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I have a family member who is seriously delinquent on 2 credit cards. She has caught them up, paid the fees and after loosing 2 jobs due to cutbacks is back in the red. Her credit is clean except for the 2 credit cards. She owes collectively around $5000 on each before the companies started pouring on the fees, charges and crap. It seems like everytime she sends them $$$ the balance is the same. I have tried some negotiation and they aren't budging. She got a call from a lawyer this week and I am guessing its from the CC company.

My question is should she file the big B (bankrupt) for 2 credit cards. I thought about the credit counselor since her credit score is already in the 500's from these 2. She has $6500 coming to her but $3250 each will still leave her in volatile (sp) debt. What do you think is the smart thing to do?
 

· DRIVE4SHOW-PUTT4$$$
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I have a family member who is seriously delinquent on 2 credit cards. She has caught them up, paid the fees and after loosing 2 jobs due to cutbacks is back in the red. Her credit is clean except for the 2 credit cards. She owes collectively around $5000 on each before the companies started pouring on the fees, charges and crap. It seems like everytime she sends them $$$ the balance is the same. I have tried some negotiation and they aren't budging. She got a call from a lawyer this week and I am guessing its from the CC company.

My question is should she file the big B (bankrupt) for 2 credit cards. I thought about the credit counselor since her credit score is already in the 500's from these 2. She has $6500 coming to her but $3250 each will still leave her in volatile (sp) debt. What do you think is the smart thing to do?
I think $10,000 in debt. isn't enough to have the big B on your record!!!.....just my opinion
 

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I have a family member who is seriously delinquent on 2 credit cards. She has caught them up, paid the fees and after loosing 2 jobs due to cutbacks is back in the red. Her credit is clean except for the 2 credit cards. She owes collectively around $5000 on each before the companies started pouring on the fees, charges and crap. It seems like everytime she sends them $$$ the balance is the same. I have tried some negotiation and they aren't budging. She got a call from a lawyer this week and I am guessing its from the CC company.

My question is should she file the big B (bankrupt) for 2 credit cards. I thought about the credit counselor since her credit score is already in the 500's from these 2. She has $6500 coming to her but $3250 each will still leave her in volatile (sp) debt. What do you think is the smart thing to do?
She can do a debt settlement on the two cards, BK will kill her for many years if she can even do it. Some cards need to go 90 days late. If she is not comfortable with hassling with them find a company to do it for her, but they will charge her. With that $6500 she should be able to settle both of them.

one thing to watch out for is if she is not insolvent the IRS will tax her on the part that is written off. Also if her score is 500 because of just the two cards she had bad credit before. If it was 700 range before it will not drop 200 points from two cards.

Anyway seek help now before any more money is wasted.
 

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They should probably stop everything now and get the advice of a good attorney

IMO they should do everything they can to avoid BK, use it only as a last step and with the advice of a solid attorney, (not the budget ones advertised on buses and stuff).

also an attorney will very rarely if ever contact you on behalf of the cc company. Your first contact with the cc company attorney is usually a court summons if (very rarely) they go that far. You will however get a ton of collection calls for company's that word there names and use language that make you think there attorneys.

These are just my opinons so take them for what there worth.
 

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A lawyer called from the card company? That's not typical. Usually they just send you to collections at around 90-180 days.
 

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Check out Consumer Credit Counseling...

If it is like it used to be, they are the way to go.
 

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If she has 6500 coming, don't split the payment amount, pay off one card and put the 1500 balance on the other, leaving her with around 3500 which is much easier to pay off. No reason to BK over 3500, or even 10k.

I wouldn't even waste time on the debt consolidation companys, I have heard nothing but horror stories. The best way to pay off debt is manage your spending. Does she smoke cigs, have a starbucks every morning or a Red Bull? Cut that crap out. Drive less, don't purchase that song on itunes, etc. I know first hand, I was in a lot of debt and I have paid it off the hard way, by paying for it. If she has a car with some good value and she doesn't owe anything or a lot on it, sell the car and purchase something for 3500 bucks less for the mean time. 3500 in debt isn't the end of the world.

