What are bank sponsored credit card hardship payment plans? Banks reach out through the phone and with mailers in an effort to get accounts that have fallen behind back on track. Large credit card banks are willing to work directly with you shortly after you miss a payment.
Hardship payment programs are a bank’s 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.
I cover the many issues with missing payments, and hardship repayment plans in general, in more detail below. You will want to be aware of potential drawbacks before agreeing to the plan with your lender.
First I want to dig in to how and why banks offer to reduce your monthly payments, and that you do not have to wait for an offer to come to you, but can be more proactive in asking your credit card bank for help.
Talk to Your Bank About a Hardship Plan
The first step is to talk to your creditors about your situation. 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.
Your bank that was unwilling to work out lower and more affordable monthly payments with you when you were current is often willing to work with you if you have fallen behind.
If you’ve 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 a few weeks to a month or more late.
We have previously discussed 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 directly 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 typically 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.
If your bank representative asks you to send in something in writing that outlines your hardship, it is typically not a problem to send them what you would convey over the phone, but detailed in a letter or email.
The vast majority of us will be able to answer one of our credit card lenders frequent calls, or place a call ourselves, in order to discuss lower monthly payment options.
How Temporary Credit Card Payment Plans 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 will often 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 and typically will not exceed ten percent.
Your bank 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 reduced payment plans are useful to someone who is only experiencing a hardship that is not expected to continue for any significant period of time.
How Long Term Hardship Payment Plans Work
Longer term hardship repayment plans offered by credit card lenders did not become popularized until the economy started to take a dive several 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 10%, 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 (federal regulations typically prevent these plans from exceeding 5 years).
Some banks offered long term plans during the worst of the recession, but now only offer temporary plans.
These “life of the balance” repayment programs closely resemble debt management plans available through a nonprofit counseling agency. Some 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.
- 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.
If you have many credit cards, and some of them do not offer the longer term hardship plans, you are often better off getting the lower monthly payments through a credit counseling service, rather than making all of the efforts on your own. And because talking to a certified counselor to get an exact quote of what your credit card payment will get lowered to is free, and you DO NOT have to be late with payments, I recommend you speak to one at 800-939-8357, ext 1.
Getting Approved For a Repayment Plan
Approval for reducing your monthly payments is not automatic just because you are late with payments. You can be turned down, and for predictable reasons. Your bank is going to want to discuss your ability to make any lower payments, and this will typically involve answering a series of qualifying questions. The information you will be asked for will focus on your monthly income and household bills.
Be ready to answer questions about what you pay for rent or a mortgage, how much you pay for phone and cable, 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 you assume wants nothing more than 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 your bank offers may not be as good, or may not be made available to you at all. Mainly due to the fact that you do not appear to them to be in a hardship situation using their preset criteria.
There are many situations I see where your bank may not offer you a hardship plan, but would allow your account to be enrolled in a credit counseling plan, which accomplishes the same long term payment reduction.
Some banks that offer the 5 year long hardship repayment plans may require that you recommit to the plan every year.
Additional Benefits to These Plans
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 your credit 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.
Warnings About Credit Card Reduction Plans
I already mentioned how these payment reduction plans are generally not available to you until you miss a payment (depending on the credit card lender). That can have credit reporting impacts if you allow an account to go more than 30 days late. But here are some warnings to consider before you try to get set up with a reduced payment, or call in to see if you qualify.
- If you make calls to your bank asking about a payment reduction plan, you’re basically telegraphing to them that you are at risk of missing payments. This may result in the bank lowering your credit limit to what you currently owe, or possibly closing the account. If you still have the means to make your normal monthly payments, calling your creditors to discuss your hardship, or any available lower monthly payment options, is not recommended. The hardship repayment strategy should be reserved for the banks and accounts you are already late with, or know that you soon will be.
- Some of the smaller banks, credit unions, department store cards, and fuel station credit cards, do not offer hardship payment plans to you directly, but do generally offer the lower monthly payments to you if you go through a credit counseling service.
- In nearly all instances of banks offering credit card hardship payment plans, whether temporary or long-term, they will want the payments to be pulled through electronic access to your bank account on the same day of the month. You must be prepared for those payments being pulled (always leave yourself a balance cushion). If the money is not in the account, causing the payment to fail, you may not get another chance at it, and your payments can revert to the higher interest rates.
The biggest concern you should have with starting a hardship repayment plan directly with your creditors is the same drawback to getting lower monthly payments with a credit counseling service – the inflexibility. You must make your monthly payment on time, all the time. If you miss a monthly payment on either of these plans, it often results in losing the lower payment benefits, and the lower interest rates. The worst part of falling off of a payment plan will be the lost time and money that gets wasted on a strategy that did not relieve your debt problem.
Credit Card Hardship Payments are Not Flexible
I mentioned that any credit card payment plan you agree to will require you to never be late in order to keep the benefits. It is rare to get your bank to forgive any payment failure and keep your payment reduced. But you can often be more flexible with how you use hardship payment programs with your different credit cards. You can be deliberate with your planning from the outset.
A good example of this would be enrolling one or more of your higher balance, or higher interest cards, into a hardship plan while maintaining normal payments to others. Due to passage of the CARD Act, creditors can no longer arbitrarily raise your interest rates based on your payment performance with other creditors. They can only raise your rates if you miss payments on your account with them directly (and after 60 days). But be careful with this, as it would not prevent them from lowering credit limits if, during a periodic review, they see that you are behind in payments to other creditors.
Conclusion
Creditors often will not set you up in lower payment plans, or offer any form of payment concession, more than once over a set period, or perhaps only once… ever (though you can often negotiate and settle the debt for less after dropping the hardship payments).
A temporary credit card hardship plan today may keep the bill collector at bay – but be sure you have a real plan for your debt and not just some one time band-aid.
You may have multiple credit card accounts that you are trying to juggle. You can use a creative and flexible approach to managing your bills through selectively enrolling only some accounts in creditor-sponsored hardship plans. Alternatively, combining lower monthly repayment plans with budgeting and money-saving strategies can also work as a debt solution for the right person. There are also instances where I have worked with people to settle some credit card debts, and then do a hardship payment plan on others accounts.
Readers are welcome to schedule a one on one phone consult with me to talk through how a hardship plan could work for them. You can also post anonymously in the comments below for my direct feedback.
Hi Michael – going through a horrendous divorce and financial abuse from my husband. I had zero debt and excellent credit before this but could only pay for lawyers on credit cards. I am the out spouse – stay at home mom for high support kids (mental illness, disability) for 30 years while he ran his business, now husband has not paid support payments in 6 months (contempt of court date pending). I am paying minimums on cards, but it is impossible now, I am looking at buying food or paying minimums on credit cards because things are that bad. I won’t be able to pay rent next month. Is it worth calling for forbearance (Chase Sapphire, Chase Ink, Amex Business Blue Plus)? What happens in that instance? Can I still use the card if I need to – as long as I pay? The Chase Sapphire and Chase Ink minimums are killing me and I need relief. And the American Express Blue Business Plus will be come August when the interest kicks in. I think I can handle the Amex gold personal card. Keep paying the minimum and more when I can. Not sure what to do about the Apple Mastercard. I don’t want my credit score to go down, which is 723 today
Current personal cards:
Chase Sapphire. Balance $8,854 Min payment $368
American Express Gold. Balance $4,359 Min payment $150
Apple Mastercard. Balance $5,407 Min payment $120
Capitol One. I haven’t used yet but will probably need to use for food this week. Available credit $1,000. 0% APR until June 2024.
Current Business Cards (I have an LLC, but it doesn’t produce income last few years):
Chase Ink. Balance $13,912 Min payment $430
American Express Blue Business Plus. Balance $12,175 Min payment $122 *0%APR until August 2024 then 26.24%
American Express Blue Business Cash. Available credit $2,000. I haven’t used, but will probably have to use for some bill this week. 0% APR until 2025 then 30.24%.
I would suggest you schedule a call with me to go over your situation and options in more detail. You can schedule the call here: https://calendly.com/debtbytes/15min
HI Michael, very helpful article thank you! I have a hardship plan with Citi that I’ve been paying on a few years for 4 cards with them totaling $18K. The card with the highest balance is now at $9K and payment is $560/month. I’m 60 days behind and wondering if I have any leverage to re-negotiate that down either myself or through Cambridge. Have you seen Citi budge on interest rate for those behind in their hardship payment plans? Also I have nearly $30k with Amex spread over 2 cards and after falling behind they proactively offered me a 48 month hardship plan at 9.9% interest. I’m wondering if you’ve seen Cambridge or other do better than 9.9% with Amex these days? For Citi I considered trying the settlement route but I don’t have 50% of the $18K handy as cash reserves right now but maybe I could try settling the one with $9K at $4500 (spread out in a payment plan) while I keep paying the hardship programs on the 3 lower balance cards with them. You mentioned sometimes you mix and match settling with hardship plans so wondering if Citi plays ball with this. Thank you!
Go ahead and schedule a phone consult with me here.
I can help you evaluate what a hybrid approach to payment plans and debt settlement in this situation will look like.
Hi Michael – I have a Chase Ink Business Card with 32K on it. Ran into problems with business during pandemic and have just been making minimum payments for 3+ years now. Chase closed the account beginning of the year – so I have no access to use the card now, but still making min payments to stay current. Would like to set up hardship plan to lower the monthly payment, but they claim no hardship plan and that I have to deal directly with their “collections department” to set up payment plan. Want to keep the Chase business card from reporting to my personal credit bureau file (which could create issues with my personal cards), Would getting on a hardship plan or payment plan with chase collection result in them reporting to my personal credit report, they have never done that in past because I am current despite the closed account status? Thanks for help
I tend to see the Chase business credit on personal reports after a couple missed payments, so there is a window to try to prevent that.
Thanks for reply michael – guess what I’m trying to figure out is – even assuming I stay current and always make min payment – would the act of going on a payment plan/hardship automatically trigger reporting to personal credit report even if I make all payments on time? Thanks again for any further thoughts.
Typically… no. Not unless you have fallen late with payments, and in your particular situation, by more than 30 days.
Hello Michael! I spoke to you a year ago and it was a genuinely life-changing conversation: it was the first time I fully admitted that my financial situation wasn’t sustainable and considered alternatives to slowly drowning in debt. Thank you!! I still have a truckload of credit card debt, but at the rate things were escalating it would otherwise have been a lot worse!
11 months ago I enrolled with a debt management program for much of my debt, but I recently arranged two reduced payment programs directly with creditors at even better terms, and I wanted to pass on the latest.
If you have any thoughts on the debt management program (specifically the 4 creditors at 10%, and if there’s any way I can renegotiate), I’d love to hear them, but I’m not super optimistic –– I just wanted to let you know about the unexpectedly decent terms from Bank of America and TD Bank, and to say thanks!
