Just Started "scorched Earth" Method. Couple Questions..

[Brad]

Hey folks. First, I wanted to say that this forum has been a life saver for me. I have been able to gather so much information about credit card debt, and it has opened my eyes to the mistakes I have been making by paying out 800 bucks per month on credit card interest. So here is my quick story, and I will follow with just a couple questions I have. I will make it quick.

We (my wife and I) have a large house payment (2,600.00 per month), a couple vehicle payments (800 per month), a couple school loan payments, and other normal monthly bills. We have never missed a payment on anything in the 15 years we have been married. My wife lost her teaching job a couple years ago due to the state budget (Illinois) and her income went down drastically.

We have been playing catch up ever since. A couple weeks ago we re-worked our budget, and to our surprise, not only are we paying out 800.00 per month to service credit card debt (all minimum payments), but the balance on the cards has barely moved. In other words, they are HAMMERING us on interest.

We are spinning our wheels with the CC's. SO, I made the decision (after reading this forum) to stop paying them altogether, and start stock piling money into savings to save up for settling these cards. It is a huge weight off of our shoulders to stop wasting the 800 per month for interest only!!

Here are the facts. Total credit card debt is spread out between 3 banks, all total about 34K. There are 7 credit cards total, and the 3 banks are Chase, Bank of America, and Commerce bank. The largest portion of the debt (13K) is with Commerce bank, followed by Bank of America, and finally Chase. We are not overly concerned with the hit to our credit score, because we built our house 10 years ago on 40 acres, and plan to die here.. so we won't be financing a home.

Also, we do all of our banking with our local bank, and the bank president is a personal friend of mine, so I have access to money with no questions asked. Our house is also financed through this bank (500K) so they generally jump through hoops to help us.
Here are my questions...

1) I know that there are basically 2 ways to settle. With the OC before charge-off, or with the debt collector after charge-off. I am shooting for settling at 10% with all of these cards. Am I right in thinking that AFTER charge-off is the best bet??

2) Of these 3 banks, are any of them likely to sue? Obviously if they do, I will certainly answer if I am served.

3) IF they sue: In college I lived with a high school friend who was in law school. He ended up being our states attorney, and now has his own law firm. I know he would be happy to help me if I made a simple phone call to him. If I am sued, would it be wise to retain him?

Obviously there would be cost involved in this, because I would never ask him to do it for free. I know from what I have read that often times the attorneys that sue are not very organized, and often times lack the evidence they need to get a judgement.

4) If you have 3 credit cards with the same bank, do they add the 3 cards up and settle on 1 big debt? Or will I be settling with each card separately??

5) Last but not least: We are keeping 1 card active, and continuing to pay on it. It has a 1,000.00 balance on it. We are never using it unless it is an absolute emergency. One of the other cards we are stopping paying is with this same bank. Will they close out this card as well if we keep paying it on time? (It's a Commerce Bank card)

Thanks in advance.... sorry I wrote a tome, but I wanted to be thorough.

 

[Brad]

Oh and one more thing.... I may have used the wrong terminology, forgive me, I am new to this. I assumed "Scorched Earth" meant that you stopped paying your credit card payments, then later settled with a CA for a fraction of the balance. Maybe "Scorched Earth" means never pay anything?? I am a little unclear on the terminology. Maybe I should have titled the thread "Settling"?? I apologize for any confusion.

 

[Moe Bedard]

Hello Brad and thanks for sharing your story with the LoanSafe community. I'm glad that you found the information on this forum useful.

You are right on the scorched earth policy. It just means stop paying your debt with the ultimate goal of settling them for a fraction of what you originally owed.

Let me see if I can help guide you here with your questions.

1. Yes, that means settling after charge off. What will happen after some time of missed payments is your creditor will most likely charge off the debt and once they do this, it makes it easier to settle.

2. You never really know if they will sue or not. Only time will tell. If for some reason, one bank or more does sue, this is when you can get aggressive in trying to work out a settlement.

