with creditors willing to negotiate with a third party (they usually don't) and take a fee for every account they handle. They don't help you with your credit rating. In fact, they make it worse since it will look as if you're a loser who can't even negotiate his own terms.

The object here is to renegotiate for better terms, and the unrating or complete removal of the account from your credit files. Otherwise, and if you're eligible making $50,000 or less, Ch 7 is a better option and you can have your score back within 1 year instead of the 7-10 years credit counseling without credit bureau 'cleaning' would give you.

[DebbieCDC]

9. You can't remove valid information from your credit file

That's what these sham companies offer -- "we'll get negative information removed for you". That's BS. Valid information is there on your record, like it or not, for a long time. Nobody can "clean" valid debt information off your credit report.

All of my card companies (BoA, Chase, etc.) very readily negotiated with the debt management company I'm working with. I didn't have trouble with anyone not going along. Certified non-profits can only charge a minimal fee (mine is $15.00/mo. -- that covers ALL my accounts)

Yes, you have to beware of the sharks out there that promise the moon and that bankruptcy goes away quicker than debt counseling. I tried negotiating myself with the credit card companies and basically they told me to stick it. Then here comes the non-profit (AND I STRESS NON-PROFIT) debt management company and all of a sudden there go the interest rates down and the phone calls stop.

You need to differentiate between for-profit non-accredited companies and non-profit accredited debt counseling agencies. There is a BIG difference.

[BlueCaliDem]

10. The question is what is legally "valid"?

Accurate reported items can't be removed. You're right. But what if you owe $998 dollars and the credit report shows you owe $892 dollars? Is that valid, accurate information?

I've done it for myself, husband and family, so I know what I'm talking about here. I'd cleaned my husband's report once so well that I had to transfer credit history to it to raise his score because we were on the verge of buying our home.

For direct credit bureau disputes the negative item has to be at least 2 years old for successful correction or removal. There are plenty of books in your local library about credit repair and all tell you that no agency can do it for you. You have to do it yourself. They'll also tell you why credit counseling is detrimental to your credit, and if eligible, Ch 7 is better for you and your credit.

Just stop by your local library and look for credit repair books. Ones written It will have them, and you'll see that I'm not just making this up.

DISCLAIMER: This is not meant to offer any legal advice. This is merely based on personal, successful experience. If you feel you need legal advice, please contact a consumer attorney near you.

[Gore1FL]

3. I tried it in 2001 during my seperation/divorce

A friend suggested it, because for him it worked. I had problems with one company (Providian) and it pretty much blew the whole thing--in fact a lot of people who showed up in court when I did had the problem. This was sort of stupid on their part, because the people that offer the service typically work for the credit card companies.

After hiring a lawyer who managed to not show up twice in attempts to file chapter 13 (which cause both cases to be dismissed, but cost me a total of $2000 in legals fees, I called the State bar and they fond a lawyer who set everything up for me.

He sent out letters to my creditors and asked them what they would settle for. If the creditors called me, I was instructed to either not answer the phone. If I did I was to send them to him. If they called back, I was instructed to hang up. If they wouldn't put anything in writing, my lawyer would hang up on them.

I'd recommend calling your state bar and getting a name of good lawyer to handle the negotiation. It'll cost less in the long run, and because a l;awyer is handling it, some will just write off what you owe--at least that is what happened to me.

[Dogmudgeon]

4. Contact a bankruptcy lawyer if you can

The first consult is almost always free of charge, even if you don't have to use their services. Many work with non-profit debt counseling companies (but avoid for-profit outfits like AmeriDebt).

You are NOT in as bad a situation as you think.

I mean, it isn't ideal, but it isn't "Fuckedville".

Bankruptcy also isn't "hell" by any means.

Next piece of fatuous advice: NEVER put medical debt on credit cards. Medical creditors are much easier to deal with on their own. Why bring the plastic companies into the discussion? Sounds like you got your arm twisted while you were frightened.

If you do not have any significant assets, like houses or investments, you are pretty much the top dog in the situation. But you have a house, right? Your mortgage is up-to-date? That is a big part of the battle right there, so you are in good shape in at least one category.

Read up on debt management, talk to a lawyer or a professional debt manager -- and relax. "Problems" do not mean "Disaster". The Capitalist system will not require you to sacrifice your life in penance. (And if it did, I'd say to flip it the bird.)

Good luck!

--p!