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LESSONS LEARNED (for others reading this thread in a panic):
My fixation on credit score and relief at ANY reduction in APR both worked against me. I made minimum payments for as long as I could, and only skipped 1-2 payments before enrolling in my debt management plan, which I accepted without comparing terms. Those missed payments were cleared from my report when I enrolled, which was nice, but I would likely have gotten much better terms if I had waited longer –– and my credit score ended up taking a hit later anyway.
That goes to the biggest lessons: If I could go back in time, then when first setting up a debt management program I would have:
1) spoken with more than one nonprofit to compare terms;
2) taken those terms to the banks to see if they would agree to something lower;
3) enrolled ALL of my credit cards in plans, whether through a DMP or with the banks.
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DEBT MANAGEMENT PROGRAM (2-10% over 60 months)
I’m working with Greenpath, a nonprofit based in NYC, to pay off 5 creditors. They negotiated 2% interest for one Chase card (~$8.3k), but the other four cards (~$22.3k, 3 with Citi, 1 other with Chase) were set at ~10% interest rates. I now think this seems high for this sort of program, but it seems unlikely that I can renegotiate the terms (though I’d love to hear otherwise!). I started off paying $335 every 2 weeks; after losing a job, they agreed to lower this to $298 every 2 weeks.
Over the last year I’ve paid ~$6.3k, with ~$24.4k remaining.
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BANK OF AMERICA (6% over 60 months)
For both BoA and TD, I stopped paying, dodged all calls, and even ignored a scary FedEx’d document before getting in touch after several months.
–– Balance: $2,000 @ 21.99%
–– Payments: 5 payments (of $94/month) past due, current due $495
–– Reported income: When asking about hardship programs, I reported ~$15k in annual income; they didn’t ask other questions.
• Offer 1, 55% payoff: $1,100 to be paid in 3 installments over 90 days
• Offer 2, reduced payment program: $39 / month, for 60 months, at 6%
–– no penalty for paying more than the minimum or paying the balance early
Unfortunately I can’t make any large payments while still handling the $600/month for Greenpath, so I went with the second offer.
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TD BANK (0% over 60 months)
–– Balance: $2350 @ 29.74%
–– Payments: 120 days past due, current due $536
–– Reported reasons past due: medical issues, a stretch of unemployment.
–– Reported income & expenses:
They had a full questionnaire with questions related to income, rent, utilities, and other bills, including other credit card payments. They were clear that I needed to show an ability to pay in order to qualify for a hardship program; without full specifics, I reported ~$9500 per year in income above my expenses.
• Offer 1, 12-month to good standing: no significant reductions.
• Offer 2, reduced payment hardship program: $40 per month, for 60 months, at 0% APR
I was very surprised to hear 0%, especially given the threatening letters I’d received saying I needed to pay off the full account balance immediately! I wonder if TD is trying to recover anything they can, given their recent $1.2 billion settlement? Either way, they confirmed that there would be no fees or penalties for paying more than the minimum or paying early.
Thanks for those updates. The possibility of getting creditors to renegotiate the interest rate reduction on an existing debt management plan is something you will want to discuss with the nonprofit agency you are working with.
Every one of the creditors you listed have, at one time or another, approved zero percent repayment plans spread over 60 months. Qualifying for these plans is a moving target based on different criteria, as you saw. There are times where some major credit card banks seemingly will not go to zero percent at all.
I think you did pretty well for yourself!
That settlement deal with Bank of America had lots of room for improvement. If you hit a snag where you then have to consider settling accounts for less than the balance owed, post an update.
Also, please post an update if you get your DMP rates further reduced.
Looking for a way to lower my minimum monthly payment.im going through a hardship.
What is the total of your combined unsecured debts?
Yes I’ve not got a huge amount of debt but I do have a credit one credit card account that never got paid because I had a medical emergency. I owe Credit One Bank I think 1600.00 and they’re trying to garnish my wages and need setup something to pay them back because I can’t pay it all at once right now but I can do a payment plan other than garnishment.
It will be tough to get the collection law firm to agree to a payment plan outside of wage garnishment if they have already started that process.
Call your court and see what the process is to petition the court to show the garnishment creates a hardship. If you are successful with that, you can often get the law firm to agree to a payment plan that works better for you.
Reading through this comment thread is a strange kind of reassuring…
Here goes: I have over $29,000 in credit card debt.
Rough balances / APRs (the Citi rates go up to this in November, when my balance transfer rates expire):
Chase (2 cards): $8k (15%) + $6k (20%)
Citi (3 cards): $7k (20%) + $4.2k (16%) + $4k (13%)
I’m barely making my minimum payments (and obviously not putting a dent in the debt), but I have not yet missed any. My credit score has still suffered because my debt-to-credit ratio is poor, so I’m no longer as worried about maintaining it, and I also don’t plan to buy a car or home or have kids.
Chase repeatedly said they have no options because I haven’t missed any payments. After writing a semi-emotional letter I was given a different number to call, and someone dropped the words “repayment plan.”
The next spokesperson initially repeated that Chase will not renegotiate payments or APR, but when I told him that someone else told me about a repayment plan with a lower rate, he put me on hold, and on his return admitted that they have a “balance liquidation plan,” and that I would need to provide info about my income and expenses when applying. He gave me a head’s up that I would likely be ineligible right now, so I decided to hold off and search around for best practices first—surprisingly, it wasn’t because I haven’t yet missed any payments, but rather because of how recently I’ve used one of the cards.
Any thoughts?
Assume for a moment that both Chase and Citibank put you on hardship repayment payment plans where they charged super low, to no interest. You could basically dived your balance’s at enrollment by 60. Is that monthly payment something you can afford with confidence? If it is than hardships payments are something to explore.
If that lower monthly payment is not something you can commit to with 100 percent confidence, how long would it take you to pull together twelve thousand dollars, while not paying on these credit cards?
Thanks. They only offered me short term with 5/3 so I thought maybe that’s how all banks do it… Short to long. But I’ll shoot as long as possible with HSBC and Capital One.
Hey Michael. Had a question about hardship plans for myself. I enrolled in a 6 month 0% interest rate with 5/3 bank yesterday. What are the chances they extend it to a 5 year if I prove hardship (SSDI) and can still manage to make my payments? Also, similar question for HSBC and Capital One. Any chance they allow me to enroll in short to eventually long term hardship plans with the lowest possible interest rates when I’m on time with my payments currently? Thanks!
It is typically best to enroll in the 5 year hardship plan where they close your account up front, and you then pay off the balance over the 60 months (or less) at a reduced interest rate that whole time. This is because some banks only offer one hardship plan on your account… ever.
Other banks will offer temporary hardship plans, and not roll you into another for a year.
Is you are unsure about your situation improving in the near future I would err on the side of taking the longest payment plan available.
Oops. Sorry for posting in the wrong place last time.
HSBC made me apply for a 1 year hardship plan and I’ll have a result mailed to me in 10-14 days. The guy said as long as I make my payments it’s likely I would be accepted for re-applying after the year.
Capital One wouldn’t even do a short term plan yet because I’ve paid on time. They waived my next payment though and said call back next month and maybe the option will be available.
Some banks hardship plans you are better off talking to them about when you are already late with a payment by a couple days.
Hi Michael. I received notice a month ago that my HSBC hardship account is being sold to another company. I was wondering if you heard any news as to what that company was. I’m wondering if they will renew me in Feb.
I would call them and inquire who is picking up the account.
Somehow they don’t know. I’m told the transfer will occur between October and March and I will find out more information as it becomes available. Oh well!
Thank you for your thorough exploration of hardship plans with credit card companies. Based on what I am reading here, I feel confident about my next move with my credit card payments. Bless you!
What to do when your hit with a worldwide pandemic, such as right now with covid-19, and I lost my job as a teacher.
I can’t talk verbally to anyone in regard to this matter. I have an account with Synchrony bank and I would like to enter into a hardship program to no avail, your help would be greatly appreciated.ail.
You typically have to talk to the bank in order to get the hardship plan yourself. If you would like to have someone else help you do that, I suggest talking to a counselor (still need to converse) by calling 800-939-8357 and hit ext 1. The call is no charge, and you will be able to get a quote of how low they can get Synchrony (and other credit cards) to monthly.
Hardship because of a divorce and death of my ex-wife
Michael,
I own a construction company and recently have had major Back Surgery. Long story short the Titanium Rod Broke in my back causing me to barely be able to move I found a specialist Dr. That operates out of NYU. I have been in severe pain and most of the nights and days I have been laid up in Bed. I had been working to schedule the required surgery. During the month of January My 27 year old son started feeling really sick so I took him in to Patient First where they discovered he was just a day from going into a Diabetic Ketoacidoucous Coma we spent 8 days in ICU were they found his blood sugar has been bad for a. Long time but diabetes was missed in many appointment. We finally felt better because we now knew with the proper medicine he could get better. Saturday February 4th ge had a dr appointment we overslept Saturday morning or so i thought i went in to wake him up and he passed away in his sleep. I am devastated and have be beyond words my Home Depot commercial citibank credit card $20,000 limit i have been devastated and need help if i can get on their Hardship program would help me more than i can say. Is there anyway you can help me? My name is Brian Madrid my cell phone is [edited} can you please call me oi let me know i would be so grateful.
Sincerely
Brian Madrid
I am so sorry for your loss Brian. I will contact you and set up a time for us to go over your finances and see if you can meet the monthly payment on a hardship plan with Home Depot.
Michael,
Thanks for your detailed analysis. It all makes sense – and doesn’t make sense – at same time. … I’m currently paying $1,600 a month on 18 credit cards and another $1,050 on a prosper loan $11,000 left from original $36,000 loan. So, counting prosper I’m paying about $2,700 a month, with about $1,000 per month interest. My total debt, including prosper, is $70,000 and we obviously are making no headway. I would like to pay my debts, and think I could, if I could freeze my accounts and work out reasonable payment plans. My wife and I make about $150,000 a year, but putting 4 kids through private schools and college has dug us a very deep hole. We have talked with national debt relief, and the only thing I don’t like is the idea of not making payments. I can’t deal with hourly calls and harassment. We have considered a refinance in our home, but we don’t have enough equity to pay off the debt, and I know what when you leave a few accounts unsettled. It sounds hopeless, I know. We have both taken 401k loans and used them to fix our house so we can either sell or refinance. It’s taken about $15,000 to get house up to its $111,000 appraisal worth. We have $50,000 left to pay on our mortgage. Any ideas?
