Credit Cards Debt and it's Impact on Loan Modification

[hope67]

I'm falling behind on my credit cards and I'm planning to go to Consumer Credit Counseling to repay the credit cards. However, I can't do this at this moment, I'm planning to do that in a couple of months, by then I'll be 3 months past due.

I'm trying to figure out two things:

-How long (past due months) does it normally take for Credit Card companies to start taking legal actions against the debtor?

-Would being past due on my credit cards effect my loan modification process in any way?

I would really appreciate it if someone would shed some light on these issues. I'm so worried as I know there is no way for me to pay my credit cards bills at this point.

TIA

[j-nice]

Hope67-Each state is different in it's collection process and also the dollar amount owed on your cards. Typically after 180 days of non-payment a creditor will charge off your debt, they will then sell it for pennies on the dollar to a collection agency who makes you think they are working on behalf of the original creditor - they are not- the debt has been sold to them. The collection agency will then try to collect from you and has the right to sue for a judgement. If you are sued and do not respond the collection agency gets awarded a default judgement and can garnish your wages up to 25% or levee your bank account.

Do not waste your time or money with CCCS. You can work with your creditors just like you are working with your mortgage company. If your debt on the card is less than $5K they are easier to work with and usually not as hostile in trying to collect. See if they have a hardship program they can offer you. Again, you may have to talk to many before you get someone with a heart.

If you are past due on your credit cards then it does show a hardship on your credit report via low score to your mortgage company. If you are paying your unsecured debt and not paying your mortgage then I would suppose that is another story.

[hope67]

Originally Posted by j-nice

Hope67-Each state is different in it's collection process and also the dollar amount owed on your cards. Typically after 180 days of non-payment a creditor will charge off your debt, they will then sell it for pennies on the dollar to a collection agency who makes you think they are working on behalf of the original creditor - they are not- the debt has been sold to them. The collection agency will then try to collect from you and has the right to sue for a judgement. If you are sued and do not respond the collection agency gets awarded a default judgement and can garnish your wages up to 25% or levee your bank account.

Do not waste your time or money with CCCS. You can work with your creditors just like you are working with your mortgage company. If your debt on the card is less than $5K they are easier to work with and usually not as hostile in trying to collect. See if they have a hardship program they can offer you. Again, you may have to talk to many before you get someone with a heart.

If you are past due on your credit cards then it does show a hardship on your credit report via low score to your mortgage company. If you are paying your unsecured debt and not paying your mortgage then I would suppose that is another story.

Thanks j-nice, at this point I'm about 1 month past due on my credit cards, so being past due on my credit cards would actually be a plus as to the loan modification because it confirms hardship?

CCCS is a non-profit organization, so I don't think they will charge me money. I will start by dealing with the credit card companies first, if that fails then I will go to CCCS. However, I can't afford to make a payment now, so I will do that in about couple of months.

As to what you said regarding being sued, if more than one collection agencies were awarded judgements, the garnishment of 25% of my wages will be distributed among them?

I'm just exploring every possibility so I can be prepared.

[ItsJustMe]

We are behind on our cards and were offered a mod. I don't know if they 'helped' or not. They sure did prove some financial hardship, though LOL.

Most of our creditors didn't call us until 90 days late. One hasn't called us at all (180 days late). AmEx called us (daily, relentlessly) at 30 days late.

[j-nice]

CCCS will actually put a bigger ding in your credit than would filing bankruptcy or settling the debt for a lower dollar amount. You may think they are helping you but it is a long process and does adversely affect your credit. As far as multiple charge offs and default judgments, I do not know the answer to that. If you go to court and can show that you do not have the ability to pay the debt (no assets, no equity in your home, etc) then a judge may rule in your favor BUT usually at this point is when most would file bankruptcy. I have heard that it can take up to a year for a collection agency to sue (one year after non-payment). You may just want to try to continue to work with each of your creditors individually.

In my case, two of them (Amex & Washington Mutual=$30K) would not work at all with me. I have not paid them in 6 months and the Amex has just been turned over to a collection agency. I will play the game with them and send them letters asking to provide me with proof of original debt agreement, etc in order to bide some time. I have a personal/unsecured loan with Citifinancial that just as of today (now 60 days behind) they are willing to put me in a hardship program which will cut my payment in half to them-in 6 months they will review it and see if I need to continue with hardship. In 6 months I hope to have the mod completed, no judgements and can hopefully file chapter 7 because my income is below the state median for Michigan ($51K annually). My God, it's a full time job just dealing with all of this mess! Life will be so much easier debt free...never again will I fall into the trap of extending myself to plastic!

