Hardship Payment Plans for Credit Card Debt

What are bank sponsored credit card hardship payment plans? Banks reach out through the phone and with mailers and offer a number of options to their credit card customers who miss payments. Most of the large credit card banks are willing to work directly with you shortly after you miss a payment. Hardship payment programs are a banks loss mitigation effort for credit card debts. The larger lenders have well established and effective strategies that are often fair and measured to your ability to pay. The problem is… they only offer them to you when you fall behind.

Short headline grubbing break:

There is no shortage of media coverage that touches on how difficult it is to modify an underwater mortgage; get mortgage payments reduced to a level consistent with a homeowner’s ability to pay; get approval on a short sale etc. Banks who originated, and/or service home loans people are struggling to pay are either insincere about, or ill equipped to provide, solutions to the housing implosion they helped to create.

How banks are dealing with those unable to pay credit cards is nearly the opposite.

How to get your bank to talk to you about a hardship payment for your credit card.

The first step is to talk to your creditors about your situation. Yes, the same credit card banks that may have jacked up your interest rates, or lowered your available credit limits – even when you paid them on time.

You may have already tried talking to your credit card banks about lowering your payment in the past. The hardship you explained to the customer service rep probably did not seem to matter.

That is primarily because the person you are speaking with is generally not empowered to make any changes to your payments, even if they wanted to, if your payments on the account are current. The same banks that are unwilling to work out lower and more affordable monthly payments with you when you were current are often willing to work with you if you have fallen behind.

If you are reading this section of the debt relief program after having missed credit card payments, you already know that banks start reaching out to you with phone calls, emails, and letters right away. Banks know that constant “reminders” that you are late with a payment increases their potential to get your credit card back on track with some type of payment. Many of the larger credit card issuers will reach out to you and offer lower monthly payments within days of missing a payment, while some banks won’t offer a lower payment option until you are weeks to a month or more late.

In the prior section of the our debt relief education, we covered how lower monthly credit card payments are available through consumer credit counseling services and companies offering debt management plans. More banks began making direct offers to account holders when payments were missed after the economy began dipping into recession. The payment reduction a bank may offer direct to you comes from their willingness to reduce your interest rate temporarily, or over the life of the repayment plan.

You do not need to send a hardship letter.

Drafting and sending a hardship letter to your credit card bank is totally unnecessary. Hardship letters are something more consistent with what you would include when you are looking at a home mortgage modification, a short sale, or qualifying for some type of benefit or adjustment on your home loan. Qualifying for a hardship program with credit card debt is literally just a matter of a phone call, and qualifying in your credit card banks system for the payment reduction.

How does a temporary credit card hardship repayment plan work? 

Hardship repayment plans will be different from one bank to the next. How late your payments are, how much you owe, your household expenses, all will contribute to what type of lower payment the bank will offer you in one of their internal hardship plans.

Bank sponsored lower monthly hardship repayment plans are accomplished by reducing your credit card interest rates.

Some hardship payment options have a temporary timeline. The temporary plans can last as little as 3 months and go as long as 12 months. Your payment is reduced because the creditor is willing to lower your interest rate for several months while on the the temporary hardship plan. Interest rates may be as low as zero percent on up to around nine percent. The creditors will often waive or eliminate any fees and penalties that were charged to your account when you are repaying through one of their hardship plans, but only after you make several payments on time.

Some, but not all banks, will allow the account to stay open when you are on a temporary hardship repayment plan. This would mean you could resume using the card when the temporary plan is over and you successfully made all of the payments.

The temporary plans are useful to someone who is only experiencing a hardship that is not expected to continue for any significant period of time.

How do long term hardship payment plans work?

Longer term hardship repayment plans offered by credit card lenders direct to their account holders did not become popularized until the economy started to take a dive a few years ago. Those banks offering long term plans, at the time of this writing, will close your account, freeze your interest rate at between zero and 9%, and amortize your monthly payment using your current balance. Your new lower monthly payment will be the same every month over a 60 month time period.

Some creditors offered long term plans during the worst of the recession, but now only offer temporary plans.

Long term hardship payments closely resemble how your debts are paid using a credit counseling service.

These “life of the balance” repayment programs closely resemble debt management plans available through a nonprofit counseling agency. One of the differences between using a credit counseling service, and setting up the hardship plans yourself, will be how many creditors you will have to contact in order to achieve the same result. And you may not be able to get the same results a counseling agency would get for you.

The credit counselor will only have to get your account details and your income and expense information from you once in order to start setting up your debt management plan.

If you have many creditors, and some of them do not offer the longer term hardship plans, you may be better off getting the lower monthly payments through a credit counseling service, rather than making all of the efforts on your own.

Your credit card bank will have some questions for you to answer before offering a hardship program.

Making calls to your creditors, or picking up one of the many calls they make to you, and then discussing lower payment options, will involve answering some qualifying questions. The information you will be asked for will focus on your monthly income and monthly household bills. Be ready to answer questions about what you pay for rent or a mortgage, how much you pay for phone and cable (cell phones too), utilities, groceries etc. How you answer these budget questions will impact what plan you qualify for, or if a reduced payment plan will be available at all. If your monthly cash flow shows money is too tight after you pay typical living expenses , you obviously cannot reasonably commit to any plan, no matter how good the terms.