Call in for a consult this coming week at 800-939-8357 ext 2. You can also email me at the same address you get this comment notification from (if you are a subscriber). We can a schedule a time on the phone through email.
hi michael, my husband and I hit hard financial times several years ago, but just in the last several months stopped paying our credit card bills. We could no longer afford them. I want to try to settle them. To date, I have not spoken to any of them but am approaching the 180 day mark in March. I have read how you should not accept the banks first offers, but when do you know when to accept? Citibank sent me an offer in the mail to settle with a lump sum or 3 payment plan at 40% of the balance of one of my cards. i never contacted them, they just sent me the letter. I called them and asked them if they would take a lesser amount if I paid it as a lump sum and they said that the 40% was as low as they would go. Should I accept the 40% or keeping trying for less. Also my other creditors who I have not reached out to yet are Bank of America, two Synchrony credit cards, two Chase credit cards, Navy Federal Credit, (Home Depot (also Citibank holder). The total indebtedness is about $70,000. Can you give me any guidance on the different creditors? Thanks for any help.
What are the balances on each account?
If you could get this all over with quickly, could you access the cash to settle fast?
If you are stuck saving monthly only, how quickly are you able to save up to pay the settlements?
Hi Michael,
I currently have 3 credit cards in my name that I had before my husband and I got married equaling roughly $20,600 Sadly our son has special needs and with the cost of therapy he needs 5 days a week and specialists along with keeping a roof over our heads, we can only make the monthly payments on these cards and its just becoming too overwhelming. I am current on all my payments and have never missed a payment ever and don’t wish to purposely miss payments.
We were denied a consolidation loan from banks and credit unions as my debt to income is terrible and my husband has roughly $50,000+ in student loans (currently in forbearance) and medical bill collections ($2,000) and unemployment that he now owes back ($3,000)
I have a credit score of the low 700’s and have considered bankruptcy as a last option but would rather not when my credit score is decent, but with the fact that we are stuck between a rock and a hold place, I’m not sure what I can possibly do to get out of this hole besides bankruptcy. I get advertisement from Lending Tree and other companies like them all the time in the mail but have heard horror stories about going with them and getting screwed (to say it nicely)
With the medical bills for our son, they will never go away and we don’t qualify for government help for medical expenses as they don’t factor in any credit card debt, car payments, car insurance, daycare as we are both full time employed. Not sure if really going through with a bankruptcy is the best option or trying to settle with the card companies themselves and explain all the medical bills are adding up, etc. Below are the cards, current balances, APR and max limit. Any advise would be greatly appreciated. Thank you in advance.
Balance APR Max Limit
Chase: $7117 15.74% $8,000
Wells Fargo: $6727 14.49% $10,000
Walmart Master: $6734 24.99% $7,800
Assume you could get the payments on $20,600 down to $391 a month. That payment will stay the same until all the balances are paid in 60 months or less. Is that payment workable long term (your income is consistent)?
What do all unpaid medical expenses add up to right now? Are there any major medical costs you can project will happen, and if so when?
I am currently 19K in debt. All credit card debt. I started missing payments after the birth of my daughter almost 3 years ago. Maternity leave didnt even kick in until I went back to work after just 8 weeks. I kept putting it off and letting the late fee’s add up (stupid of me). Now, I am really ready to face this and get this resolved before it creates any more damage. What do you suggest? I am willing to call every company up to get fee’s waived and total amounts lowered. Or would it be better to go with credit consolidation? Please help. Any advise is much appreciated.
Post the credit card banks and balances. I can provides some estimates and comparisons in reply.
Hi Michael,
I have about $15k in credit card debt and my monthly payment for all of them is $550. I’m having trouble keeping up with all of the payments at this point but haven’t been late. I’m going to have to start paying on student loans soon, which will make it impossible to pay that full amount. About half of my cards are maxed out, which has caused my credit score to drop significantly. Because of this, I don’t qualify for a debt consolidation loan which a decent interest rate (I wanted to pay off the maxed out cards- even paying more than the minimum due is not helping because the interest rates are high).. I looked into a debt management plan which would bring my monthly payments down to $400 (plus management fee). A family member told me to call each creditor and inquire about hardship programs, but it seems they are only for customers that fall behind with payments. At this point I’m not sure what to do. Any advice?
If you can afford the payment that the nonprofit credit counseling agency quoted, that is often now a better route to take than trying to get all your creditors to play along with a reduced monthly payment for the lifetime of the balance. Many banks are not offering direct to customer 60 month hardship plans anymore.
Be sure you can consistently afford the monthly payment. If you cannot, or are skeptical, I typically would not encourage going that route, as you would be spending money on an incomplete solution.
Along with hardship plans and credit counseling, I highly recommend you get informed about chapter 7 bankruptcy and also settling debts for less that what is owed. Once you have looked at how the math ads up for all of these options you are the best prepared to move in the direction that best suits your needs and goals.
Not all cards will offer this plan. First and foremost if a person is having a hardship often three or four months will not correct the situation, and you keep getting charged late fees even though pay the agreed payment no one will get ahead. I do not urge anyone to consider this option unless creditors are also willing to suspend or lower interest rates to allow consumer opportunity to get out of the hardship situation.
Hi Michael,
Will banks ever let you skip a payment due to hardship? I have a Wells Fargo credit card at 25 percent interest and haven’t been able to work much the past couple of months because of illness. The high interest rate and my reliance on the card out of necessity has made my monthly minimum soar.
I also hold checking and savings accounts with them.
Would it be better for me to request skipping a month, or just not pay and then ask for a hardship plan? How likely is it that WF will work with me, especially considering they know how much is in my other accounts? Thanks for any insight.
Wells Fargo is not one of the better banks at offering long term hardship. I would call and consult with a counselor and get a quote on what your monthly payment can be reduced to through a non profit agency. It’s a free call at 800-939-8357, ext 1.
What is the balance on the Wells Fargo credit card?
My balance is currently $7400.
You may be able to get the reduced to something like $140 a month through a credit counselor.
Thank you!
I owe 5000.00 to capitol one. About 1500 of that I would say is interest. I have been on a hardship program for the past three months sending in 50.00 per month. I called them to let them know that I cannot afford the 50.00 but would be able to send 20.00 a month. I am not working and have cancer and my funding for chemo has even not been extended for 2017. They told me that the 20.0o would not help and to not send it in but if I could pay the past due (about 500.0o or send 145.00 and then was told 93.00 it would not offset my being past due but would help.
I am contemplating two options, not to do anything and hopefully after a while they might be able to accept 1000.00 as settlement (which my sister is willing to give me) or offer them 75.00 a month for 60 months with no interest (if they would do this) and also to “reage my credit info)
what do you suggest. I can do one of the following only, 75.00 a month till debt over, or 1000.00 to clear it up or do nothing. I have about two more years before previous bankruptcy disappears from my record, if I do nothing with this charge my record will linger longer.
They will typically not be able to approve $75 a month for 60 months because that fall short of the balance by $500. I am not seeing Capital One do the 60 month plans at zero interest like other banks still may.
You cannot settle a 5k balance with Capital One for 1k. They just don’t approve settlements for 20%. You may be able to get them to agree to something around 40%, or a touch lower.
Nothing about your Capital One account should impact when your bankruptcy will fall off.
How would you suggest I go about asking about a settlement for 40% or less.
My lateness has already affected another small account I have (700.00 limit and I am at 646 with Amazon) They sent me letter today that they decreased my limit to 660.00 due to credit review.
Two sources for how to settle with Capital One would be reviewing the debt settlement article series (hit the debt settlement tab at the top), and this page about settling with Capital One.
Hello Michael,
I just read your article while searching for options. I have never been late on any payment. I have 6 credit cards that I can pay without trouble. Due to an “elective” medical procedure (it wasn’t really elective, just not covered by insurance), I took applied for a loan through Lending Club Patient Solutions. I was offered only 1 option: Comenity for a 24K revolving loan (credit card) at 0% interest for $1000 per months for 24 months. (The full limit of 24k was paid to my doctor for my medical procedure). That’s supposedly a promotional rate for paying the full balance in 24 months. BUT, the minimum payment IS the promotional amount, and when I called, they said that I had no option to pay a lower amount. I asked: “Why does it say that interest will be charged if the balance isn’t paid within the Promotional Period?” Can’t I just choose to pay a lower monthly amount that DOES have interest?” I was told:” I don’t know” and “No”. I was told: “If you send in a lower amount, a late payment fee will be assessed”.
Should I call back and ask to speak to another department in this case? I want to pay the bill, but after my medical procedure 3 months ago, I had complications. Instead of returning to work in a week, as I had planned, I have been unable to return to work at all. I’ve been on an unpaid Leave of Absence, and if I don’t recover soon, I may not have a job at all. Even so, my significant other will cover my expenses, it’s just the amount of this 1 monthly payment that is killing me financially. If I could pay them $400 or even $500 per month, I would be fine. I wouldn’t even mind if the interest added more to the overall debt, I just need to monthly payment to be less. Any advice would be greatly appreciated.
Thank you,
Amanda
Have you made any payments yet, and if so, hoe much have you paid?
Do you have a copy of the credit agreement?
Hi Michael
My husband and I have been struggling with credit card payments. I have 2 that I am about 3 months late on. Capitol One $3600 and Barclay $4600. My other cards are up to date. I was thinking of calling them for a hardship plan. How bad will that hurt my credit? I am already as stated 3 months behind and I have a bankruptcy still on my report. I dont know what my best option is. I just cant get ahead and with those balances I feel I will never pay them off.
After falling 90 days late, and if monthly payments are not something I am confident I can keep to, I would be prone to want to save up and settle the accounts. Partly because the credit damage is already done, but mostly because I want a solution that ends the monthly budget pains.
I have pages up about settling with Capital One and Barclays.
Hello Michael,
Another friend referred me to your site and I must say there are a wealth of useful information here. Basically, I would like to have an expert confirm my understanding before proceeding.Is it right that if I enroll in DMP: 1) I would be allowed to pay off early thru either bigger monthly payments or lump sum settlement. 2) With the lump sum method I can expect to usually pay around 35% of the amount still outstanding in the DMP program as opposed to original pre-DMP amount. For example, original amt owed was $10000. While in DMP it was brought down to $8000, so the 35% would be based on $8000. 3) when I settle with a lump sum does my credit score take a further hit or would it actually improve it since it’s acct paid off? Actually, how would the card companies report the lump sum payoff to credit unions, and are the terms the company use to report the payoff open to negotiation between customer and card companies if it is unfavorable to score rating. Can a customer obtain a more favorable reporting terms used in reporting to the credit unions?
I appreciate any expert advise you can give me. Thanks.
1. You can pay off your debt faster in a DMP. Many people do. It is not necessarily settling though. You are simply paying the full balances owed more quickly by using a bonus at work, a tax refund, or something similar.
2. No. You will not be settling anything for less while you are actively enrolled in a DMP.
3. Whether or not your credit bounces back from settling a debt for less than what is owed will vary from one person to the next.
You appear to mostly be talking about settling debt for less, and not about enrolling in a debt management plan with a credit counselor.
I compare the two debt relief options more fully here: https://consumerrecoverynetwork.com/question/how-to-compare-credit-counseling-with-debt-settlement-for-lower-monthly-credit-card-payments/
Your concerns about credit reporting suggest this article about how debt relief options impact your scores and access to financing would be worth a read.