[ama125]

j-nice,
Thanks for all the info. I've been paying the minimum on just two cards to keep them open and haven't paid the others. I think it's been since March. I get calls frequently but have not yet gotten any notices from collection agencies. I also have a friend who is a bankruptcy attorney and he advised me not to worry about the credit cards, just work out the loan modification first, tackle the rest later. I used to pay all balances in full every month. And you're right, this really has become a full time job! If only we could all get paid for it

[hope67]

Originally Posted by j-nice

CCCS will actually put a bigger ding in your credit than would filing bankruptcy or settling the debt for a lower dollar amount. You may think they are helping you but it is a long process and does adversely affect your credit. As far as multiple charge offs and default judgments, I do not know the answer to that. If you go to court and can show that you do not have the ability to pay the debt (no assets, no equity in your home, etc) then a judge may rule in your favor BUT usually at this point is when most would file bankruptcy. I have heard that it can take up to a year for a collection agency to sue (one year after non-payment). You may just want to try to continue to work with each of your creditors individually.

In my case, two of them (Amex & Washington Mutual=$30K) would not work at all with me. I have not paid them in 6 months and the Amex has just been turned over to a collection agency. I will play the game with them and send them letters asking to provide me with proof of original debt agreement, etc in order to bide some time. I have a personal/unsecured loan with Citifinancial that just as of today (now 60 days behind) they are willing to put me in a hardship program which will cut my payment in half to them-in 6 months they will review it and see if I need to continue with hardship. In 6 months I hope to have the mod completed, no judgements and can hopefully file chapter 7 because my income is below the state median for Michigan ($51K annually). My God, it's a full time job just dealing with all of this mess! Life will be so much easier debt free...never again will I fall into the trap of extending myself to plastic!

j-nice, I learned a lot from your posts, you are very well informed. Unfortunately, I do not qualify for chapter 7 because my income is slightly more than the state median. So I will have to work with the creditors to obtain a hardship repayment plan. I just hope my mortgage modification plan will be successful.

You're right, it is a full time job dealing with all these debt problems. I wish you luck and everyone else including myself..

[hope67]

Originally Posted by ItsJustMe

We are behind on our cards and were offered a mod. I don't know if they 'helped' or not. They sure did prove some financial hardship, though LOL.

Most of our creditors didn't call us until 90 days late. One hasn't called us at all (180 days late). AmEx called us (daily, relentlessly) at 30 days late.

WOW! AmEx was calling you daily just for being 30 days past due!! They have nothing better to do?!

[wattsm]

My problem is that I feel like I have to stay current on my mortgage so that my credit card rates don't increase. But by staying current on the mortgage, it's less likely that I'll be approved for a modification. And in order to stay current, I have to charge about $1000 a month on my credit cards. It's a vicious cycle, and if I don't get approved for the modification, I don't know what I'll do. I have about $60,000 in credit card debt. I know that probably sounds absurd (and it is), but almost all of it is at a low fixed rate (under 6%), so I'm actually making some progress paying off the balances each month. But I've also heard that if my credit score goes down or it shows that I'm late on my mortgage, the credit card companies have the right to raise my rate up to 20% or higher. If I don't get approved for this modification, then I have no idea what I'm going to do. Becoming late on my mortgage is not an option.

[hope67]

Originally Posted by wattsm

My problem is that I feel like I have to stay current on my mortgage so that my credit card rates don't increase. But by staying current on the mortgage, it's less likely that I'll be approved for a modification. And in order to stay current, I have to charge about $1000 a month on my credit cards. It's a vicious cycle, and if I don't get approved for the modification, I don't know what I'll do. I have about $60,000 in credit card debt. I know that probably sounds absurd (and it is), but almost all of it is at a low fixed rate (under 6%), so I'm actually making some progress paying off the balances each month. But I've also heard that if my credit score goes down or it shows that I'm late on my mortgage, the credit card companies have the right to raise my rate up to 20% or higher. If I don't get approved for this modification, then I have no idea what I'm going to do. Becoming late on my mortgage is not an option.

I'm past due on my mortgage, yet the credit cards that charge me 8% interest didn't raise the interest rate. I'm sure they will now because I'm about to be 30 days late paying them.

[sandyg]

Originally Posted by hope67

I'm past due on my mortgage, yet the credit cards that charge me 8% interest didn't raise the interest rate. I'm sure they will now because I'm about to be 30 days late paying them.

They pulled my credit report and raised my rates before I was late on any of my CC's. And of course the 1st to do so was BOA...Imagine that?