Your bank, who want nothing more to collect on what you owe, may actually tell you that they don’t want your money!

If your income and expense exercise shows you have too much money after your regular bills are paid, the lower payment plan a credit card bank offers may not be as good, or may not be made available to you at all.

Some banks that offer the 5 year long term hardship repayment plans may require that you recommit to the plan every year. At the time of this writing, Bank of America is requiring this.

Benefits to hardship payment plans other than lowering your monthly credit card bill.

Depending on how many months you have missed payments your creditor may agree to “re-age” the account after 3 or more timely payments on the plan. This means they will bring your account current in their reporting to the credit bureaus. This takes the sting off of the 30, 60, 90 and longer late pays, that may already be on your credit report, and prevents them from affecting you in perpetuity. There are limitations to the re-aging benefit. Once your account is 3 months late, some banks don’t re-age.

If your account is not charged off (typically 6 months late), you can still get lower monthly payments from banks offering them.

As a general rule, whether you work through a credit counseling service, or work directly with your bank(s) to set up a hardship payment plan, it is best to do so before you reach 90 days of consecutive nonpayment.

Post your questions about hardship payment programs in the comments below for feedback.

Continue on with the Hardship Payment Plan section of the CRN debt relief program – 3 Warnings About Hardship Repayment Plans.

 

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About Michael Bovee

Michael started CRN in 2004 with a mission to provide detailed debt and credit help and advice that encourages and allows people struggling with debt to solve their debt problems just like a pro - but without the high fees.

Comments

  1. Cfar305 says:

    Do these hardship programs, in your experience, cause the creditor to report anything negatively on your credit report. In other words, if you haven’t had delinquencies reported on an account, will getting into a hardship repayment program itself hurt your credit score?

    • Michael Bovee says:

      Yes they can. Some creditors, but not all, will reflect that your account is enrolled in a managed plan similar to how they would report if your credit card balance was enrolled and be being paid through a nonprofit credit counseling agency. This is not considered a negative item on your credit report that drops your credit score significantly. It is just a scenario that future lenders will see (while you are on the plan), and that they may use in evaluating whether or not to extend you new credit.

      Hardship repayment plans for credit card debt are often not going to be available unless you miss a payment. Calling while current with your credit card payment usually results in no available payment reduction options. Once you are behind, and depending on the creditor, you can get late payment penalties removed and your credit report re-aged.

      Do you have just one credit card balance you are concerned about, or several? Who are the accounts with? What are your interest rates?

  2. What if you simply cannot make payments at all anymore due to disability and being widowed? What if a credit card company has a lien against your home and you can’t keep up with your payment agreement anymore? Can they force you to sell or will the lien just stay there? Is the credit card company more likely to offer a settlement or do they prefer to have the lien on your property?

    Thank You,
    Desperate Senior Citizen

    • Michael Bovee says:

      Susan – I have never seen a credit card judgment result in the forced sale of a home. It is just not worth the expense, and credit card debts can be easily eliminated through bankruptcy.

      You have a hardship situation no doubt. One that may mean settling is not viable. Please post a follow up comment with:

      The state you live in.
      The balance on the debt today.
      The name of the creditor and debt collector involved.
      What you have been paying monthly.

      I can offer some more detailed feedback and options to consider in reply.

  3. My Mother-in-law is 83 years old, in a hospital in Knoxville, TN, and heading to a nursing home. She has about $5,000 in credit card debt, maybe $10 -20,000 in assets after sale of her house which has two mortgages in it. She’ll need all of this to pay nursing home expenses. She has $1,100/ month in social security income. The minimal payments have been made.
    How can my wife who now has power of attorney eliminate the credit card debt through some kind of hardship relief, if this is possible?
    Thank-you, Rob

    • Michael Bovee says:

      Rob – Are you contemplating some type of reduced monthly payment on the credit cards, or a balance reduction through negotiating a settlement? Both are possible in this situation. I just want to be clear on the type of hardship debt relief you are targeting? Let me know in a comment reply. It would also be good to know who the specific lenders are and the approximate balance on each credit card.

  4. Hello my question is about debt consolidation. I have tried to getting loan to consolidate all my debt, but since my credit to income ratio is to high I get declined. I know if I were able to consolidate my cards i would be paying $300-500 less than what I am paying on them seperately. It seems to me that the banks do not take this into account. What are my options? I really dont want to declare bankruptcy or use the reduced debit plan if I dont have to.

    Signed,
    Losing my mind

    • Michael Bovee says:

      Is your current credit score 680 or higher?
      Are you trying to consolidate credit card balances totaling less than 30k?

      Let me know in reply and I may be able to point to some alternatives. There are also some creative ways I have helped people work through something like this using one or two banks hardship payment programs, but not the others.

      • Yes the cards are about 25-30, but my credit score is 640.

        • Michael Bovee says:

          Peer to peer lenders like Lending Club look for a 680 score, but do lend up 30k. Your credit score will hold you back from getting approved from them or the other national player – Prosper.

          Which banks are your largest 3 balances with?
          What are the interest rates on those cards?

          Also, if balances total 25k, could you afford the credit card payments if they were consolidated to a single payment of roughly 525.00?