Michael,
Thank you for your expert insights. I read the above link for the debt relief option comparisons. I am glad you went through the trouble of attaching this link. It’s incredibly informative and I am glad I was able to read it.
I think I will go with the DMP through a credit counseling agency. However, if you will I would like to clarify, or rather, confirm one point with you: Before starting a DMP and in order to obtain a better interest rate from the banks. It’s advisable to start the program AFTER one has fallen behind on 1 or 2 payments?
Thanks you so much.
‘
NO. I encourage you to start working with a credit counseling agency without missing payments! The credit counseling companies have preset deals with your banks. They can do things to get your monthly payments lower that you and I sometimes have to miss payments before we can do (if we can do).
Michael,
Thanks for your reply. In regards to answer #2:
“2. No. You will not be settling anything for less while you are actively enrolled in a DMP.”
Does this mean if for any reason later on I drop out of DMP, Debt settlement would still be an option to me? Of course, I am planning to stick with DMP to its conclusion. I am just trying to understand what the big picture is in case things get worse unexpectedly, I will know what other recourse will be there.
Thank you.
You can typically negotiate a settlement with a creditor that was in your DMP, but whom you stopped paying prior to completing it. That is fairly common.
Michael,
I owe several credit cards and am current on all of them but having a hard time staying current on payments specifically due to Chase’s high interest rate which is 25.24%. I really think falling behind on my payments is an inevitability pretty soon down the road. If Chase is willing to lower their interest rate then that would leave me with enough breathing room. I read about hardship programs on your site’s postings. So I was wondering if I could negotiate a hardship program with just Chase to get their interest lower’d. I also read some where that Chase could find out that I was negotiating with just them and not with the other credit card companies and would therefore refuse to negotiate, is this accurate? Would I really have to negotiate with all the cc companies just in order for Chase to negotiate? All the other cc are charging in the low 10’s interest rate and is manageable at this time. So, I really need only to have Chase lower its interest rate in order for me to remain solvent. Thank you very much.
It is not true, in my experience, that Chase will not allow you to lower your interest rate with them if you are not trying to do the same with your other accounts. And the same goes for settling with Chase for less, while keeping another account current.
You do sometimes have to fall behind with payments before you can have a productive interest rate discussion with Chase.
Hello Michael,
Due to an abrupt loss of the majority of my income source, please enlighten me on the following:
1. Chase around $30,000, Late on one payment and pretty soon a 2nd payment. 27% interest rate
2. At&t around $29,000. Never missed payment but about to. 17% interest rate
3. B of A. $5500. Never missed payment but about to. 13% rate
4. US Bank. $10000. Never missed payment but about to. 0 promo till Oct, 2017
5. Discover. $3000. Never missed payment but about to. 19% rate
6. Citi. $3600. Never missed payment but about to. 13% rate.
7. California bank and Trust. $7500. Never missed payment but about to. 12% rate
*All card accounts are under only my name.
My two considered options:
Option 1.
If I were to approach any card company with DIY lump sum settlement:
1. I have heard you could end up paying between 35-50% of the owed amount.. Realistically how much reduction should I be negotiating for? Or, going with a pro would yield a better result than DIY in my case.
2. Do I need to have missed payments before approaching them and if so how many missed payments.
3. Would I in anyway be able to have them not report negatively to credit bureaus. If so, how would I go about asking for this request. Or, in a lump sum settlement your credit score would be affected and if so to what extend.
Option 2.
Since I could still be able to come up with around $1200/mo to pay for the cards. How likely would I be able to get a 0% interest rate 5 yr long term hardship program with all the above companies.
My foreseeable financial future for at least the next 2 years would not change from my current predicament. As of right now, combined with my wife we are grossing $3100/mo, but this income is shaky and could take a big hit as well. We don’t have to pay rent only the other usual bills and necessities of life.
Option 3.
The s**t hits the fan and I file for bankruptcy. I don’t own a business so which bankruptcy would afford the best protection for personal/real assets. I live in California and in the event credit card companies sue me to come after assets. I have only 2 old cars under my name. However, my wife does solely own 2 condo rentals acquired DURING our marriage free and clear. CA being a community property state, I heard my wife’s properties could be liened upon or even sold thru court judgement to satisfy my above personal card debts, is this accurate?
Thank you for your kind guidance.
1. Fill in the talk to Michael form in the right column. When I see that I will email you to set up a time to connect on the phone. I will want to get a feel for your ability and inclination to negotiate. There are times where the outcome is better with a pro, but the flip side of that can be true too.
You absolutely need to be late with payments in order to settle for the best rates. How late can vary from account to account. More often than not, 5 or more months late is the baseline.
There is no way to do debt settlement without hurting your credit. How much credit score pain you will experience will vary from one person to the next. Assume you will not be able to get any credit until after all of your settlements are complete.
2. It would be unlikely to get 0% interest with all of them. Chase is the most flexible out of your list, and Discover the least.
3. You should talk over your situation with an experienced bankruptcy attorney in California. Are you living in one of the condos? What is the value on that one?
I can cover more of your exposure if a collection suit is filed when we speak on the phone. I think you heard or read something that has confused this a bit.
Ok. Michael I will fill out the Talk to Michael fields and look forward to connecting with you. Thank you so much.
It was good to talk with you on the phone this morning David. Let me know how things go after talking with the credit counseling agency, and what the monthly payment quote is on the DMP.
Hi Michael,
I’m about $40,000 in debt right now and only make that much for my annual salary. About $23,000 is with credit cards and the rest are personal loans I took out with the credit union, Upstart and Borrowers First. I regret taking those out now since they don’t have hardship programs at all. After paying them, my car payment, rent and other necessary bills, there’s literally nothing left for the credit cards. I can’t even afford a hardship program with all of them. I’m in one with Chase, but that’s all I can afford. Comeniry is calling telling me to have my lawyer call them. I don’t know if this is legal or a scare tactic. I don’t qualify for debt consolidation. I also can’t file bankruptcy because my dad cosigned my car loan. I feel stuck with no options, and am afraid at some point the credit cards are going to sue me. I have nothing they can take so maybe I don’t need to worry?
You can file for chapter 7 and still make your auto loan payments so that your Father’s credit is not hurt by it. Talk with an experienced chapter 7 bankruptcy attorney, and if you learn something that would prevent you from filing, fill in the talk to Michael form in the right column and I will email you to set up a phone consult. We can then look at what settling with the credit cards and personal loans will look like.
Hi Michael,
Can you please explain the capital one hardship program and how it can affect your credit score. I was told that after 4 months of on time payment, the credit rating will revert back to R1 status. Any information on this program would be appreciated. Thank you.
Are you more than 30 days late already? By how much? Did Capital One tell you they would reage your account and bring it back to an R-1?
Hi Michael, I am currently considering “debt settlement” with National Debt Relief (Freedom Debt Relief); however I have a few concerns about moving forward…I currently have approximately 50K in credit card debt over 5 credit cards (this is in addition to my normal life expenses as well as monthly payments to my Ex-husband). I am not behind on any accounts to date but things are extremely tight and I desperately need to increase my cash flow! I have recently been laid off but I am receiving severance pay until the end of Jan ’17. I have an ok credit score of 730. I am concerned about letting my accounts, which have always been in good standing default in order to move forward w/ the debt settlement process (as suggested).. I am also concerned about the potential tax implications that I’ll face in regards to the forgiven debt (I believe I will be solvent, which means tax plenaties for me when each debt is settled). Is there any advise that you can offer me as to how I should proceed? Thanks!
Post an outline of who you owe, the balances, and interest rates on each credit card. I can offer a detailed outlook in reply.
Michael,
Does it hurt my chances of settling a debt later if I have accepted a hardship plan and later can’t make the hardship payments?
Generally speaking, no, you can still settle later on, and sometimes you are setting yourself up for better success this way. But who is the creditor at issue?
Synchrony Bank
There is not much point to a hardship plan with Synchrony if the intent is to settle the account with them later.
Synchrony rarely offers life time of the balance hardships, so you are looking at a short term payment plan.
Hello Michael. I am wondering if you know of any debt management companies that will work with Lending Club. I have a $30,000 loan at 26% , which I took out to care for my grandmother. I had no other options at the time. I am hoping to get the interest cut in half , and found not alot of places will accept Lending Club. Thank you- Vicki
It is not the credit counseling agencies that don’t work with Lending Club, it is that Lending Club will not work with them.
I often recommend settling with Lending Club if you cannot make the minimums. Can you pull together 12k in 10 or so months somehow?
I think I could, but it really doesn’t seem like they will settle. Thank you for the advice.
People settle Lending Club loans every day. It never seems like a lender will settle at the beginning.
Do you want help with this one? If so, call in for a consult at 800-939-8357, ext 2.
Hi Michael, wonderful that I can present my problem in writing after all the research reading I’ve been doing. I’m 77, only have $823 social security and part time nanny job. I have asthma and serious back problems. I enjoy working but am limited. Michael. My credit card debt is over $5000 with $30o minimum total monthly payments. My score is 750 ish but list my roommate who was paying $600 towards $950 rent plus utilities. I’m really scared, and need to stop paying. Please tell me about the absolute reasonable way to accomplish this. Thank you so much Michael.
Stopping payments is as simple as removing any ACH or auto pay authorization. You could explain the hardship you have going on if you like, but it is not necessary if you are not looking to establish some form of lower monthly payment right now.
Hi Michael…I have a cc with Capitol One. I owe 4500.00 on it and about two months ago I called them to tell them that I am having difficulty in making payments. Until then I had never been late and paid at least the minimum… they told me that they would waive late fees for 3 months and I sent them only 50.00 for the two months….I see that I have a delinquency showing now on my credit report and my credit rating went down. (I had a chapter 7 about 7 years ago and this does not help)
I am 72 yrs old and both my husband and I only live on social security. He does some business on eBay but not that much and nothing that is reported. My husband is not aware of this cc card debt. He has money problems too and had a heart atttack and I do not want to burden him.
I plan to call capitol again this month as my payment is due on 11-6 and tell them I can only send them 25.00 a month but I will always be able to pay that amount. Do you think they will work with me or what do you suggest.
They know I had health problems and am not working (colon cancer, back surgery, car accident, and chemo for non hodgkins, all of which I was willing to send documentation for) At the time that I initially called them they told me to keep in touch with them and that there was not much else that they could do until I got delinquent.
any suggestions you can provide would be most helpful.
The best payment plan Capital One would likely be able to offer on a $4500 balance would be $75 (if they were offering you anything other than a temporary hardship plan). That would be zero interest over 6 months (they cannot offer plans longer than that).
Capital One may not offer that type of repayment, and it does not sound like you can swing it.
An alternative is settling with Capital One some time down the road, but you could need to come up with as much as half the balance owed.
