Strategy experts on CC Settlement/Management please help!

[analysisparalysis]

Hi Everyone. This is my first post but I have read many on here. As my name implies, I have analysis paralysis in that at this point I may have over read all the info out there and am not sure what to do. In the meantime debt is rising and things are getting tighter.

My situation is this.
I live in California. I have some income property that so far is not underwater. I've tried to do a refi on a building with equity to get a better rate and lower payment with a cash out due to high cc debt - $87,000. No chance. My income has fallen (self-employed) so my debt to income ratio is too high. I've been able to remain current all this time with my credit cards except for last month...I have one chase card where I'm within the 30-60 day period before it gets reported to the credit reporting agencies unless I pay. The interest on it is obscene.

I have never been late with the mortgages. Currently B of A has cleared me for an in-house loan modification but I really don't have any faith in that considering what I've read here. The new loan amount would be MORE than I am paying now so in the short-term it wouldn't work with my cash flow issues. In the long-term when the market picks up, I'm making more and there is no more principal being added to the loan it would.

I'm looking into selling one of my properties (mentioned above) that has an 8% neg am loan on it. If I did I may break even with it after taxes and realtor commission. If there is any money in hand after the sale I could either pay off what I owe, or negotiate with the credit card companies since I'll then have some cash to do a settlement. Hard to say what and if any money would remain.

Another settlement option is a law firm here in town that I went to speak with. They will settle my debt with their cash for 60% of face value and I will pay them back at 0% interest for a period of 3 or 3.5 years. I realize that they will probably settle it for 50% and pocket the rest as profit since there is no other fee. Thinking that since I have no cash on hand that by using their services the settlement part will go faster, even though I'll be paying them for a while afterwards.

My concerns are:

Being sued. Since I do have some assets - equity in the properties I own, will that make me a more likely target?
Would they be less willing to settle?

If I settle how long will this have a negative impact on my credit score. I plan on keeping most of what I have and one day want to get another loan. Also would like to start a business in the next year and a half.

Is a DMP a better option with quicker recovery for a credit score? Not sure if I can swing it but may want to try. Looking for the least harmful way to resolve all this with the options I have.

I have been reading about others who for instance stopped paying their chase cc and were able to negotiate a 0% interest/ 5 year payment plan. How would this look on a credit report? Anyone know?

Thanks for reading. I'm a 45 year guy with a 15 month old. I have to do what's best for him and his future.

Any advice or personal stories with insight would be appreciated!

[Erik Sandstrom]

Sorry to hear about the nightmare you are facing, many Americans are in a similar position.

To Answer your concerns:

1. Being sued - in your case having the assets you have does make you a priority for a lawsuit. You want to make them feel like you have nothing they can take. Then they are more willing to offer a settlement on the cards.

2. Impact on Credit - definitely will be negative, you most likely wont be able to get RE Financed for at least 2 years with the delinquency. You will however be able to get another credit card, most likely at a very high interest rate which will then rebuild your credit. When you settle, you want to make sure they're going to report it as: Paid as agreed or settled 0 balance owed. Not settled for less than owed.

3. DMP - (Debt Management Program?) This sounds like a consolidation, I'm not a big fan of these because you wont be able to settle for a percentage of the balance owed and you're now affirming your debt. Essentially it's combigning your debt and you would be repaying the entire balance at a lower interest.

Myself I actually negotiated with my Chase card and settled the balance for 35%. Capital One was on the more difficult end of the spectrum which gave me trouble but finally was settled at 50%. It took some time and making them believe they had NOTHING to come after me for. Chase was one of the cards which was more willing to work with me but once again still took some time. I had an agent offer me the 0% interest but I made it clear to them that I had absolutely NO interest in pursuing that outcome.

All in all - I wouldnt hire anyone to take care of this for you, it's something you can handle on your own and either way around it you're still going to get the nasty collection calls. Just keep making offers... I've heard of many people sending off debt validation letters or continue to report the debt as bad debt on their credit report so every time the credit reporting agency sends out a letter asking them to validate they have a certain period of time to respond and if they don't respond within that time period than the debt is null. Not sure how this has worked out for people, just wanted to share my story.

[analysisparalysis]

Thanks for your response Erik. I appreciate it very much.

Yes, the DMP - debt management program basically lowers the interest rate and puts people on a payment plan. The full balances get paid off. In my case this would take a long time. The benefit (?) is that the credit score is better off and when a creditor looks at my history in the future, it will show I payed my debts. My credit score if I settle will not look so good as you know. Do you happen to know how long it will stay on it for? 7 years? Longer?

I just got a call from Chase and they want me to fill out an application to close my account and re-figure my interest rate. She started asking me several questions about income, bills, reason for hardship, etc. We didn't complete it and asked that I call back to do so. New interest rate would be from 0-15% or so.

You mentioned that I may be sued and to make them think I have nothing. Can't they look at my credit report, see mortgages that are being payed, realize I have property and look into them? Not sure how much information they can get on me. I guess I can always verbally tell them that I will be falling behind in mortgage payments and see foreclosure in the future. Not sure....

Also, I was curious as to the last part of your e-mail:

"sending off debt validation letters or continue to report the debt as bad debt on their credit report so every time the credit reporting agency sends out a letter asking them to validate they have a certain period of time to respond and if they don't respond within that time period than the debt is null."

Not sure I understood what people were doing. Sorry but this is all really new to me.

Thanks again to everyone for reading this. I would appreciate any insights at all.

[Erik Sandstrom]

Not a problem, that sounds similar to the interview that Chase did with me as well. And absolutely they can look into your credit report and see mortgages being paid and look into those, but if you don't have the ability to refinance and that is your only home - what can they really make you do? Sell the house? I highly doubt a court would force you to sell your home to pay off unsecured liabilities.

Here's something i found about validation letters:

The Fair Debt Collection Practices Act contains a provision by which consumers have the right to request validation for unsecured debts held by collection agencies. If debt collectors from a collection agency are contacting you concerning a debt you supposedly owe, sending a debt validation request requires the company to mail you proof of your debt. You must put your debt validation request in writing. You can only send a debt validation request to a collection agency. These letters are not valid with original creditors.




Read more: Letter for the Validation of Unsecured Debt | eHow.com Letter for the Validation of Unsecured Debt | eHow.com

You can read more about it here: Letter for the Validation of Unsecured Debt | eHow.com