          • If I were able to consolidate them with payments of $525 that would be great. Discover, USAA are my two biggest and I am not sure what the rate is for them off the top of my head. I mean I am trying to get a smaller amount to pay off the smaller ones and am unable to do it.

            • Michael Bovee says:

              With your credit score, and a debt to income ratio that lenders would view as too high, working with a nonprofit consumer credit counseling agency may be the best way to consolidate your credit card debts into one lower monthly payment.

              Credit counseling services have preset arrangements with your lenders where your payments will be reduced to between 1.7% and 2.5% of your combined credit card balances. With a 25k total your payment would look something like:

              25k at 1.7% = 425.00 consolidated monthly payment.
              25k at 2.5% = 625.00 consolidated monthly payment.

              My comment above estimated the middle of that range at 2.1% of your combined credit card debts being your consolidated payment of 525.00.

              You can learn more about the benefits and drawbacks of using a credit counseling agency to consolidate debt in the article series here.

              Depending on your monthly cash flow, you may also be able to use some of the ideas I outline in how to consolidate debt creatively.

              Post any questions or concerns you have in the comments of those additional resources and lets go from there.

  5. Michael – if you make your payments in a low-interest hardship program consistently and then hit a point where you can’t pay, will the previous interest rates be reapplied to your balance? Second questions: Is it possible to settle with a cash pay-out after you’ve agreed to a hardship plan if things get worse for you?

    • Michael Bovee says:

      Bob – Anytime you cannot pay on time you risk the interest rates going up. Being in a hardship program is no different. You should expect that to happen, unfortunately.

      You absolutely can settle for a lump sum lower pay off if you fall off of a hardship program. Either direct with the original creditor (often within several months of your payments stopping), or later with a collection agency or debt buyer.

  6. I have been on workout plans for three credit card accounts for over 30 months and have not missed a payment. The credit reporting agencies show the accounts as either “closed” or “charged off.” This is reported every month that I have made a payment. I have been making payments as agreed and my credit remains damaged.

    Is this ongoing reporting of negative information permitted by the Fair Credit Reporting Act? If yes or no, please cite the the specific section.

    • Michael Bovee says:

      Marc – I need to understand much more clearly what is happening.

      When you enrolled in the hardship plans directly with your credit card lender were you already late with payments? If so, how many months? When you enrolled in the payment plans, were you doing that with the bank or a debt collector?

      Which credit cards are you enrolled in these payment plans with?

      Is your credit report showing that your balance is being reduced each month?

      I can offer more feedback with answers to those questions.

  7. Thanks for your quick reply – impressed.

    Answers to your questions follow:

    I have workout agreements with three credit card companies and the bureaus are
    showing an accurate reduction in balance. Specifics about each account follow;

    1. Bank of America – I was greater than 180 days late when I entered the agreement.
    BOA reports my account as “closed” to the bureaus and accurately reports my balance.
    I receive a letter on BOA letterhead each month. It thanks me for my payment and
    accurately show my remaining balance.

    2. JP Morgan Chase – I was 150 days late when I entered the agreement.

    Chase reports my account to the bureaus as “closed” and accurately reports the
    balance. I receive a statement each month that reflects same.

    3. Discover – I was 60 days late when I entered the agreement. Discover reports my
    account to the bureaus as “closed” and accurately reports the balance. I receive a
    statement each month that accurately reflects same.

    I appreciate your help.

    • Michael Bovee says:

      Thanks for the additional details Marc. When you are offered a credit card hardship plan your accounts will sometimes be reaged to show you are current with payments on a forward looking basis (as long as you do not miss any of your new lower payment). Sometimes the bank will not reage until you have made several of your new payments on time. Sometimes they will not reage at all. They are not required to reage.

      Without seeing your credit reports I cannot say whether Chase, Bank of America, or Discover is showing you behind with payments all this time. But if one or more is, it would hurt you because the account was not brought current.

      The Bank of America account went 180 days before your new payments started, so it likely shows charged off and would not be able to be reaged and brought current. Chase and Discover may not have charged off, but would still show 2 months, and 5 months, of missed payments from back then. But these two could be brought current if they are not already.

      Do you have other missed payments with any creditors in the last 24 months? If not, do you know your FICO credit score?

      • Currently I have no other missed payments. The only other account that I have open is my home loan. I was 12 months delinquent when the lender agreed to permanently modify it in April 2012. I haven’t missed a payment since then.

        I don’t know my FICO score. Trans Union says my Vantage score is 637 as of this morning.

        • Michael Bovee says:

          Thanks. Those late/missed payments prior to the loan modification are likely having the largest impact on your credit right now.

          Go ahead and call Discover and Chase and find out if they are showing your payments and your account as current in their database.

  8. I have 2 credit cards and 1 line of credit.
    I have a low wage job with insufficient income.
    I have not missed a payment for the last 5 years.
    I’m borrowing from one source of credit to pay the other and I’m not paying my debts down.

    I owe Bank of America almost $20,000. Property tax, due twice a year, taps me out. I really need a hardship repayment plan for Bank of America credit card.

    Which one should I ask for? 0% interest? Lower minimum payment? Which program works best? Which program is attainable?