3. In my experience in counseling thousands of people, I have found that lawyers rarely help at all and often are a complete waste of money and time in debt settlement situations. They just take your money and do not do much. There is nothing they can do that you can't. They only help when it comes to filing a legal case such as bankruptcy which can get complicated due to the various laws etc.

4. Credit Cards each have their own contract and are treated legally as separate so I assume they will settle each one individually.

5. As I mentioned above, your credit cards each have their own contract and are treated legally as separate, but they also have the right to raise rates per the contract and terminate it as well at their discretion. There are many things that could cause them to cancel and yes, this may be one of them.

 

[Brad]

Maurice, thank you for taking the time to answer my questions, it means a lot. I do have 2 more questions, and they are more asking for an opinion than anything else. 1. The card with the largest balance is a citibank with 6,500.00. The rest are 4k and under. In your experience, what are the odds that I will be able to settle after charge off, as opposed to being sued? And 2. If I am sued, you were saying a lawyer is more or less a waste of time.... how could I possibly defend myself in court? How could I possibly face and beat an attorney on my own? That part confuses me. Am I crazy for doing this?? Can it actually work?? Thanks again!!

 

[Moe Bedard]

You are welcome Brad.

If I was to guess on your odds in settling, I would say that you have about a 40-50% chance in settling if you are aggressive in doing so.

If you are sued, you just need to answer and try to respond the best you can with the information you can easily find on the internet. You need to keep in mind that they will win once they sue because you have a legal contract that is pretty much cut and dry. With that said, getting a lawyer is not going to do much other than cost you money.

The goal will be to settle before that happens and worse case, to get on a repayment plan.

 

[Brad]

Thanks again Moe. I have read in a couple places that some folks recommend mentioning possible bankruptcy to the debt collectors, basically saying that you are looking into it with a bankruptcy attorney, and that this sometimes will give you a little more leverage to reach a good settlement. If one were to file bankruptcy, they may get nothing at all right? Obviously, I would avoid mentioning this unless the collector is really playing hardball. What are your thoughts on this? We are taking the 800 bucks per month that we are saving from making cc payments, and stashing it in savings. We want to have 3 or 4K in savings to be ready to settle with lump sums.

 

[bkakca]

Thanks again Moe. I have read in a couple places that some folks recommend mentioning possible bankruptcy to the debt collectors, basically saying that you are looking into it with a bankruptcy attorney, and that this sometimes will give you a little more leverage to reach a good settlement. If one were to file bankruptcy, they may get nothing at all right? Obviously, I would avoid mentioning this unless the collector is really playing hardball. What are your thoughts on this? We are taking the 800 bucks per month that we are saving from making cc payments, and stashing it in savings. We want to have 3 or 4K in savings to be ready to settle with lump sums.

Hi Brad, we settled several cards in 2014 & 2015, one was with Citi and had a balance of roughly $6200. This one took the longest, over a year, and we settled it for $1,000.

They kept trying for 35%- 50%. We let them know we had significant medical issues going on, and also used the below wording on the phone with them...this was provided by another LoanSafe member:

*****If they contact you again with an offer that you either cannot afford, or don't want to accept, this advice from another member, in reference to credit cards, is a good response:

"When your credit card company (bank) asks for financials, tell them you
already provided everything to a credit counseling agency who provided you with guidance on what
you could afford. I did this when settling with my BoA card. They must have asked me for
financials every time we talked (which was a lot over the 180 days). I would simply say
"I've already provided all this information to a counseling agency who has advised me that I
have negative cash flow and need to reduce my obligations".

I finally faxed them an offer at the $1,000 and wrote that we have seen Citi settling cards for as low as 10%, so if this was not acceptable, we would just wait for the Statute of Limitations to run out. They called us the next day and we set up the payment.