Just my .02
 

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Discussion Starter · #8 ·
She can do a debt settlement on the two cards, BK will kill her for many years if she can even do it. Some cards need to go 90 days late. If she is not comfortable with hassling with them find a company to do it for her, but they will charge her. With that $6500 she should be able to settle both of them.

one thing to watch out for is if she is not insolvent the IRS will tax her on the part that is written off. Also if her score is 500 because of just the two cards she had bad credit before. If it was 700 range before it will not drop 200 points from two cards.

Anyway seek help now before any more money is wasted.
She never used alot of credit so her score was always low 600's but positive across the boards. I will check into the consumer credit counseling

How long and what would be the best way for her to bounce back? She doesnt want to finance anything and has a vehicle that will be paid off this year

Last I checked I was around a 780 I think so I have never dealt with this
 

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Ding Ding, Solution!

Sell the car (5-6 years old?) and have her buy something 10 years old. I know it sucks to drive an older car, but she will get herself out of debt, not having anything financed, and learn a lesson!
Good advice right there.

The CCC will just help you get on a strict budget and you have to have enough income to use it. They do charge a monthly fee as part of their payoff plan, but they negotiate with the lenders and also counsel you about creating a budget.

As always, the trick is spending less than you have coming in. Easier said than done though. Good luck!!
 

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A lawyer called from the card company? That's not typical. Usually they just send you to collections at around 90-180 days.

Yep. CC Companies are very clever with stirring up slow pays. It's BS and the most they do is charge off the amount after months of calling sometimes 10x per day, at least for those amounts.

Tell her to change her phone number.

They can sue but I would think that is an extremely rare deal. It's unsecured debt.
 

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She can do a debt settlement on the two cards, BK will kill her for many years if she can even do it. Some cards need to go 90 days late. If she is not comfortable with hassling with them find a company to do it for her, but they will charge her. With that $6500 she should be able to settle both of them.

one thing to watch out for is if she is not insolvent the IRS will tax her on the part that is written off. Also if her score is 500 because of just the two cards she had bad credit before. If it was 700 range before it will not drop 200 points from two cards.

Anyway seek help now before any more money is wasted.
I did the settlement deal. Had to be past 90 days late before they'll settle, but I did end up saving $ in the long run. And the IRS did tax the write off part. Dropped my score over 200 points. But now it's back higher than it was before though. Been 2yrs now.
 

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Ding Ding, Solution!

Sell the car (5-6 years old?) and have her buy something 10 years old. I know it sucks to drive an older car, but she will get herself out of debt, not having anything financed, and learn a lesson!
That's the best solution. Then she can both learn the credit lesson and have pride in herself for having paid it off in full.

If she was short a few grand after all that and she was a family member I really cared about I'd pay off the rest out of my own pocket with the agreement she'd work it off. My house needs painted right now, for example. Surely you have something she can do to earn the money.
 

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I did the settlement deal. Had to be past 90 days late before they'll settle, but I did end up saving $ in the long run. And the IRS did tax the write off part. Dropped my score over 200 points. But now it's back higher than it was before though. Been 2yrs now.

I did this also. Mine was from a business startup went bad. My score dropped 70 points. I was way insolvent at the time so I did not need to pay any taxes. If some is solvent I feel, like i would have, pay the debt if you have a way to do it. I had nothing and was broker then broke when i did it.
 

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She never used alot of credit so her score was always low 600's but positive across the boards. I will check into the consumer credit counseling

How long and what would be the best way for her to bounce back? She doesnt want to finance anything and has a vehicle that will be paid off this year

Last I checked I was around a 780 I think so I have never dealt with this


The credit counseling is a bad idea. If she can pay it like others have said then pay it. Credit counseling is not the same as debt settlement.
 

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BigQ is spot-on.

Yiour friend should be able to settle her debt right now for a 20-30% cash offer; by threatening a Chap 7 BK. Tell the creditors she meets the "means test" and it will garner their attention.

Most importantly, there tons of regular credit advice boards, like creditnet.com and other. Before she does anything, spend about a week researching it out on credit message boards.