Hello,
I am currently figuring out if to go through Hardship case with Chase ( Freedom acct. has 7,000 in dept. and the other CC with Chase the Amazon ( 4,000) I also have a Citi bank card with 5,000 dollars in dept but is interest free. I have contacted Chases Hardship program and they are able to get dept down to 12 percent on each individual Chase card. I went through Green Path and Navi core and the estimated somewhere between 10 percent and 6 percent. I am currently hustling with catering work but it is not steady as of now. I am also looking for professional work interviewing for different jobs. My monthly expenses as of now are about 22oo a month . my take home is about 2,000 a month on a good day for now but looking to rent room out Nov 1st which should help Should I commit to program before renting out and am I better with a hardship program or credit counseling which is the ” better one” Green Path or Navi core? Its unfortunate that the bank can not give me a straight answer. Why are not APR regulated under Dodd Frank Bill… Banks are crooks no matter how you look at it…
You are likely better off using a nonprofit credit counseling agency than going with the temporary hardship plan Chase is offering you. Credit counseling is for the life of the balance, and the interest rates will be a bit lower than Chase offered you.
Does Synchrony bank and Commenity Bank offer hardship programs?
Both Synchrony and Comenity offer hardship repayment plans, but both of them tend to offer short term plans.
Hi Michael,
We are in credit crises. We have 50,000 credit card debt. Here is a list of cards, interest, Max balances and min payments.
Discover $13,129.17 19.99% $14,100.00 $262.00
Bank AMERICA 8,382.00 14.24% $11,500.00 $188.00
Chase Amazon $4,600.00 27.24% $5,100.00 $162.00
Chase Ink $6,835.36 18.24% $8,000.00 $158.00
Chase 26 $1,863.83 11.24% $2,200.00 $38.00
Chase 41 $11,771.25 24.24% $12,000.00 $361.00
Commerce $2,074.00 9.24% $3,200.00 $70.00
Dillards $2,683.00 21.99% $3,600.00 $134.00
Care Credit $1,400.00 0% for a year
This started a few years ago when I used credit cards to leave a violent relationship, and then to pay an attorney. On my own for 3 years, and now remarried. My husband has been laid off twice now since we married and recently went back to work after 3 months. I am self employed as an Amazon seller. My business gets harder every year, and profits get smaller. I recently had major surgery, and don’t even have the bills from that yet. We were on Obama care at the time. We are both 52 starting over in life financially.
I have tried yearly to get consolidation loans and been denied,, each year the balances increase about $10,000. All accounts are current.
I spoke with Chase today about their hardship plan. They offered me reduced rates of 6% for 36 months with fixed payments. The payments are slightly higher than current minimums for a total of $754.00 for all four cards. Accounts will be closed reflecting “closed by consumer” on my credit report. The operator advised me to seek a credit counselor before taking this deal. So it does not have “final approval” yet. My credit score currently sits at 714, I have a late pay from my ex on my record. Plus my name still remains on a couple million of debt for real estate I lost in the divorce. We considered bankruptcy, but don’t want lose equity in the house we have.
Chase has a recording with companies they work with. GreenPath, Naviicor, and In Charge Debt Solutions were the ones that were offered to me. I don’t like how many companies work in letting accounts go delinquent, and I have read fees are high.. Although Green Path has some great reviews.
What do you think, can I do better? I am planning to contact Discover as well about a hardship plan. The min on that card is $262.00 and the monthly interest is 216.53. I try to always pay more than the min, but sometimes it is impossible. My husband just got a new job, take home is $2600 a month. Mine income varies. I told them we made $5,523 a month out of fear of being denied if our income was too low.
What state do you live in?
How much equity do you estimate you have in your home?
I live in Missouri. I have moved into my current husband’s home. My previous home is tied up for another two years and has become a rental until then. I have 50K equity in it. Have inquired about refinancing, selling, equity loan, etc. Have been told cannot touch it for another 2 years. Another two years of this credit card interest is insane, we cannot wait that long.
There is no equity in his house. There is PIM on the mortgage.
Just spoke with Discover-they are only offering 12.99% for 1 year. They would freeze the card for one year. They said I could speak with CCCA and possibly qualify for 6.99% for life of balance, which would cancel the card.. I think I have seen the CCCA mentioned here.
Yes, and it is why I did the math on the $1,100. Call 800-939-8357 and press 1. That will connect you to the largest credit counseling agency in the country so you can get an exact quote of what your monthly payments can be reduced to (for all of your listed accounts). Let me know if that is affordable.
I mean CCCS
You owe a rough total of 53k on all of those accounts. Can you afford $1,100 a month consistently?
Send me an email to schedule a consult. You can email the same address you get these comment notifications from. We can set up a time that works for both of us next week. You have a couple of options I want to either clearly identify, or eliminate.
Yes, I think we can. We just visited Mazuma Credit Union Saturday to look into a lower rate debt consolidation loan. The woman we spoke with was doubtful. Stating we simply didn’t qualify for enough unsecured, She wanted to review our income further with someone else, as I am self employed our taxes are a bit complicated. But said they usually require paying off all credit cards with a consolidation loan. We had thought even if we could borrow enough to pay off BOA, we could transfer most of Discover over to BOA with a 1..99% for a year. Accept Chase’s offer and hit these accounts hard. However, the final straw came when I told her that my name remains on all of my ex’s real estate loans. She said they most likely would not be able to work with me.. But would look into it. Their rates were going to be 9-10% for my credit score.
I now realize this is probably why I have been being denied the last 3 years from Discover consolidation loans and last year SoFi. Three years ago this debt was 28,000 and I was denied. I will never qualify for anything with my ex debt hanging over my head.
A lawyer advised me to do a bankruptcy to break myself from all of his debt, I was trying to prepare for this, when, the ex paid $50K on the property I had lived in. Now with that equity, Bankruptcy is no longer an option. Even when I clear this debt, my income debt ratio will never be good.
Send me a talk to Michael request in the right column of this page. I will schedule a phone call with you and dig deeper into your situation and come up with some recommendations for you.
Hi Michael,
My name is Jennifer and I am trying to help my mother find a way to pay her credit card.
She currently has a limit I think of $16,000 which is mostly charged to the max. I’m not quite sure what her interest rate is but I believe it’s in the high 20s. Her minimum monthly payment is around $300.
She has a problem with being too nice to everybody and helps people pay rent, buy groceries etc. She cannot afford to do that, and now she is in trouble. She’s making minimum payments but barely even touching the balance because the balance is so high in the interest rate is so high.
I’ve been looking at your site and there was a lot of great information about debt settlement and hardship repayment. I am wondering if Chase bank will allow her to ask for a hardship, even though her account is current. We recently signed her up with a program who says they “invalidate” the debt(scared to death of this). I would like for her to cancel out of this and try to pay it on her own.
Any advice you have would be greatly appreciated!
Thanks,
Jennifer
Chase would likely offer a hardship plan where she could pay as little as $266 a month for 60 months, or perhaps as much as $304 a month for that same time.
Call and talk to them about it with her there so she can authorize you. You may have to miss a payment by a couple of weeks in order to get them to offer the best repayment option.
Cancel out of any debt invalidation program. There is no magic series of letters or process to make 16k go away other than chapter 7 bankruptcy.
Hi Michael,
Thank you very much for the advice! This is what I suspected and I glad you confirmed for me.
I will work with her on this new plan and I’m confident it will work out 100% in her favor, without the worry of the debt invalidation program. She has decent credit and a long account in excellent standing.
Thanks so much for providing advice and educating people on these important issues!
I have a discover card out for around 11,000. It is maxed out. I am way behind on payments to the point they sent a letter about a lawyer. I tried calling before time ran out on date of letter. Not sure what to do from this point on. I can’t make a payment which I’ve tried to because I can’t get into the account on the website. I am also behind 4 months on my mortgage. I am paying this months but not sure what to do about the months im behind. Do I just send an extra 200-300 a month with monthly payment until its caught up?
Call and talk to Discover and see if you can qualify for a hardship plan. If you have 2 to 3 hundred a month you should be okay. Let me know what they say.
If your account has already been sent out to a third party debt collector, let me know who and lets go from there.
Should I enter my credit card debt into a hardship program at 3% interest rate or do a debt consolidation loan? I’m just wondering what the impact on my credit would be with these two options.
Who is your credit card with? What is the balance owed? How long is the duration of the hardship plan they are offering? Are you already late with payments, and if so, by how much?
Is it possible to negotiate a hardship agreement that will lower the balance due through forgiveness of past interest and penalties?
Bank of America offered $149/month at 2% for 60 months
Synchrony Bank offered $138 at 0% for 48 months
Citi Bank offered $100 @9.9% for 54 months.
My husband has been diagnosed with a chronic health condition that will make his ability to work unsteady. While I can handle these payments now without difficulty I worry about the length of the agreements and future medical bills. I have tried to talk to one bank about a retro active forebearance due to the fact that we are 4 months behind on all of these account due to his illness. I had no luck and was told that they cannot forgive any amount previously owed. Am I barking up the wrong tree?
If you have any concern that you will not be able to keep those payment agreements it is often better to look for an alternative. What are the balances on each account?
My siste, a catholic school teacher recently lost her job due to school closure. To make matters worse she has just been diagnosed with colon and uterus cancer. She has 16,000 in credit card debt. I am thinking about helping her out with her debt but I would like the Discovercard to lower her 19 percent interest rate. Do you have any suggestions for me?
Discover is one of the better banks at offering hardship payment reductions in situations like this. Call them and talk to them about this. Be sire your sister is in the room to give verbal authorization when you call first. You can do all the talking after that if she is not up to it.
Hi Michael,
I have been reading through some of the situations people have asked you about and was wondering if you may have a suggestion for me…
I have been working on rebuilding my credit for about 2yrs and have opened quite a few cards. Too many. I am nearly maxed out (I had a few unexpected expenses come up). My income has dropped some in the past 6 months and with both of those factors I am falling behind on my payments.
My debt to income ratio is well over 50%. Should I use a consolidation loan or ask for temporary relief from monthly payments through a hardship program? Or do you have different advise?
Thank you in advance for your time …
Oh, and my credit score has recently dropped around 100 in just the past cpl months and is now roughly 500.
Post the amount of times you have been 30 or more days late in the last 2 years. Also post the name of the creditor, balance owed, and the interest rate for each account. I can offer better feedback about who would be good to talk to about a hardship repayment, or other alternatives.
I’m in a situation similar to the reply above. I’m an accomplished writer for a well-known magazine who also freelances on the side. I’ve managed to run up about $20k in installment debt (two debt consolidation loans and eight credit cards, six of which are close to the limit) and know that I will soon owe what I estimate will be about $15k in taxes and penalties – plus I will need to start setting aside money for estimated tax payments for the future (how I got into the pickle with the IRS in the first place). My installment payments are all current but they eat up most of my discretionary income after rent and utilities are paid (and I’m falling behind on one utility bill). A professional contact I spoke with recently is going to see if she can arrange another side gig that I can accept as a journalist, but I think I also need to get a handle on things and know what my options are.