    I don’t qualify for chapter 7. I would have to do a chapter 13 bankruptcy. Suggestions please?

    • Michael Bovee says:

      Mike – It is not so much which hardship payment program you ask Bank of America for, but which one they will offer you. And more often than not, you have to have missed a billing cycle in order to get them to discuss reducing the monthly payments. The lower minimum payments on these hardship plans are a direct result of interest rate reduction. The rate you qualify for is something that will come from your conversation with BofA. Be prepared to answer a litany of monthly income and expense questions. You can also call a consumer credit counseling company and have a free budget session over the phone and get a monthly payment reduction quote out of them. The CCCS company quote will be similar to what Bank of America would offer. Call 888-948-4425 to talk to a credit counselor.

      If your monthly payment cannot be reduced to an amount that is within budget, and because chapter 7 is off the table, I would suggest you look at settling debts as an alternative to chapter 13.

  9. Frustrated Student says:

    Hi:

    I am in way over my head on 3 credit cards and have a boat load of student loans. I used my credit cards to pay for my expenses associated with survival and supplies from my undergrad and graduate education and now I am just plain BROKE! I recently got granted a principal and interest deferment on 1 set of student loans but could only get an interest only on the other which I still cannot afford ($189/mo). I am only 30 and while I admit to making some bad purchase decisions when I was younger now I can’t get out of the whole of credit card debt. What is even more frustrating is that I have never paid late due to using 1 to pay another or borrowing money from family, but my credit score is still only 613 with no late payments ever. I feel like I might as well never have paid the credit cards if my score is still rock bottom low. I need to know how to approach my credit card companies as I am now over each limit and really can’t pay considering I can no longer finagle using 1 to pay the other and am a firm believer in making my own bed and lying in it. My family is fed up with helping and I can’t say I disagree.

    1 – Chase $6,600 – min pymt $140
    2- Capital One $5,000 – min pymt $150
    3 – My local credit union $15,000 – min pymt $300

    I am employed FT but do not make nearly enough to support my household expenses (contrary to popular belief of student loan authorities) and pay these high monthly payments. I really hate any derogatory remarks on my credit report, but what is the purpose of caring at this point when I’ve busted my butt to pay on time and now have a 613 (I used to have a 700+ before student loans). I have a friend with multiple collection accounts and she has a 589 score…my squeaky clean payments haven’t earned me much better. What do you suggest? What can I do to bring my credit score back up and how can I lower my payments.

    • Michael Bovee says:

      Frustrated – What are the interest rates on your credit cards? Could you afford the payments on them if your consolidated monthly payment on them were say $550.00? If so,creditor styled hardship plans could work. With the Capital One account and not know what credit union you have, you may want to work with a nonprofit consumer credit counseling agency to achieve that same credit card payment consolidation (maybe lower).

      If your credit card debts were out of the way, would you be able to then afford the payments on the student loans? Are your student loans private or federally backed? Have you consolidated?

      • Frustrated Student says:

        Thank you for the reply! I am at my wit’s end with cc debt at this point. I want to go back to the way my grandmother did it…cash only!

        My rates are as follows:

        Capital One rate = 22.90%
        Chase rate = 13.24%
        Credit union = 7.5%

        I want to do whatever will harm my credit the least but still allow me to lower my monthly payments. At this point it is probably only a matter of time before they take my credit limits away anyway considering the consistent over the limit activity. If I pursue hardship or credit counseling, do those statuses come off of the report once you have exited the program or is it like bankruptcy and stays reflected even though it’s satisfied/over? Do these hardship programs/counseling notations on your credit report really look better than bankruptcy?

        1/2 of my student loans are Federal and the other 1/2 are through the HESAA which I believe is a private state agency. I definitely want to explore consolidation but want to allow my deferment to run out first (why consolidate and have to pay if they are deferred for a while ya know). The payments will be an excess of $1400/mo once the deferments expire which is still unaffordable. But with the hopes of consolidation (do you know any companies for this?) and alleviating cc debt I can definitely send something.

        I just want these cc balances gone! I am trying to do the responsible thing and continue to pay but at this point I’m ready to give up.

        • Michael Bovee says:

          If you enroll in a debt management plan with CCCS, some or all of the creditors will add a notation about that to the credit reports. This does not really impact the score in any meaningful way. When you finish the repayment plan, or take over payments down the road, the fact that you were working with a credit counseling company is fairly irrelevant. CCCS has an advantage over the DIY hardship plan approach.

          Working on your own – in order for you to get your creditors to agree to reduce your interest rates through their internal hardship programs, you often have to prove a hardship. That is not easy to accomplish when you are current with payments, but becomes all to evident when you miss payments. You sometimes have to miss more than one payment before a creditor offers a reduced monthly payment. This means 30 day, 60 day late showing up on your credit reports. And this will impact your credit reports and credit score.

          Comparing credit counseling with bankruptcy on your credit report is a bit nuanced. The DMP on your credit report does not dramatically hit your credit score and can be viewed as temporary. Bankruptcy on your credit report is a killer, and stays for 7 years (chapter 13), or 10 years (chapter 7), and will have a dramatic affect on your score. But that’s a long term view. Short term – lenders will often see the fact that you are on a managed payment plan through credit counseling and view that similar to how underwriting looks at a chapter 13. So your score does not really help in this scenario. Many people will qualify for new credit products sooner by filing chapter 7, than by signing up for credit counseling or using a DIY hardship payment plan approach.