 

[Brad]

bkakca, thanks so much for the info! Very useful, and I will use this advice. There is really only 1 thing that I am a little confused about though.... you said that it took a little over a year to settle? I thought that all credit card banks automatically charge-off after 180 days? Then I assumed that after charge-off, you are then dealing with a collection agency. Were you still dealing with the OC (citibank)?? The 3 cc banks that I have cards with are Bank of America, Citibank, and Chase. Do you have experience with BoA or Chase? Also, did any of them sue you, or threaten to? And is a lawsuit something you can see coming? Or will it just happen out of nowhere? Thanks again for sharing your experience. I can't help but to be nervous going into this, I have never missed a payment on anything in my life and I am 41. Did you successfully settle with all of your cards?

 

[Brad]

Bkakca, in your settlement journey, werent you worried about any of them suing? Or did any of them? Were you basically just rolling the dice?

 

[Moe Bedard]

Thanks again Moe. I have read in a couple places that some folks recommend mentioning possible bankruptcy to the debt collectors, basically saying that you are looking into it with a bankruptcy attorney, and that this sometimes will give you a little more leverage to reach a good settlement. If one were to file bankruptcy, they may get nothing at all right? Obviously, I would avoid mentioning this unless the collector is really playing hardball. What are your thoughts on this? We are taking the 800 bucks per month that we are saving from making cc payments, and stashing it in savings. We want to have 3 or 4K in savings to be ready to settle with lump sums.

My pleasure!

Yes, you can use that as a tactic. If you qualified and filed for example, a chapter 7 bankrupcty, then they would most likely get nothing. You can also play hardball as bkakca stated by saying that you will just wait for the Statute of Limitations to run out.

 

[bkakca]

Bkakca, in your settlement journey, werent you worried about any of them suing? Or did any of them? Were you basically just rolling the dice?

We successfully settled each card, there were four, if memory serves. Some were prior to charge-off, and the others were with the CA's (collection agencies). Citi was charged off and sent to a CA called Client Services, and we settled that one with them.

We are in AZ, and had spoken with an attorney's office on trying to settle two Heloc loans on rental properties. During that consult, they recommended we stop paying on our cards as well, blow everything up at once they said, and get it over with. They also said BofA was not settling Heloc's and wanted us to use them to negotiate Short Sales on the rentals, with BofA.

We had never been late on anything either, and it was very hard. The attorney wanted to settle the cards for us too, and told us it would be in the 40-55 percent range. They never mentioned any concerns about being sued, not sure if that is because we are in AZ and it's a state by state thing, or what.

I had already found LoanSafe and had been reading everything I could, so we told them we needed to think about things first.

Within a day or two, we got settlement offers from BofA on both Helocs (just lucky timing, as they had a bunch the wanted to get rid of). They started at 33 percent (form letter to everyone), and we settled with two different CA's for 7.5 percent and were able to keep the rentals.

With that, we decided to attempt to settle the cards on our own too, and it worked.

BofA- balance was about $9,600, I think, and it was the first one, so I was nervous. I took BoA's offer and settled it for around $2300.

Chase - balance was about $11,000. CA was MRS BPO Services, , settled for $1700, or 15 percent.

Citi AT&T - balance was about $6200, settled with Client Services for $1,000, or about 16 percent.

We had one more with Barclays- about $6,000, they are tougher.... I think we had to do about 45-50 percent to settle that one.

 

[Brad]

Bkakca, thanks so much for the detailed story. It gives me hope that my situation can in fact work out. Your settlements were exactly what I am looking for. You obviously did a great job. I am taking notes and stashing cash in my savings account, so I can be ready when settlements can be reached. I am really only confused about 1 aspect of this whole thing though..... here is the big question: What determines whether you settle BEFORE or AFTER charge-off??? I am not concerned about my credit score, so this is not a factor at all. I AM concerned however about being sued, and having my wages garnished. So are you more apt to be sued AFTER charge-off? Or does that have any bearing on a lawsuit? I just want to have a good grasp on whether to settle before or after charge-off. IF anyone else has any advice on this particular subject, please chime in! Oh and, I assume Bkakca that your credit score was trashed, is it starting to recover yet?