What are you interest rates and balances on each account?
Who are the consolidation loans with?
I have about 50,000 in debt with credit cards. I am 55 single mom to grammar school kids. not much help with child support. Have 25,000 irs bill that keeps escalating. I was considering debt hardship for 2 credit cards. Have considered bankruptcy but worried about the impact on my credit . Plus I would still need to pay back about 1,000 a month. What is the best way to go when I do not want to do bankruptcy
Give me a call for a consult this week. I will go over your situation in detail and make some recommendations based on your finances and near term goals (next 1 to 5 years). You can reach me through the debt relief hot line, 800-939-8357, option 2 rings to me.
If this post still active — want to know if anyone has any experience with Chase. I am not behind but recently laid off and would like to get the
You bet. You can discuss all things Chase here and get feedback.
What is it you are trying to get? Your comment looks incomplete.
I can honestly say I’m not as bad off as others, but I am wanting to keep it that way and look to get out of debt before my student loans start to roll in. I currently owe about 6,000 dollars to discover card and 3,000 to American Express. I made my min. payments but I would like to find a way to get out of debt soon. My current credit score is 685. Is there any advice which you could give me.
Read over my article about debt roll up. If you can manage to use that approach to paying down your debt more quickly, you would not need to try to request any hardship reduction from Discover or AMEX.
What are your interest rates with AMEX and Discover now?
Michael:
I currently have an account with Family Credit Services and am paying $934.00 per month over a 55 month payment plan. I am now working part time and on SSDI and would like to negotiate this payment. I began the payment plan in 5/14 when I was working full time.
I estimate that I have about $30k remaining in debt. Do the debt management programs ever renegotiate the plans, plus I don’t want to lose the negotiated interest rates they received from the credit card companies.
Looking for some expert advice.
Thank you!
Typically those payment plans are not renegotiated. You can either afford the repayment plan or not. Call Family Credit Services and talk to a counselor about what you have going on. If you have doubts that you will be able to consistently make the monthly payment you have now, it is likely time to start thinking of alternatives.
I called Citibank today to lower the interest and the minimum payment on one card. Balance is 12,650, APR 15%, payments are current. They offered to lower the minimum payment from 260 to 210. I know they could get it down to 160 if they lowered the interest rate more. Do you think they would offer a better rate if I miss a payment? If I take this offer from Citi, can I still get a better rate later with a debt consolidation company?
You bring up a good point Dan. You should read through to the next post in the article series (linked above at the end of the original piece), and on through to what I cover regarding consolidating credit card bills through a nonprofit agency.
I cover some warnings about starting on a hardship plan if you have any doubt you will be able to consistently make your payment(s). That goes for working with a debt consolidation company too.
If you agree to the Citibank hardship plan and later try to consolidate your bills you may not be able to. But the reverse is possible, where you work with a debt consolidation agency, and something later happens to cause you to miss a payment, you may be able to get Citi and other banks to agree to a hardship plan, and you will certainly still be able to negotiate settlements if the wheels fully fall off of any repayment plans.
What are the other credit cards and balances you are dealing with?
Mike,
I’ve read through the other posts and I think I know the answer however I’d appreciate your info to me. In debt about $8K. Hav 2 Cap 1 accts, total owed $2K, the rest in retailers, $6K. Income is thru SSD & Pension. Not able to pay anything at this time. Own Home. What are my options Mike?
Thanks Mike!
If you cannot pay anything than a hardship payment or lower interest rate plan is not going to work. I would suggest reading through a brief outline of your legitimate options and posting what you are inclined to do. I can then offer more direct feedback.
Michael,
After reading several of your responses to other people in similar circumstances of financial hardship, I am hoping you can advise me as well. I am hoping to negotiate a workout agreement with 2 of my credit card companies, similar to what Alan from the July 2014 post did. Here is my info:
I have been struggling with credit card debt for over a decade. My debt has only continued to grow, instead of decrease. Every year, we say this will be the year we will get our cards under control, but our living expenses continue to increase, and with no savings, we no longer can make more then our minimums for about the past 2 years. Now our cards are all pretty much maxed out and soon paying the minimums won’t be an option anymore either. I have tried for years to get a consolidated loan with a lower interest rate to pay off my two most difficult cards, which are roughly at $40,000 together, but I never get approved because of my high debt to income ratio. We managed to maintain credit scores into the mid 700’s until recently, when we bought our first home. Since buying our home, our credit card situation has gotten worse and our scores are now in the high 500’s. Every time I respond to a consolidated loan offer, it turns out that I don’t qualify and that they recommend I join a debt settlement instead. For years, I refused to take that route, because I didn’t want to hurt my credit and I honestly want to do the responsible thing and pay my debt in full. But now, I feel like I know longer have any options left to me. To join a DMP, I have to put all my cards in the program, to include my husband’s because we have joint cards. His credit circumstances mirror mine, but he can’t join a program because his job requires a secret clearance, one that will need to be renewed in a years time, so he can’t have anything super negative on his credit. We manage our bills and debts separately and though it isn’t working for us, I need to find a way to fix mine so we can then fix his after. We also can’t join a DMP and give up all our credit cards because we have some for emergencies. It would be different if we had savings, but we do not, and we have 3 kids to support, so credit cards are there as a back up.
I recently got a settlement offer from Freedom Debt Relief and after much deliberation, I decided to finally consent and enroll. My first missed payment to my credit cards enrolled will be on the 14th, with my first deposit into the escrow account happening on the 16th. It has been 2 days since I made this decision and I still can not deal with going this route. I decided maybe it was time to contact my credit cards directly and negotiate with them myself, for a workout agreement, but I am current on all my cards and everything here and online says they won’t negotiate with me until I am late, but if I go with this settlement company, they will get almost $10,000 in fees, money I could pay on my debts. And that is with only an estimated 50% going to my cards…so wouldn’t it be better for my cards to negotiate with me where I can pay them in full, at a rate I can afford? I want to call them and tell them I am enrolled in this plan and this is what they’d be missing out on, to see if we can come up with something better between the two of us, but is this even possible? How can I get what Alan got?
Here is my info:
Current credit score is 580’s.
I owe about $20,000 on USAA with a 9.90% interest rate, and my minimum is just under $400.
I owe about $21,000 on Barclays with a 9.99% interest rate, and the minimum is again around $400.
These are the two cards I want to negotiate new terms with.
I also have:
Capital One with $5,000 on it with a current 0% interest rate until Jun 2016.
US Bank with $1,200 on it with a 23% interest rate
These are two fairly new cards that I got for emergencies and which were not used for the majority of the time I had them until very recently. Capital One is maxed but US Bank is not. The minimums on these are very small, $50 and $30. I want to pay these off myself and keep these two for the future.
I have a joint card with my husband with Sychrony bank at about $3400, which he pays on.
I have another Sychrony bank card with about $1800 that I pay a minimum of $70, no interest currently, ends in less then a year.
My last card with a balance is with Home Depot at about $500, minimum is $25, high interest rate, but I don’t have the info with me right now.
So If I pay the minimums only on my cards, it comes to a total of about $975.
My half of the family expenses comes to about $1472. That is for things like day care, insurance, student loan, car payment, utilities.
So my combined monthly expenses I have recurring every month is about $2447,
My monthly take home pay is $2954. That leaves me with $507 for gas, groceries and other day to day expenses that I can not always budget for. I try and budget about $200 of that for gas and shopping needs and put the remaining $300 on a card as extra, and some months it works, and other months it backfires and then I need to use the card I just made a small dent on.
With all this information, what do you recommend as the best option for me? Please take into account that I have been slowly drowning further and further in this debt I have created for over ten years. Everything is getting worse, with no end in sight. And my husband’s financial situation is similar, so he can not take on any of my debts or bills.
Is there a way I can present this info to my two big credit cards so that they will give me a long term repayment plan? One with 0% interest and minimums I can afford…maybe $300 each? Can I do this before going behind in payments? Alan gave a percentage of his income to debt and when his income was too small, they wouldn’t even consider him…do my numbers put me in that category?
Or, do I need to just cut my losses and bite the bullet and admit I can’t pay this all back and go forward with my debt settlement plan with Freedom Debt Relief? In this plan, 4 of those cards are in, with about $42,000 being enrolled, with just under $10,000 of what I pay going to them for fees, and they estimate I will pay off about $28,000-31,000 of that $42,000, which means those 4 cards will get anywhere between $18,000-21,000 of the money I save in the escrow account, Does telling my two cards this is the current plan, would it at all entice them to work with me instead, to let me pay it off in full on my terms? And if you think there is a chance, what terms exactly should I ask for? What is asking too much but not enough? These cards have already made thousands on me, so if I have to go the route of the settlement plan, I will, but I don’t want to. For obvious reasons, my credit will be horrible for the next 7 years. I have no plans to need credit in the near future, as we have good cars and a home we plan to retire in, but that doesn’t mean this is a risk I should take. I haven’t even looked into bankruptcy but I definitely don’t want to do that. I really don’t want to do debt settlement. Please tell me there is another way to climb out of this hole.
Thank you in advance for helping me weigh my options.
-Jessica
You may be able to get creative with how you enroll in your larger creditors hardship plans. I would need to speak with you and dig in to more details about the differences in your household debts (between you and your husband).
You can reach me at 800-939-8357, choose option 2.
Thank you Michael, for speaking with me today.
To discuss debt counseling and joining a DMP vs debt settlement was very helpful. I know with more certainty that debt settlement is what I need to do, but after watching your interview with Charles Phelan, and downloading his free consumer report on DIY debt settlement, I’m ready to have a consultation with him and purchase his course. There is no reason I should hire a company that will charge me 21% in fees based on what I enroll in their program, when I can do it myself for free and in less time. I just need guidance that I think Charles can give me. I’ll keep you and your readers posted as this process begins and how it all turns out. Thank you again for your consultation.
My husband owned a physicians’ office and had two billing companies that did him wrong, he had employees working behind the scenes to help them achieve their goal. (long story) This, plus the payments from insurance companies becoming less and less and the big “BOOM” THAT CLOSED THE PRACTICE WAS A FREEZE PUT ON HIS OPERATING BUSINESS account. Not to mention “our” joint account was frozen. Basically anything with his name on it, even if it included my name. We have a child with autism and I , (before all the above mentioned exhilarated) quit my job to take care of her. We could no longer afford help. It took my husband 6-7 months for my husband to become employed again. He has been employed making less of course, for about 6-7 months. We feel like we are shoveling ***against the tide. Obviously we have no other choice, but to file bankruptcy. I made a huge mistake on my part. I take full responsibility, but with the shock and devastation of all that was going on……I have been ignoring MY creditors. I also was thinking that family members, that I so generously helped out , would be there for me. I WAS WRONG. I didn’t know that there was such a thing as “hardship” cases, because I have never been in this position. I always paid on time and some of the time, paid in full. So did my husband.