Getting a new phone number or Internet number is also a great idea as OCMerrill suggested. And remember, they are a creditor, not the IRS or any other government agency where there are statutory penalties for not telling the truth.
 

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Yep. CC Companies are very clever with stirring up slow pays. It's BS and the most they do is charge off the amount after months of calling sometimes 10x per day, at least for those amounts.

Tell her to change her phone number.

They can sue but I would think that is an extremely rare deal. It's unsecured debt.
Agreed. Pretty rare. Probably someone posing as an attorney through the collections company. I got that all the time. BUT, it's remotely possible that in these tough financial times CC co's may be taking the last resort first.

Blue,

I got into some tough times about 10 years ago. Had close to 30K in debt. Secured and unsecured. I let a lot of it go, meaning I did nothing and it was charged off, the other stuff, I paid what I could. Just wasn't in a position to dig myself out. At one point my credit report was 3 pages of nothing but negative items. If it's possible to have minus credit score, I had it. Anyway, even with all that, I never once got sued or called to court. All collections. Those ***kers are ruthless:|err
I would think two separate cards with 5K each isn't a big deal certainly not enough to file BK. She should work a payment plan or negotiate a lump sum a payoff and then borrow the money from family.

This is small potatoes. She doesn't need to pay a credit counseling service for something this trivial. Shes needs a friend or family member to counsel her on spending and proper CC use before she gets in bigger trouble down the road. She needs to use this as a lesson. Pay cash as often as possible treat her credit rating like a criminal record--keep it clean.

BTW, there is a statute of limitations (7 years in CA last I heard). Everytime she makes a payment on either of those accts., the limitation restarts. That means so long as she is making payments after it goes into collections, she's continues to liable for the debt for another 7 years. IE, collections will continue to harass, pursue, ding her credit and generally make life hell for her until it's paid off. So, either she makes arrangements to pay it off completely as fast as possible or not at all and let it go. After 7 years, legally, it'll be done but they will probably still try to get her pay and restart the limitation. I still get notice of collection for things 12 years old.

I recommend mint.com for people that have a tough time with personal finance.

Good luck
 

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Guys, just an FWIW
Banks readily sue on any amount of CC debt.
Either they'll do it, or refer it over to a junk debt buyer who will readily sue for even hundreds of dollars.
 

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Agreed. Pretty rare. Probably someone posing as an attorney through the collections company. I got that all the time. BUT, it's remotely possible that in these tough financial times CC co's may be taking the last resort first.

Blue,

I got into some tough times about 10 years ago. Had close to 30K in debt. Secured and unsecured. I let a lot of it go, meaning I did nothing and it was charged off, the other stuff, I paid what I could. Just wasn't in a position to dig myself out. At one point my credit report was 3 pages of nothing but negative items. If it's possible to have minus credit score, I had it. Anyway, even with all that, I never once got sued or called to court. All collections. Those ***kers are ruthless:|err
I would think two separate cards with 5K each isn't a big deal certainly not enough to file BK. She should work a payment plan or negotiate a lump sum a payoff and then borrow the money from family.

This is small potatoes. She doesn't need to pay a credit counseling service for something this trivial. Shes needs a friend or family member to counsel her on spending and proper CC use before she gets in bigger trouble down the road. She needs to use this as a lesson. Pay cash as often as possible treat her credit rating like a criminal record--keep it clean.

BTW, there is a statute of limitations (7 years in CA last I heard). Everytime she makes a payment on either of those accts., the limitation restarts. That means so long as she is making payments after it goes into collections, she's continues to liable for the debt indefinitely. IE, collections will continue to harass, pursue, ding her credit and generally make life hell for her until it's paid off. So, either she makes arrangements to pay it off completely as fast as possible or not at all and let it go. After 7 years, legally, it'll be done but they will probably still try to get her pay and restart the limitation. I still get notice of collection for things 12 years old.

I recommend mint.com for people that have a tough time with personal finance.

Good luck
it's 4 years in cali from date of first collection attempt.. this restarts everytime you make a payment as they can restart a new collection.. after 4 years it is generally illegal for them to continue to collect however they will still try. it can and will show on your credit for up to 7-10 years though but there are ways to get that removed.
 
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