 

[bankwhipped]

Bkakca, thanks so much for the detailed story. It gives me hope that my situation can in fact work out. Your settlements were exactly what I am looking for. You obviously did a great job. I am taking notes and stashing cash in my savings account, so I can be ready when settlements can be reached. I am really only confused about 1 aspect of this whole thing though..... here is the big question: What determines whether you settle BEFORE or AFTER charge-off??? I am not concerned about my credit score, so this is not a factor at all. I AM concerned however about being sued, and having my wages garnished. So are you more apt to be sued AFTER charge-off? Or does that have any bearing on a lawsuit? I just want to have a good grasp on whether to settle before or after charge-off. IF anyone else has any advice on this particular subject, please chime in! Oh and, I assume Bkakca that your credit score was trashed, is it starting to recover yet?

The longer the account is in default the better chance you have of settling for less also, for getting sued.
I would be checking the court house website regularly to be for-warned of any suits filed.
It has been a few years since I had to settle many accounts but I would think that things have not changed that much but when
dealing with accounts in default anything can happen.
For me BOA insisted on settling all cards at the same time, business, personal and spouse's. they were the easiest.
Chase filed suite on 1 account and I was able to settle with the attorney that filed the suite for 50%.(made 3 monthly pmnts) This was at the beginning of my journey so I freaked out when I got served, probably could have settled for less.
another bank filled suite but was unable to serve me so after a year or so the courts closed it, never settled.
I would not worry about wages been garnished unless you won't have the funds to settle if sued ( should try to have about 50% just to be on the safe side but should be able to settle for less)
If they sue and you don't respond they will get a default judgement and garnish wages so be sure you always know if there is a suit filed and always file a response or call them and settle.
They have to charge off after 6 months by law and it might be a little worse for your credit score but other then that it doesn't effect you.
The older the account is the better settlement you will get and sometimes the best offers are from collection agencies.
I would not contact any of them for settlement, that makes you seem worried and them less likely to offer their best settlement (unless you are been sued).
Do to business failing, we defaulted on everything at once, around 20 different accounts and mortgages, settled about 10-12 of them only.
home foreclosed but no judgements. SOL has passed but because we no longer have any credit our credit scores are trashed, went from about
750 to around 560 now around 640.

 

[Brad]

Ok just thought I would give a little update. We stopped paying on our 3 cards in October. So far, the banks have started to call and email, notifying us that we have missed payments. No biggie. I have blocked the numbers on my phone. Since I started this method, I have carefully done hours of research, learned all about Bill Bartmann and what he is all about, (you should familiarize yourself with who he is) and also watched ALL of Michael Bovee's videos (Michael founded Consumer Recovery Network, a debt settlement agency) and actually consulted with him on the phone. It is a free service he offers, and he actually recommends settling on your own, as opposed to hiring a debt settlement company. I knew this already, but it was good to hear him say it as well. What I have learned so far, is that I may have gotten lucky, specifically with the 3 banks I am going to be dealing with. The information that I got from Michael on the phone is... 1) Chase hasn't sued since 2011, so I have nothing to worry about with them as far as litigation, and can take a little more time if needed with them. 2) It is unlikely that BoA or Citibank will sue. Obviously not impossible, because it can depend on who ends up with the debt. But I have already stashed 3k into my "settlement" savings account, and plan to stash another 4 or 5k within the next 3 months. I don't plan on letting these debts go to the point of being sued, if at all possible. My targets for settling are 20-30% of the balances on the cards. Whoever gets down to around that range first, I will take the deal. Normally, I would not have the kind of cash flow needed to stash this kind of money in savings, but my co-worker is out for 2 months with back surgery, and I am working 60 hours a week. Perfect timing, I'll take it! I will keep you all informed as the process unfolds. It is my understanding that of these 3 banks, Citibank is the bank most likely to offer a decent deal BEFORE charge-off, but the chances of that are 50/50 at best. So, it looks like post charge-off is what I am going to be working with, most likely. The 3 banks Michael warned of (most litigious) were (in this order) American Express, Discover, and Capitol One. I am lucky in that I don't have any of those. I will post back soon.