This all being said, I’m thinking….. going anywhere from 3-6 months of not paying, or paying, but less then the minimum, ( I know that isn’t what my contract with these credit card companies agreed to.( taking less than the minimum due.) just a FYI…….. As far as hardship cases, could the credit card companies LOOK BACK OVER THE YEARS AND SEE WHAT A GOOD PAYER I WAS? Knowing that something happened.! The cards are store cards, banks and American Express. Now that the shock has worn off, I just want a resolution to all this. I know it’s probably too late and do they really care? I honestly don’t know what to say when or if I do respond.Ccan I add this point? It is a waste of time to talk to these companies that out source. Those people can’t help me. It seems like they are just reading from queue cards.
I know my husband will have no choice, but to file bankruptcy, both personally & professionally. So maybe, both of us filing is the answer. I’m not asking you to tell me what to do. I’m asking, what do I say to the 100 calls that come in everyday? Is there something you can add that I just am not aware of? Thank-you so much for responding, I wish I had found you earlier.
It sounds to me that if you can qualify for chapter 7 bankruptcy, where your debts are discharged, you would both benefit the most. Getting a fresh start with bankruptcy is not an end, it is a beginning.
If you cannot qualify for chapter 7, then I would look at how your current debts and income will take shape in order to qualify for hardship or other repayment plans.
How much total credit card debts do you have?
How much is the total of your husbands credit card debts?
What are the totals of the business debts?
I have 14 Credit Cards, some in my name and some in different corporation’s that I owned with me as a personal guarantor. Total is @ $137,000.00. I recently lost my company in a foreclosure and have no source of income. Barely getting by on the little funds I have left in the bank. My home is in the foreclosure process as well. I was told to send a hardship letter to the credit card companies, all of whom are major banks. Is this the correct path, its been @ 60-90 days since the last payments were made to the credit card companies. My FICO score was always 790 or better, it is now approaching 605. I don’t have any resources to service the debts at this time or in the foreseeable future. The monthly debt service is currently @ $ 4.000.00 all in.
You could contact all of the banks to let them know about your financial difficulties, and some will offer you a hardship payment, but to what end? If you do not have the funds to maintain paying a lower monthly amount than hardship plans are not going to help.
Have you looked at bankruptcy? Is there a reason why you would not qualify to file chapter 7?
First off, let me say thank you for offering this forum as a resource. We are completely overwhelmed on what the best route for us to take is & every website offers a different view, so it will be helpful to get some advice from someone who deals with this daily.
We purchased a home 3 years ago and have had several unforeseen issues that had to be fixed w/ our home. Our son enrolled in college 2 years ago in a state across the country from us. We spent a lot of money flying back and forth when he decided after his first semester to transfer to a school in our state. My husband was out of work for 6 months this year and we had to put things like groceries and other payments on credit cards until he was back to work. We did not foresee all of the extra cost these 3 situations would add to our budget.
We used credit cards that had 0% introductory rates and now the interest rates are all adding up very quickly. Up until now we have been able to scrape by and make all of the required minimum monthly payments, but we have reached our breaking point. With our current finances when we include our utilities, mortgage, car payments, car insurance and all of our credit cards and their minimum payments we are $572 short each month. My husband & I have both started working 2nd jobs to try and bridge the gap, but it still doesn’t get us there.
We currently have $40,000 in credit card debt on 7 accounts that equals a total of $1065 each month with their minimum payments. The accounts are:
Sears Citibank: @ 20.4% apr w/ $235 min. pymnt
Simplicity Citi: @ 17.99% apr w/ $196 min. pymnt
Thank You Citi: @ 12.99% apr w/ $173 min. pymnt
Home Depot: @ 21.99% apr w/ $150 min. pymnt
Chase Southwest: @ 15.24% apr w/ $111 min. pymnt
Barclay LL Bean: @ 13.99% apr w/ $105 min. pymnt
CapitolOne Quicksilver: @ 22.9% apr w/ $40 min. pymnt (0% apr ends in 8/2015)
We called ACCC services and they immediately offered us a DMP that would cost us $991 per month for 5 years. Although it would be great to have all debt paid off in 5 years, it still wasn’t affordable to us.
I also watched the webcast where you interviewed Charles Phelan & we considered going that route. But based on his 12 month plan, I’m not sure we would have the lump sums for payout at the required times.
Another factor that we aren’t sure how will impact us is that we have taken out Parent PLUS Loans to subsidize our sons college education with what isn’t covered by scholarships/grants/student loans. He has 2 years left and we’re not sure if any of these credit card issues will keep us from being approved for the Parent Plus Loans.
We started researching hardship plans, thinking this might be the way to go. We were hoping to contact the 7 lenders and set up a hardship plan for 12 months where we would pay them each 20 per month for 12 months & then after that period, continue paying them their required minimum monthly payments. In a year we have a secured loan that will be paid off (freeing up $214 per month) and a 401K loan that will be paid off (freeing up $457 per month). Once the 401K loan is paid off, we could also take out another loan from my 401K that could also help payoff the debt. And during that year we will have had additional funds via our 2nd jobs.
We started out calling the Cit Simplicity & Thank You card. The gentleman we spoke to was very helpful, but said because we were customers in good standing that we wouldn’t qualify for any hardship plans until we missed a payment & that we should call back after we miss a payment. When we called Barclay, they were not as helpful, simply referring us to three different websites that had to do with bankruptcy. After that, we have put the calling on hold, since we haven’t had any late payments yet & it seems based on what I’ve read so far, that once we have a late payment, they’ll be calling us.
So…my question is this: Based on the details of our situation, do you think using the hardship plans would be best for us? Do you know if any of these companies have a history of not allowing hardship plans? Will any of this keep us from getting a Parent PLUS Loan? Is there something else you would recommend?
All of those creditors have hardship plans they can offer to you. The repayment plans could vary in lengths and amounts you must pay. None of those creditors will let you pay as little as you would like to, and you are most often going to need to make the minimum payment that at least amortizes to a 60 month pay off of today’s balance. That means as it good as the hardship plan may get will be $167.00 on a $10,000.00 balance over 5 years.
If you got each bank to give you zero percent for 60 months (they cannot go any longer than that), you will need $667.00 a month. With the $572.00 you are short each month, accomplishing this could get you through until some other money frees up.
How likely is it to get all the banks to go to zero interest and offer the 60 month hardship program? Not very, but you could get closer than what American Consumer Credit Counseling quoted you. Did ACCC do a full budget consultation with you?
If you get where you need to be on each account, and make that work until other money frees up next year, you are good to go and could use an aggressive get out of debt strategy with that money.
You will find that your credit cards will offer the best payment plans that you qualify for when you miss a payment or two. Your credit is going to take a hit from this, but that will be a month from now if you are current with all your payments. I do not think a few 30 day late pays will hurt your plus loans that will likely fund this summer. But you can make another months minimum payments if possible, and then fall behind in order to see what reduction you qualify for.
I would encourage you to buy the debt settlement success seminar from Charles. I think once you listened to it (it is the best on the market bar none), and using an estimate for settlements with those credit cards you have, you could be done in 18 months or less. Settling your debts is the mathematically superior choice if you leave chapter 7 bankruptcy out (I am not bringing that into the discussion because it would likely prevent you from being able to get the plus loans next year).
I would suggest you call me for a consult. I can go into some creative steps you can take, that are consistent with your goals and abilities, but will need some additional information from you. You can reach me at 800-939-8357, press option two. You can also email the address you get these comment notifications from with your number and some times you are available this weekend.
Michael,
Thank you so much for the comment & most importantly for the time you spent on the phone with me today (on Father’s Day, no less!).
The most important thing to us at this point is qualifying for the PLUS loan for our son’s education. He has 2 more years left and I was looking for a way to make it to August of 2016 without having to take any action that would impact our credit. We’ve had some time to come up with several options(that’s what happens when you spend 3 days straight researching & looking under every nook and cranny for solutions…but not sleeping!), but we’re shooting for Option 1.
What we’ll be doing for now is using the available credit left on our cards to get us through to January/February, as well as both my husband and I picking up extra shifts at our 2nd jobs. Once February comes, we’ll have our tax refund to carry us through until August 2016 (when the next PLUS loan application will go through.
As soon as we’re in the clear with that, we plan on working some short term hardship plans to get us through December 2016, when my 401K loan will be paid off and I can borrow against myself again. Then it will be time to start the debt settlement process.
If all goes according to plan, we will be credit card debt-free before the end of 2017. If there are bumps in the road, we’ve got Option 2, which is to work with creditors to get some long term hardship plans in place, that will carry us through until December 2016, when we have access to the 401K loan to use to pay off any debt settlements.
If that fails, we’ll go with Option 3 and start the debt settlement process. If Option 1 or 2 impact our ability to qualify for a PLUS loan, we have the ability to take a hardship loan out of my 401K that can pay for his last year of college.
Thank you SO much for talking me through all of the pros and cons of these options. I will definitely keep this thread posted with how this all turns out so that others can see & learn from the experience. Here’s hoping for a happy ending:)
Its been 6 month since we started our plan and all is going well. My husband and I both are currently still working 2 jobs, but we plan on going back to one job each after the first of the year. We have taken every opportunity to work overtime at our full time jobs and that has helped out a lot.
I was able to lower our monthly bills by almost $200 by making shopping around for better auto/home insurance, cell phone plans, electricity plans, and cable services…things that I originally thought of constants that didn’t have a lot of wiggle room.
We actually have money in savings that we will use to pay off a 401K loan early, that will in turn give us an additional$457 per month. Right now we are thinking that we will start using the snowball method to pay off the credit cards after the 401K loan is paid off. If that turns out to be too much of a strain (or some unforeseeable crisis comes up) we will consider using Michael’s service to pay off the debt.
Needless to say, it has been a stressful time-but we’ve also learned a lot from it. We are both on board with our plan and it’s nice to feel hopeful about it.
Thank you again Michael for providing this platform as a resource!
I have a capital one credit card that was closed 2 years ago because I didn’t pay anything for 2 months. I have been paying the minimum every month but i still owe $3500.00. I didn’t pay last month. I want to call them and see if they will reduce the interest rates. If I call them should I ask for their hardship department. I feel like I not making a dent in this bill, Very annoying!
Hi Michael,
Following up from a post from a year ago…at the moment this area of your site seemed the right spot. I am still in debt on several credit cards. I became employed around 6 months ago so that has helped a lot, but of course high interest on some of my cards keeps me from making much progress. Pretty much making the minimum payments or a little more as I can.
