Why you should listen to me? I had $75,000 in credit debts and settled for 21,000 dollars.
If you have the money or can get the money (friends / family) to settle with credit card companies … do it! Does being settled by credit card companies ding your credit? Yes. Do you care? Yes. But not much. It is obvious that every person is different … but each one’s credit is dinged these days and people with outstanding credit cannot buy things like they used too. You can start rebuilding your credit right now and it is enough to buy a house in a couple of years.
Quick things you SHOULD KNOW:
- Credit card companies will send you a Form 1099 with the amount for which you will be settled. In our case, we get 1099 for $54,000 (i.e. income on our taxes) at the end of the year
- IF … you are insolvent (we are), you are obliged to pay more than you deserve. As I said, in our case, we get 1099 for $54,000. But after we owed more money (credit cards, home, second mortgage), than we have. Therefore 1099 … it does not count against us! Thus, for example your house upside down is good at identifying it. We are like upside-down by $75K.
- SO .. If you are a failure … it will not take into account your taxes. It (1099) simply disappears.
- Do not charge things on your card or withdraw cash in more than 600 U.S. dollars to stop paying them. This is a fraud. If you have taken out large volumes, you better be able to prove it is not fraud, and you would need to wait at least 3 months before getting a new credit card.
- Your credit card companies will not work with you for as long as you are behind on payments. I know … stupid … but true.
- Do not threaten them (credit card companies) talking about the bankruptcy. This is your ace in the hole. Also not be ambitious with them when they call for the collection. They are just doing their job, and 9 out of 10 of them will at least be fair and very understanding. Now, when your debt is sold to a “collection agency” … then the rules change. But let’s not go there … You’ll see why.
Stop all deposit credit card account today!
- Keep very good notes to stop payments on all outstanding credit card orders (by internet or telephone). This will be very useful in the future.
- Between 1 month and 3 months they will call you and try to collect. In fact, they will be more understanding and pleasant. Just be honest, say you are trying to get the money together, but you do not have enough money to pay right now.
- After or about 90 days it will begin the questions phase such as “there is anything that can be done, what options do you have?” They may or may not raise the settlement. Provided they do not amount to a percentage. If you have enough money for a settlement, never recognize that. To the extent of what do they know you are going to bankrupt. If you can not pay your bills and go bankrupt with a credit card, they will have FAR less than you would pay them now.
- They will come back (almost laughs at you) when you tell them how much you can get (around 15%). They will probably say that they can not do that … but they may settle at 85%. “Thanks, but I can not afford it, let me try to get the money together and see if I can get closer to that amount.” This is your response to them, this will happen and back in a month or two … they get up to 50% and it would seem, they will not go below! They will.
- They can also give you a deal … conversation led them to agree with you on 35%. They will say, “so to pay 35% … let me take it to our managers to see if they can do it.” This does not happen. If you are not in the range of 160-180 day they’ll come back and tell you they could not do it … but they would take 50%.
- But between 160 days and 180 days it will begin the serious negotiation phase. We have 5 credit cards (track / Bank of America / capital-1), Bank of America was the best, easiest to solve. I highly recommend … No games. At 165 days, such as Chase, who all along said they could not go below 35% dropped to 45% … and when I decided to offer 30% … Deal!
- There is every bit a chance we could have got them up to 20%, if not better. I’ve heard stories. We did not want to take the chance that debt went to the collection (agency), having to start with them again. Plus … let’s be real. We owed money, they do not force us to use the card. But they certainly do not forget charging us loan shark interest rate charges. No one is neither the innocent or the guilty and therefore not feel bad as you do it badly … it affects both.
- Once they settle … they give you to pay from 3 to 6 months (3-6 payments … usually 3-4) … kinda, you can select your circle. They will send you a letter of agreement that they will do the deal.
Things you SHOULD & SHOULDN’T do:
- SHOULD: answer all phone calls. If you answer the call to say the first day of the week (or whenever), can not and should not hear from them for another week. If you avoid them they will make a few calls per day and even start to look for alternative ways to contact you.
- SHOULD: If you have voice mail (recorder) … put your name in the message. Thus, they know it’s you, and they will not try to call someone else.
- SHOULD NOT: give them any personal information about yourself or anyone in your family. They will ask about your income of your spouse … where he/she works … where you work. You are not obliged by law to answer their questions … In addition to the core. Just say “no relevant where you or your partner is working and what you are doing your best to get the money together to pay … that is what you are trying to do.”
… well I had an insignificant 🙂 credit card debt problem and I wanted to share my case