          Here is a more thorough outline of credit ratings/reporting when comparing debt relief options: http://consumerrecoverynetwork.com/credit-report-score-rating-debt-relief-programs/

          You can call and speak with a credit counselor and get an exact quote of what you monthly payment would be reduced to by consolidating in a DMP: 888-948-4425.

          When it comes time to look at any and all student loan options you can qualify for, check out http://www.studentloanborrowerassistance.org/. You can consolidate your loans without hiring anyone. You can also look at the availability of income based repayment plans when ready to tackle this.

  10. My situation is similar to that in Jason’s post on August 7th. I want to consolidate my credit card debts and I cannot get a loan to consolidate them from traditional banks. I have researched DMP and Debt Settlements, but am not entirely certain what is right for me. I have not missed payments, but had to use one of those promotional checks companies often offer for either 0% or very low rates for a certain period of time and it was for $450. I am the only person working in my household and we live paycheck to paycheck, my girlfriend is in school full time. We have had a hard time paying bills, but have only had a couple of late payments of a few days. My credit score is between 730-740 and my debts on cards total roughly $25,000 and the companies I have them with are Discover, Bank of America and Chase. Do you think Lending Club might be the way to go? Or some other alternative? I have contacted 2 companies I have cards with and asked about hardship programs or lowering my rates. I haven’t heard back just yet as I emailed them this morning.

    • Michael Bovee says:

      Chris – A few years back, at the peak of the recession, you could contact your credit card lender while still current and discuss eligibility for their internal hardship repayment plans, and succeed with getting a reduced monthly payment (from their lowering your interest rate). We now appear back to a point where most people do not get approved for hardship plans and payment reductions without having missed a payment first. Let me know what happens with your requests.

      I can offer more meaningful feedback about consolidating with a place like Lending Club or Prosper, working with a nonprofit credit counseling agency, or settlement, if you can answer the following in a comment reply:

      What are your interest rates currently?
      Do you consider your income stable?
      When does your girlfriend finish school?
      Are there student loans that will enter your budget picture? If so, how soon?
      Do you have credit product goals in the next 2 to 3 years (home loan, auto)?

  11. Overwhelmed says:

    I am looking for the best solution to my debt problems. Until this past year our credit score was well into the 700s and there were no issues. Then one thing after another came our way causing us to over use our credit cards. First, a tornado ripped through our tiny town, doing damage to our home and vehicles. The insurance claims were not enough to cover the needed repairs. Then my father n law suffered a stroke that left him disabled. He was the only one in the household working and still had two minor children at home. Four months later my daddy passed away unexpectedly without any life insurance. We were trying to help run three households on two incomes and there was no way to male ends meet other than use the plastic. That has left us with four credit cards (none with more than a couple hundred dollars remaining credit), medical bills and a loan for home repairs (not to mention student loans). Credit cards alone are around $38,000; all interest rates of 12.99% or 13.99% with the exception of one being 6.5%. We can only afford the minimum payments and those are even getting hard to do. My current credit score is 643. I have tried to get personal loans to consolidate debt but been denied because of too much debt. I have contacted my credit card companies to ask for a reduction in interest rate or hardship program but have been told nothing like that is available to me. I refuse to file bankruptcy and I don’t want to damage my credit score any further but I don’t know what else to do. My husband and I both have jobs. We are willing to repay the debts but just need help tomake the repayment more manageable. Please help!

    • Michael Bovee says:

      Overwhelmed – It is not uncommon for credit card lenders to deny access to some of their lower monthly and hardship payment programs when your payments are still being made on time. And it is becoming increasingly difficult to coordinate lower credit card payments across multiple credit cards. While the banks may be saying no to you, they work efficiently with the proposals that they receive from nonprofit consumer credit counseling agencies.

      How would your budget look if you were able to get your credit card payments down to, say 750 to 800 a month? If that seems doable call 888-948-4425 to reach a credit counselor and go through a free DMP consultation to get a down to the penny idea of what your payments can be reduced to. Be sure to talk to them about the hardships created by the tornado in the event there are some better reductions available.

      If you learn something that would prevent you from enrolling in a managed repayment plan, come back and post an update and lets go from there.

      • Overwhelmed says:

        My only concern with debt management plans are that you cannot have any credit cards during that time. My husband has to have a credit card, he has to stay away from time to time with work and has to have a credit card for reservations and such.

        • Michael Bovee says:

          Keeping a card out of the DMP is common for the self employed and for work purposes. Be sure to highlight the job angle of having a card kept out of the program when speaking with the credit counselor, and take care to select the appropriate one.

          Debit cards can function the same way too.

  12. Overwhelmed says:

    Can you give me an estimated payment if using a DMP to pay off approx $26,000?

    • Michael Bovee says:

      Sure, but just know it is only a rough estimate based on national averages. You need to call a credit counselor and go through a complete session in order to get an exact quote.

      I estimate your monthly payment would be 546.00.