Once I get these mod's done I will seriously have to look into a 13 BK. You have to pay $500 a month for 5 years on a 13. Man that is a long time!

[AzGryffindor]

My hubby and I are now at the 180+ mark on our credit cards. Two of them have been sold off to a JDB (junk debt buyer). Haven't heard a peep from any of the others.

If you can make it to the statute of limitations mark (in AZ it's 3 years since the last payment was made on unsecured debt), if the OC or CA (Original Creditor / Collection Agency) attempt to sue you can use the SOL as an affirmative defense.

I personally plan to "duck and cover" for 3 years as there's no way we can possibly pay our cards back and there's no way in hell that I'll ever pay a collections agency.

If we do get sued I'll file for BK before they can even present their case in court.

Hopefully, they'll realize that we're not even worth their time. Should they attempt to go for a judgment they won't get anything. Currently BofA has our house showing as 60+ days late to the CRA's (Credit reporting agencies). And, considering that pretty much everyone in AZ is upside down on their homes and unemployed/under-employed I don't know why any CA's would even bother to buy debt in this state.

[dthom]

We also have cards that have now charged off. Tried everything to work with the 2 that charged off. Lucky enough to have paid for payment protection on a few cards, so as long as we can show hardship (husbands job loss) we don't have to pay. A couple of others are working with us. Just depends on the cardholder I think. If the two that charged off decide to sue, we are ready to go to court to prove we absolutely could not afford the payments any longer and requested help but they would not work with us. At this point our concern has only been to do our best to pay our secured debt and other basic living expenses. I would think it would look better to lender if they see that you are doing as much as you can to attempt to make payments to them. Our home is much more important to us than the Credit Cards right now. Of course I am sure our credit score is horrible, but we will work on that after we get the mod done and hopefully my husband can find a job.

Main thing to remember, if they do sue, do not ignore the summons. Go to court and be totally prepared to show what your hardship is and that you do not have the funds to pay, have copies of your expenses,and be sure to include everything, even as small a thing as a haircut etc. to show there is nothing left to pay the creditor who is suing you. Learned this when our son turned a car back to the lender and was sued. An attorney gave him that advice and the court discharged the whole debt against him.

[ItsJustMe]

Originally Posted by hope67

WOW! AmEx was calling you daily just for being 30 days past due!! They have nothing better to do?!

They called my PARENTS WORK on a SUNDAY at about 45 days

[j-nice]

Here are two very informative pages/websites to give you insight on slowing down the collection process:

How to Beat a Collection Lawsuit Not Pay Your Debt or Beat a Collection Suit

Free sample letters for disputing old, outdated or invalid debts

This information is useful once the orginal creditor has written off your debt and sold it to a collection agency (typically 180 days after non-payment. Please remember that the collection agency has not purchased your debt for the amount of the balance-they have purchased it for pennies on the dollar.

Also, if your income is $20K or less per year-Your unemployment or your spouses unemployment/disability/social security cannot be counted as income-then you are uncollectable and a judge will not grant a judgement. Hopefully, this information can help you slow down the collection process so that you can complete your modification.

If you talk with attorneys regarding bankruptcy (13 & 7) make sure you check with several to get correct information. If you file chapter 7 and want to keep your home you must be current on the mortgage payments or foreclosure proceedings can start immediately.

[Wizard]

I have friends that have worked w/ their credit card company in this case chase,
with one card bal of 11K and Bal of 15K they were able to work out a 60 month
payment plann@ 2% fixed, and some will go lower, but you must agree to close the
card voluntarily, this could impact your fica score, so you need to prioritize. Some
companies wil also negotiate cents on the $. Its' hard to know, this all depends on
how many credit cards you have, with balances, and the total amount of debt with
the various banks. The credit cards Co/'s will pull a Credit report to see what kind
of credit card debt you have with others!

Wizard

[hope67]

Originally Posted by hope67

j-nice, I learned a lot from your posts, you are very well informed. Unfortunately, I do not qualify for chapter 7 because my income is slightly more than the state median. So I will have to work with the creditors to obtain a hardship repayment plan. I just hope my mortgage modification plan will be successful.

You're right, it is a full time job dealing with all these debt problems. I wish you luck and everyone else including myself..

Hey! I do qualify for chapter 7, I researched it further, my income is indeed below the median in my state, initially I thought I didn't qualify because I included my social security benefits.