[lib2DaBone]

5. Thanx Pigwid.... good advice....

I guess I will have to contact a Bankruptcy lawyer.

I never should have put that medical debt on a credit card. I thought I could catch up... but they cut our overtime and I'm lucky to be still working.

But I wanted to avoid foreclosure at all costs. I was always told that Foreclosure was WORSE than bankruptcy and stayed on your credit longer, so I put all my money to catch up the mortgage.

Hopefully, if Obama's plan kicks in, we will get some jobs again and get things moving.

[BlueCaliDem]

6. You can work it out directly with the credit card issuer yourself. Stay away from those companies!

They can't do anything you can do for yourself AND you don't have to pay them their fees, saving on that too. Credit card debt is the easiest to renegotiate. They're unsecured (meaning, there's no collatoral securing the loan).

This is how I did it.

But before making any contact with the card issuer, be sure to check your budget, calculating whether you can negotiate the account to pay them a percentage in one lump sum (you can negotiate it down until you only owe a third, even less!), or in affordable monthly payments without interest.

DON'T MAKE THE CALL UNTIL YOU'RE SURE WHAT YOU CAN AFFORD AND ARE WILLING TO DO.

How you approach this would also depend on whether of not the account is closed or open.

If closed, you have greater bargaining power:

Call them up and ask to speak with a decision maker. Tell them you want to settle on your account (monthly payments you can afford or a lower, negotiated one-lump sum). You give them your offer and stick to your guns. There might be a little back and forth, but under no circumstances do you tell them how much you make, or your spouse. It's irrelevant and it only weakens your bargaining position. Their goal is to get the max out of you, yours is to remain within what you can actually afford.

If they get difficult, tell them you are contemplating bankruptcy. This usually makes them more willing to work with you.

IMPORTANT NOTE: Make sure you put in a condition that they either wipe your credit reports clean of the account, or they "unrate" the account with the credit reporting agencies (also known as credit bureaus). An unrated account doesn't affect your credit or FICO score. However, if you can get them to remove the closed account from your credit reports, that would be the best option! Some will try to tell you they can't do that, but that's a lie. If they can put it on there, they can take it off. Nowhere in the law does it say it's mandatory they have to report you. That's a choice they made.

Before any payment info is exchanged (like bank account numbers - and they'll try to pry it out of you, but don't give in), you insist upon a written agreement outlining what's been negotiated down to the removal/unrating of the account with the credit bureaus. Nothing is final until both they and you sign, creating a new contract neither of you can back out of.

If you have a fax, have them fax a signed copy to you. This is recommended since you'll have a date/time stamp on the document just in case trouble arises. If you don't, have them mail it to you. Mark the date when you receive it. After overlooking the contract and seeing all is in order, sign it and mail it back to them certified mail with return receipt requested. This way, you keep record that you've sent the piece back AND that they've received it - just in case there are problems.

If open: You still have bargaining power and the same principle applies except you'll need to ask them to freeze all interest, penalties, account fees and lock it in the principle amount owed, otherwise it's like mopping the floor with an open, running spigot.

Make sure you insist on the removal of the account from your credit reports or have them unrate it, no matter which scenario applies to you. You made a mistake, but now you're trying to rectify it by paying up. There's no need for 7 years worth of penalizing via a bad credit/FICO score to add insult to injury, right?

Everyone will tell you that credit counseling bureaus are a sham. These credit card negotiation companies are taking advantage of the economic downturn and are no better than credit counseling agencies. Although listed as "non-profit" they make millions in profit from credit negotiations whether it's straight from you, or from your creditor.

Remember, they're third party and hold no sway with the creditors. You, the second party, do.

Disclaimer: This is not meant as legal advice. This is based on my own personal, successful experiences with creditors in the past, and those of my husband, and sons. If you feel you need legal advice, contact a consumer attorney near you.

[DebbieCDC]

7. Use a debt management plan service that is accredited

By agencies like National Foundation for Credit Counseling (NFCC). I am using one now to work out my credit card debt. The group I'm dealing with charged a $25 set up fee and the monthly fee is $15. They withdraw directly from my checking account once a month and pay all my creditors a negotiated fee. All my account holders have signed on, and in 3 months my interest rates will be cut in half. It will take me 4 years, but all the credit card debt will be gone. Don't go with these fly-by-night "we can eliminate 60% of your debt instantly" places. The debt management plan takes time, but after 3 months your credit report shows you are current on all your debts AND you get the fees waived and interest rate reduced. It's working real well for me.