 

[Brad]

It has been a while since I have posted. You can look at the dates on my post to get an idea of the timeline of everything. I am posting this in hopes that it will help some folks, since you have all given out such valuable information. As of today, most of my debt mentioned above (Chase, BofA, and Citibank cards) has been sold off to junk debt buyers. They are sending me offers to settle at very low amounts (most around 15%). However, the news is not all good. Bank of America was my highest balance (13,000), and they sued me 3 weeks ago. I knew I was getting sued a month ahead of time, because I got a letter from Blitt & Gaines, a collection atty in my state (Illinois). I did a little research, and they do all of the credit card lawsuits in my county, and all of the surrounding ones. Got served with a summons at home, etc etc. We have about 12k in our savings account, so I hired a local attorney (a good family friend), and he is handling the suit. My goal is to settle for around 50%. I am hoping that is not too optimistic, the attorney seems to think that 50% is where it will land. First appearance is set for April 4. I plan to post here again once the smoke clears to let you all know what happened. My attorney advised me of the following.. 1) They will likely settle for 50%. 2) If they play hardball, our only leverage is to take it to trial. 3) If it were to go to trial, I would likely lose. BofA has all of the documents to easily prove that we owe. The only thing I didn't understand was.... why wouldn't the other attorney refuse to settle and just go ahead with trial if they KNOW they are going to win and get a judgement. My attorney explained that they will more than likely settle, because collecting 7k in a lump sum today will be a bird in the hand for them. Whereas, collecting on a judgement is difficult and costly at best, plus even if they do, it will take years of garnishment to collect. So here's to hoping for a good outcome. In the end, if they do in fact settle for 50%, then this whole plan was well worth it. Yes we got sued... BUT.... we will hopefully be paying 7k on a 13k debt. That's not too bad! As for all the rest of the cards, the bulk of the rest of the debt is with Chase, and it is my understanding that Chase hasn't sued since 2011. Stay tuned!

 

[Jo Jo]

It has been a while since I have posted. You can look at the dates on my post to get an idea of the timeline of everything. I am posting this in hopes that it will help some folks, since you have all given out such valuable information. As of today, most of my debt mentioned above (Chase, BofA, and Citibank cards) has been sold off to junk debt buyers. They are sending me offers to settle at very low amounts (most around 15%). However, the news is not all good. Bank of America was my highest balance (13,000), and they sued me 3 weeks ago. I knew I was getting sued a month ahead of time, because I got a letter from Blitt & Gaines, a collection atty in my state (Illinois). I did a little research, and they do all of the credit card lawsuits in my county, and all of the surrounding ones. Got served with a summons at home, etc etc. We have about 12k in our savings account, so I hired a local attorney (a good family friend), and he is handling the suit. My goal is to settle for around 50%. I am hoping that is not too optimistic, the attorney seems to think that 50% is where it will land. First appearance is set for April 4. I plan to post here again once the smoke clears to let you all know what happened. My attorney advised me of the following.. 1) They will likely settle for 50%. 2) If they play hardball, our only leverage is to take it to trial. 3) If it were to go to trial, I would likely lose. BofA has all of the documents to easily prove that we owe. The only thing I didn't understand was.... why wouldn't the other attorney refuse to settle and just go ahead with trial if they KNOW they are going to win and get a judgement. My attorney explained that they will more than likely settle, because collecting 7k in a lump sum today will be a bird in the hand for them. Whereas, collecting on a judgement is difficult and costly at best, plus even if they do, it will take years of garnishment to collect. So here's to hoping for a good outcome. In the end, if they do in fact settle for 50%, then this whole plan was well worth it. Yes we got sued... BUT.... we will hopefully be paying 7k on a 13k debt. That's not too bad! As for all the rest of the cards, the bulk of the rest of the debt is with Chase, and it is my understanding that Chase hasn't sued since 2011. Stay tuned!

Just wondering if you have any updates since this was over a year ago. I'm researching and trying to get as much good information as possible. Thanks!