      Here is how I came up with that:

      Credit counseling agencies are able to get your credit card payments reduced based on interest rate concessions they have, for the most part, preset with most banks. The interest rate reductions for each credit card will vary based on the bank, and stuff that is unique to you. All of that rolls into the national average payment for people in a managed plan with a credit counseling agency of 2.1% of the total balances enrolled in the plan. This is the middle. People can pay 1.7% of enrolled balances, and on up to 2.5%.

      While I shot the middle on yours at 2.1%, I encouraged you to bring up the tornado because there are instances where some (not all) creditors offer better concessions to those hit by a natural disaster.

      I cover credit counseling in a three part debt relief series starting on this page: http://consumerrecoverynetwork.com/credit-counseling-services-help-lower-credit-card-payments/. The last installment covers cautions about credit counseling.

  13. There is a credit card debt of over $18,000 in my name, it is debt that occurred while married. This debt is mostly transferred debt to obtain lower rates than my then husband had on his debt, the rest was raising the children while support payments were not there: the debt was recognized as my husbands, agreed upon by both and written in the divorce decree.
    I am disabled and receive approximately 10,000 a year to support myself and children(one of whom is disabled). My former husband became disabled this past year; he has stopped paying all debts in his name. This one remains in my name (except on the divorce decree); I can no longer pay this debt and have no chance of being able to do so in the future.

    I have little assets left. I do own my home outright and dearly want to protect it.
    I live in Michigan and the debt is to Bank of America.
    How do I best address this situation?

    Thank you in advance for your consideration.

    • Michael Bovee says:

      Barbara – Likely the best lower monthly payment you would see in a BofA hardship plan would be 300-ish a month. If that is just not affordable, it is what it is, the account will go unpaid. You will want to work toward saving up about roughly 40% of your balance in order to settle the debt at some point in the next year if possible; within 24 months would be good; and within 36 months if you just simply have to take that long to save up. If you end up getting sued for collection, the amount you will need to settle the debt will be higher than catching this earlier. Also know that settlements can be lower than 40%, but being realistic means you are better prepared.

      If you want to protect the home you own free and clear, you likely have to rule out bankruptcy in Michigan. If you want to protect the home from a lien resulting from a judgment if sued for collection, settle this debt early to remove the risk of being sued.

      • Is there no hope of the debt being excused when there is no way to pay it and those circumstances will not change? Is this something not done by B of A?

        And why is it that in Michigan bankruptcy would not protect the home? (I couldn’t even afford to file for bankruptcy at this point.)
        Would it make a help if I transferred ownership/title of the home? (Joint or totally)
        The neighborhood is changing quickly as the economy continues to dive here and the equity in the home is our only hope of moving on.

        • Michael Bovee says:

          Barbara – It is the equity in the home owned outright that I was responding to regarding chapter 7 bankruptcy concerns. You should talk about this with a bankruptcy professional in your state, but Michigan has a lower home exemption when filing chapter 7 in order to discharge the BofA debt.

          I would not venture to guess what you would need/want to do about assets you hold that are at risk from creditors. That is something else to talk over with an attorney, and not the kind of detail to discuss online.

          As far as BofA excusing, or otherwise forgiving your debt in it’s entirety, no, that is not typically done. Not in today’s debt collection environment, and certainly not at this early stage of delinquency. And besides, most any creditor or debt collector is not going to view your situation as no asset and fixed income (where some great outcomes for consumers are available), when you own the home unencumbered.

  14. A main question that prompted my search for answers today is how best to address this situation with B of A.
    It seems that most folks insist that you must default in payments prior to discussion but that seems like it only makes a bad situation worse (i.e. late fees, bad faith, etc). It also creates in environment of extreme stress in an already over stressed situation.
    Is there no way to address the situation with honor.

    • Michael Bovee says:

      Barbara – It is, unfortunately, next to impossible to reduce the balance of a debt to an affordable level at this stage. It sounds to me like the only way for you to be able to afford the credit card debt with BofA would be for them to reduce the balance, then amortize that new lower balance out over xx number of monthly payments. They are not doing that. There were some signs that something like that was being tested (60/60 plans – 40% balance reduction with 60 months to pay), but that was at the height of the recession a couple years back. I do not think BofA is doing that anymore, and when they were, I am pretty sure it was mostly through a few third party non profit credit counseling agencies.

      BofA can settle directly with you, but it is not generally going to happen for the first several months. I cover that in much more depth in the debt settlement section of the site. You can start here to learn more: http://consumerrecoverynetwork.com/how-call-bank-negotiate-credit-card-yourself/.

      I hear you on pegging the stress meter! But that stress can be reduced by knowing what can happen, and when, before it does. I try to pull the curtain back on any/all outcomes on this site.

  15. Hi & Hello!

    I have more than nearly 20 credit cards and have a load of student loans. I used my credit cards 5 different to pay for my expenses associated with purchases and supplies from my undergrads and I am just almost broke every time I paid bills. I recently repayment education loan ($150/240mo). I am only 27 and while I admit to making some bad purchase decisions when I was younger now and even I can’t get out of the whole of credit card debt. What is even more frustrating. My current credit score is still only 624 with no late any payment due.

    What do would you like to suggest? What can I do to bring my credit score back up and how can I lower my payments?