[j-nice]

hope67-I have been educating myself on chapter 7 since January and although it offers relief from the unsecured debt it does get questionable with your home. Most attorneys will tell you not to re-affirm the mortgage debt unless you are 110% positive you will be able to pay every month. Like I said, it is almost a must to have the mod approved and completed and first payment made under new mod before filing chapter 7 or it can get really tricky. David Leighton in the Advocacy department did research for me because of my situation and I have openly talked about the need to file chapter 7 with NACA, David and in my hardship letters to Fannie Mae and BofA. He told me there are additional hoops to jump through but that new rules are being put in place so that homeowners can get relief from the bankruptcy court and continue to work on obtaining a permanent modification to keep their homes. We will see if it works for me....more sleepless nights! Please, make sure you find an attorney who specializes in bankruptcy and real estate and someone who will listen to your situation and not just offer you stock responses.

[hope67]

Originally Posted by j-nice

hope67-I have been educating myself on chapter 7 since January and although it offers relief from the unsecured debt it does get questionable with your home. Most attorneys will tell you not to re-affirm the mortgage debt unless you are 110% positive you will be able to pay every month. Like I said, it is almost a must to have the mod approved and completed and first payment made under new mod before filing chapter 7 or it can get really tricky. David Leighton in the Advocacy department did research for me because of my situation and I have openly talked about the need to file chapter 7 with NACA, David and in my hardship letters to Fannie Mae and BofA. He told me there are additional hoops to jump through but that new rules are being put in place so that homeowners can get relief from the bankruptcy court and continue to work on obtaining a permanent modification to keep their homes. We will see if it works for me....more sleepless nights! Please, make sure you find an attorney who specializes in bankruptcy and real estate and someone who will listen to your situation and not just offer you stock responses.

j-nice, thanks for your response. At this point I won't take any action regarding BK because I'm even less than 30 days late on my cards, I think I have maybe several months before I need to file for bankruptcy, hopefully my loan modification will be approved before then.

[j-nice]

hope67-it is good that you are educating yourself now if the need arises to have to file. When I started the process with NACA in February I thought for sure by August my mod would be complete and I would be in process of filing bankruptcy. Never did I think that I would just now be getting approved for a performing forbearance and a permanent mod now 5 months away...never a dull day here! Stress levels are at an all time high BUT I tell myself everyday that this will eventually be over and everything will work out for the best. Hang in there!

[hope67]

Originally Posted by j-nice

hope67-it is good that you are educating yourself now if the need arises to have to file. When I started the process with NACA in February I thought for sure by August my mod would be complete and I would be in process of filing bankruptcy. Never did I think that I would just now be getting approved for a performing forbearance and a permanent mod now 5 months away...never a dull day here! Stress levels are at an all time high BUT I tell myself everyday that this will eventually be over and everything will work out for the best. Hang in there!

j-nice, don't let the process get to you, keep your faith and keep fighting until you get it done. You're doing great and you are well informed. Things will get better, there is light at the end of the tunnel.
My trial modification starts September, hopefully, by November 30th I'll know for sure if my loan was approved for a permanent modification. Praying for all of us!

[MommyBook]

I've dealt with CA's and CRA's before, and I've managed to raise my FAKO/FICO to something worth talking about. My dad gave me a loan at prime % to pay off my cards since I got rate jacked and CLD'd on all but one (going from 8% to 28% is quite a surprise). That boosted my credit because it looked as if I paid a bunch of stuff off and lowered my DTI, but I was cheating and just paying my dad instead. *sigh*.

Since DH lost hours, got a 2nd job then lost the 2nd job and all the additional bills with the lower income, we started putting everyday purchases on the cards again instead of debit/cash. Utilization for DH is lower, but I'm in the 90% range because guess who has the high limits (yep, me.).

Our min. CC/loan payments (not including the car) is about $750/month. I really can't afford to go delinquint on ANYTHING because I'm in background for a better job and they look at credit. Yea, I have some valid points, but they're just going to see the black and white and not the grey area. Sucks because the job would be giving me an extra $5-10/hour in income.

If it weren't for the job thing they I'd do what I can do dispute and validate until I could get things off my report, but I'm not sure if it's worth dealing with a bunch of credit card companies/banks, versus trying to fix the BIG (actual) problem and dealing with the one bank on the home loan.

[hope67]

I found this fantastic BK "means test" calculator.

You enter your zip code then enter your info scrolling down the worksheet, it will tell you whether you qualify for chaper 7 or 13 or both. It will also calculate the disposable income that could be used towards paying debt if you are filing chapter 13.

Nolo Bankruptcy Means Test Calculator for Plymouth, Michigan 48170 - - For cases filed on or after March 15, 2009?

[hope67]

Does anyone know how often do they update the median income? Is it once or twice a year?