    • Michael Bovee says:

      Nia – With that many accounts,and being stretched thin, call and speak with a counselor about what your monthly payments can be reduced to: 888-317-8770

      Let me know how that goes, and if you are still not able to see a light at the end of the tunnel, lets go from there.

  16. When an account is written off what are the possibilities for preventing movement to a collections agency?

    • Michael Bovee says:

      It depends on the lender. Using credit cards as an example, most charged off accounts will get dumped into the collection pipeline.

      What type of debt is it, and with who?

  17. When banks agree to re-age, after making several payments or completion, what does that exactly mean? Does it mean they will delete the negatives from the start of the program?

    • Michael Bovee says:

      I t basically means you are not late in perpetuity. It does not mean the late pays you may have showing on your credit reports will be removed. But you will not show late, even though you typically do not catch up all payment to current when you go with a hardship repayment plan. But they do agree to bring you current without you having to make all of those missed payments. Credit reporting wise, it is better than being considered late until you pay all of the arrears, and affordability benefits are a benefit immediately.

      Credit card banks that do not offer you to reage accounts will often reage if you are working with a credit counseling agency.

  18. Hello, I am presently 32,000 in credit card debt with 6 cards (cap. 1, chase, discover, US bank, HSBC, citibank). The interests are all between 19 & 21%. My Income drops from $900 p/wk to about $300 p/wk during July and I have no income during August and the first half of September(I’m a part-time teacher). I have paid my monthly bills on all the cards up until now. My question is, will a credit card company allow me to defer payments for three months until I am bringing in money again? thank you

    • Michael Bovee says:

      marge – No. Credit card companies do not want to give you a monthly deferment. They will often accept a lower monthly payment plan, and reage the credit cards, when you work with a credit counseling agency. And they do offer these payment plans when you are a few months late.

      If you cannot pay through the summer, but are able to pay an estimated 670.00 a month starting in September, try working with a credit counseling agency. You can call one now and look into any programs they may have for your situation, or when you are able to budget the consolidated amount with a reduced interest rate.

      Here is more details on consolidating debt and reducing your monthly payments through a credit counseling agency: http://consumerrecoverynetwork.com/credit-counseling-services-help-lower-credit-card-payments/

      Is 670-ish a month out of the question right now?

  19. I am continuing my saga from http://consumerrecoverynetwork.com/question/is-this-chase-hardship-plan-the-right-way-to-go-or-should-i-hold-out-to-settle-this-account-rb/#comment-128961

    So, today I got 60 months 0% with Chase on $40k and all excited called BofA to try to get the same terms on $35k that I have with them, but BofA denied me. We went through 14-16 questions about my financials and then few minutes of computer thinking and I was denied and referred to some debt counseling agency. When I asked was I denied because I did not have income (debt-to-income ratio to high), or because my income was too high (debt-to-income ratio to low), he said (if I understood him correctly and if he understood what I was asking him) that it is because I don’t have enough income. My impression was opposite – that I didn’t qualify because I have “too much” income and since I am current on my minimum payment, they don’t really care to offer anything better.

    Few interesting things:
    - one of the questions was “Do you currently have enough money to pay for food?” I said that that was a tricky question, and he said if I say “no” the computer wont let us progress to a next question, so I said “yes” and we moved forward. No I am thinking – if I said “no”, I don’t have enough money to pay for food (as I am so squeezed right now that can only afford mac without cheese) would that made me eligible for hardship, or would just terminate this qualifying “test”? What do you think?
    - when we talked about my expenses, he only included my mortgage payment and all cc combined minimum payments; he asked me do I have a car loan or any other recurring payment, which I don’t. He didn’t asked me how much I spend on utilities, food, gas, car insurance, or anything else. Is it possible that he misunderstood the question and by not including these expenses I (my debt-to-income ratio) basically appeared that I am not in the hardship and thus do not qualify for the program? What do you think?

    Thank you Michael!

    • Michael Bovee says:

      1 for 2 for now. Based on what you shared, BofA said you did not qualify for the hardship plan because your income could not support the minimum payment they calculated.

      Couple of approaches you can take:

      Call back and go through the exercise with updated numbers, the excuse being you were caught unprepared with the questions, and replied with ball park numbers. You now have accurate ones. See what happens. And be sure to really narrow this down, leaving off comments about mac w/o the cheese, or other embellishments (while colorful, and I would appreciate them if I were the customer service rep, some people miss out on how life is indeed a tragicomedy).

      If that does not work, take the experiences and nuances and post them in a comment update here, and lets go from there. You will have a couple of additional opportunities.

  20. …DID IT AGAIN! 2.75% on $20k and 2.25% on $15k. Not as good as 0% with Chase, but a huge help from current payments/rate.

    So, I followed your advise Michael – called BofA/FIA Card Services, talked to a super nice lady from South and we updated the numbers and computer said that now I am approved (better debt-to-income ratio – more income left). It looks like I did “too good” with my updated numbers that I couldn’t qualify for the 0%. The magic number/debt-to-income ratio was 61%; my expenses (but ONLY my mortgage + my minimum cc payments, excluding BofA) were 61% of my monthly income. Now, after I add my new monthly BofA payments, my debt-to-income ratio goes to 68%, with 32% left for all other living expenses (food, utilities, insurance, …..).

    Thanks Michael and thanks BofA!

    • Michael Bovee says:

      Sweet! 2 for 2 it is then.

      Thank you Alan, for sharing your experiences enrolling in the BofA hardship payment plan here, and the Chase hardship on the other page. Other readers are going to learn from your experiences, which is what this site is all about.

  21. hi,
    i lost my job for 2 months so i’m barely able to make payments on my credit card. i have Chase. i still managed to pay the minimum ($400) a month since my balance is $20K. would the Hardship program affect my credit score a lot? my score is about a 745. thank you

    • Michael Bovee says:

      Enrolling in a credit card hardship repayment plan directly with your bank, and when you have not missed payments, or are not yet considered 30 days late, should have either no impact on your credit score, or only hit you a few points due to the account getting closed (if a 60 month hardship repayment accounts typically get closed, where the temporary lower payment plans may not close your account).

  22. I have PoA over my father’s finances. He is 76 years old, and has about $24,000 in credit card debt that is now seven months past due. I did not know the debt was occurring until I also realized he has dementia. My issue: I need to move him closer to me, and he will need some sort of credit of his own to rent/buy in my area as I just “used” my credit to buy a home myself. My Qs are:

    Is it worth it to try debt settlement in this case? And if so, since I would be using my own money to pay, are there any special circumstances/laws to which I can refer where I can pay 10-20%?

    What advantage(s)/disadvantage(s) is/are there of a 76 year old man having/not having good credit? He just has SSI and a minimal pension payment each month coming in with his mortgage and utilities/living expenses to take care of. It is the ability to have him live somewhere closer that concerns me most…

    Thank you!
    Lori

  23. I should have noted in my previous post that my father has only lived in his current home for three years and put down a very minimal down payment through a VA program. He has regularly paid his mortgage. The area in which he currently lives is also significantly less expensive than where I am wanting him to move, thus he would need a larger loan if he buys.

    • Michael Bovee says:

      He will not get a home loan approved with those 7 months of late pays on his credit reports now.

      There are no provisions or laws, or set policies with creditors and debt collectors, where you would be able to settle for 10% to 20% of the balances owed because you are settling on his behalf, or using your money to do it.

      There will still be a utility function to your dad having credit. It will take a while for his to bounce back after the accounts are settled. If his dementia is very early stages now, what will it be when his credit is in good enough shape to buy a home again? And at that point you will need to assess if he should be on his own.

      Assume for a moment that you will need 9kto settle the 24k of credit card debts he has. How soon until you pull that amount of money together?

  24. I have around $44 K in credit card debt…won’t go into details, but obviously foolish financial decisions, Paying minimum payments over $1,300 per month. My credit score is 743 (my husband and I just completed a home refinance). I am eligible for a consolidation loan, portion home equity and portion installment loan based upon existing home equity. However, the combination of these will not satisfy the full amount owed to the credit card companies.
    I am curious if I should talk with the credit card companies to see if they will reduce balances, so I can pay these in-full? Or…should I leave my home alone and discuss some other option with the card companies? I checked with credit counseling agency…wasn’t going to diminish payment a significant amount, also spoke with an attorney friend regarding Chapter 13…not for me either…I work full-time, not a tremendous salary, but I have worked there nearly 20 years, government related and secure.
    Only late payments have amounted to 2 or 3 days due to mail issues…
    I will have to begin paying student loans for grad school ($48,000) in December…in forbearance at this time.
    Just curious about options before I sign on an installment loan…
    Thank you for the opportunity to ask these questions…

    • Michael Bovee says:

      Replacing the payment to the credit card banks with a payment now secured by your home, and for basically the same amounts, is typically not a great strategy. Not only is there little to no monthly payment relief, if something does happen with your income, and your unable to make payments, your home is at risk. Were these debts not consolidated and secured by tapping into your home equity, you have more flexibilities.

      Settling the credit card bills may be a better option than debt consolidation. I can help you weigh this alternative best if you post the name of the credit card companies, along with the rounded balance owed on each.

  25. My 86 year old husband has dementia and had to go to an out of state nursing home that can handle violent behavior. In our 50 years together we have never not paid our bills. I am 71 and now after having to pay a nearly $4000 per month patient amount (after Medicaid) I am left with 60k in credit card debt that a bankruptcy lawyer told me to simply ignore. I do not qualify for relief in that form because we own a piece of commercial property (our main source of income) that is under lease as a meineke muffler shop right now. That lease and income ($4000) per month will end in 11-19 and is not inmy state of residence – NH. After Federal, State and property taxes I have very little left to pay for living expenses. Cannot afford rent and living with our grand daughter rent free – had to cancel supplement health insurance – cannot afford. In all of this we have $ 20k in medical bills for my husband – pre Medicaid. Beginning to seriously consider alternatives involving drastic results. Obviously credit scores mean nothing to me. Thank you for reading this.

    • Michael Bovee says:

      Inza – Are you currently making credit card payments? If not, in what month did you quit making them? If you had no credit card payments at all would you be able to afford your supplemental insurance and other bills? What amount of money would be left over after all other needs are met (when not making credit card payments)?

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