This month is the first time I am going to be late for citi…I called and asked for the hardship department and the rep said call next week on the day the payment is due and they will discuss options. I think I will end up in the credit counseling program soon enough but I am still trying to hang on to the my care credit for medical expenses I am incurring.
I am hoping for some of sort reduction in interest as this card has 20 percent. It has a 6,000 balance. I know they will require me to close the card…can I try to get them to report as closed by consumer? I am sure my score is going to go down from here…but I am weighing that against the heavy load of debt for a lifetime. I also wonder how this will effect the cards I am current with. Any feedback will be appreciated.
Your website is such a great support to me…
Thank you,
DB
You can call them and close the account yourself. That may save you a couple of credit score points, but it really is negligible (the difference between closed by credit grantor and closed by account holder).
Have you talked with a credit counselor about all of your bills yet? If not, I would want to do that before I call Citibank to talk to them about their hardship plan. It is good to avoid having one account in a hardship plan direct with the credit card lender directly, and then later consolidating your credit card payments with a counseling agency. You can consult with an agency through my hotline at 800-939-8357 and then choose option 1.
Thanks so much for your reply Michael…I called for some advice thru the credit counseling but I will need to call back to go over the details with a counselor…I have a feeling my income is not going be enough to even qualify me for a monthly plan compared to my total debt.
A couple of my cards are fairly low interest that is why I thought maybe I could work with the higher interest ones to reduce. I know. I am going to be late (maybe only a couple of days) with my minimum…I didn’t realize that talking hardship plan could effect my being able to do credit counseling payment later.
Now I am unsure how to proceed, but thank you so much for informing me about this….
Hi Michael,
Thanks as always for your great website. I read many hours on your website and I am always getting new info.
I am getting to the end of the time that I can continue to meet my minimums on over 30 thousand on credit cards.
I am keeping the number for the lawyers you sent me so when I need them. Bankruptcy is not an option due to owning my condo outright. I really have no money to settle if I default, but if I end up on that road I would so appreciate your guidance.
I am waiting for a call back from Cambridge to find out what kind of payment they would be able to get for me in the credit counseling-debt management. I do not think I will be a good candidate because of my low income but like you say it is worth a phone call.
I heard of them first thru your videos. They seem pretty good. Do you still recommend them?
Here are my creditors and amounts…
Amex-10,000
Citibank 9,000 (on two accounts)
Discover 7,800
Chase 5,800
Do you think that Amex is the most risky to fall behind? I am thinking of seeing if they will let me do hardship of some sort.
Any feedback will be appreciated….
Thanks so much…
Cambridge is a good company for a DMP. You can call 800-939-8357, and choose option one to connect to a great debt consolidation company.
Both American Express and Discover are known to sue for collection. And you will be a more likely target to sue with your condo paid for. Discover is far more flexible with the different hardship and payment options that AMEX. But you could certainly talk to both of them about lowering your monthly payments.
Citibank is not all about suing you directly right now, but they do sell some of their unpaid debts to buyers who will sue.
Chase stopped all of their collection lawsuits in 2012 and have not sue anyone for credit cards since. I do not expect things to stay that way though.
With a debt total of 32,600 your best case scenario with consolidating all of your accounts will be somewhere between 550 and 700. Getting more than one or two creditors to lower your credit card payments through a life of the balance hardship plan is more like herding cats today. You have to fall behind, and sometimes significantly. Chase is often the easiest to work with in this regard.
I would call and consult with a credit counseling company and get an exact quote on what your monthly debt consolidation payment will be. If you cannot afford it, post by how much you are off.
I got my quote today. 750 per month for 55 months. The counselor was very nice and not judgmental. They show I would need to cut my expenses by around 180 a month to meet this payment. The one thing that disappointed me was although they can lower the interest…on a couple of cards it is not as much as I expected. My citi that is at around 20 percent they can only bring down to 10?
I do like the idea of consolidating and not having to cope with the stress of collectors calling everyday that is sure to come. But as I see you often advise…I am going to have really think about whether I could commit to a plan like this.
So exhausting….
It is better to put in all the energy making the best informed decision now, rather than miss taking the better path to resolving your debts, or make an obvious mistake that can result in lost time and money.
Do you have any options to pay down your balances in the near future? Taking a tax refund and paying down the Citi card is an example of how your consolidated monthly payment could be lowered.
Most people want to avoid having to deal with the collections process on their way to less than full balance settlements. And it is something to avoid if you can, but not at the risk of starting down a debt solution that you are skeptical you can afford.
I wish I did have the ability to pay down some….tax refund if any will be small. The DMP payment is actually more than my minimums now by about 50 dollars. I expected it to be high but more in the 600 range.
I will consider the settlement route, but I am afraid I will not be able to raise or save the necessary funds to settle my accounts.
Are there any differences in the rates one agency get vs. another?
Thanks for all your feedback…it sure helps.
Typically there is little difference between the payment quote you get from one nonprofit debt consolidator to the next. If you were to give different financial information to the next counselor you speak with at a different company, it could cause the consolidated payment quote to go up or down.
Thanks Micheal…I actually was thinking I didn’t allow enough for groceries and gas…sometimes I don’t think we are realistic on how much life’s everyday expenses cost.
I am trying to keep an open mind on my options and I know that in the end the only important thing is to work towards getting out of debt and having peace of mind. I will keep you updated…
I am planning for an unpaid maternity leave for three months that will start in a month and half. I have a debit consolidation loan with Discover. I combined all credit card debit four and half years ago and took out this loan to pay back over a six year time frame. I have a year and half left on it. I have the amount debited from my account every month, so I have never missed a payment with them. Could I be eligible for a short term hardship deferment for my three month maternity leave since it is unpaid and I do not get vacation pay as well?
Call Discover and see if they offer such a payment holiday. You may only be able to reduce the monthly payment for a temporary period, which is not what you need. Post an update with what you learn and lets go from there.
My plan is to finish paying off the current balance on accounts.Ask my wife to add me to her Kohls account which has $500.00 limit and $76.03 balance so it can report on my file to show a new account with activate.Ask B of A again to remove the 3 late off Experian report. Try to apply for a gas card to rebuild credit score back to 720 when I bought my house in 2005. My rate at that time was 5.5% finance with B of A.
Apply for small loan at my credit union for $1000.00 also to get information on file
You will be in better shape 6 months after accomplishing all of that, and it would those plans I would focus on, not the late pays.
You can send a good will request letter to Bank of America asking those 30 day late pays to be removed from your credit, but I would not have any expectations of that succeeding. I would do it too, just like you will be, but because it is worth the price of postage to throw a Hail Mary.
Hello MIKE
I joined a debt management program in October 2010 Bank of America and Sears/Citibank. Sears account was 2 months behind Bank of America was 3 months. Have never missed a payment since being on the program and finally I have about 6 months left on program and balance on both accounts will paid in FULL. I look at my credit report every year and notice that TransUnion and Equifax show the account for Bank of America are “current” and “pays as agreed” but on my Experian report it shows Dec. 2010 Jan, Feb of 2011 late.
My Sears/Citibank account shows late payments from Dec. 2010-Sept.2012 on all three credit reports which was also on DMP in Oct. 2010. I call Sears/Citibank they told me since account was late when starting program that I had to caught late payments up and then account will be brought current but it has never been reaged. I have the written agreement when joining the DMP and also copies of all payments made 10 days before due date to Sears/Citibank. Even if I had to bring late payments current it seems to me that the account should be reaged to current. In the pay status line it states “current” “Paid” or “Paying as Agreed” what should I do it”s hurting my report
What is the name of the credit counseling agency you enrolled in the debt management plan with?
Are there no late pays after 2012 being reported?
Do you know your current credit scores?
Careone credit counseling.
No payments miss/or late after 2012
credit score 683
On EQUIFAX, Transunion, Bank of America only report back to July 2013 going forward to Feb.2015 no lates paying as agreed
Experian reports from Feb. 2008 -Nov.2010 no late again Oct.2010 join DMP Dec.2010-Feb.2011 late payments. March 2011-Feb.2015 no late. don’t understand how i could have a late in Nov. 2010 when 1st payment was mailed Oct.10,2010 and received at B of A on the 22nd of Oct.2010
Sears reports 10/2007-11/2010 no late. 12/2010-09/2012 all late.The 10/2012-02/2015 all current on payments that account also started DMP in Oct.2010 why is there that many late
It could be that your payments through Care One were not administered properly, or that the banks crossed wires with how they reaged them. I think the latter most likely.
A 683 is not all that rough a credit score with those late pays. They may not be hurting you all that much at this point. What are your plans to rebuild active credit accounts after the DMP? Do you have open accounts that were not enrolled in the DMP that continue as positives today?
Thanks for the help!!!!
We have two cars that are leased which will end in 15 months & 27 months. We had thought about refinancing our mortgage & second mortgage but we were trying to get one beast under control first.
Thanks. My perception would not change with this information. I would take the hardship repayment plans with BofA. The tax refund being used to pay off other accounts will help your debt to income, and perhaps credit utilization too (which could bump your scores a tad).
I have a B of A credit card that is 180 days late. I spoke with a rep from B of A today and they spoke with me regarding a hardship program for the 15k I owe them (including late fees). I was told that only including my B of A credit card doesn’t qualify me for the hardship program. However, if I include my husband’s B of A card (it is not delinquent) I would qualify. If we agreed to this, B of A would close both our accounts, reduce our interest rates, & we would be able to pay off both cards in 5 years. I asked them if the hardship would affect our credit scores & they said yes but weren’t sure to what extent. I am trying to determine if we should go with the hardship agreement and pay the roughly $490 a month or if I should start making payments to them to get caught up & pay the monthly minimum on both cards (mine $400 & husband’s $325). I looked at my credit report & B of A is already showing my account closed $ my credit score is 623. My husband’s current score is 634. Any help is greatly appreciated. We are just trying to do the right thing & pay what we owe while still trying to survive.
Given your last sentence, and your already average credit scores, I would encourage the hardship payment plans BofA is offering on both credit cards.
Questions:
Are there other credit card balances than these?
Do you have any specific credit or finance goals in the next, say two to three years, like a home loan or refinance?
Yes there is additional debt between 2-3k averaging $250/month. My plan would be to take our income tax return & pay this off then take the money we are saving each month & apply it to the hardship loan. I was hoping that it would be favorable for our credit scores.
Our biggest goal is to pay down/off our debt to where we feel like we aren’t drowning. Also, to increase our credit score.
The impact to your husbands credit score will likely be neutral, though if BofA reports it like they do a DMP (debt management plan through a credit counselor), your husbands account could show it is enrolled in a managed payment plan, which will not look great to a manual underwriter.
Your account is already showing as past due for several 30 day intervals in a row. Ask the Bank of America rep you next speak to about the hardship payment plan if they will reage your account like they do with credit couseling plans, so that you do not appear to be late in perpetuity while making your new agreed payments on time.
Long term, this is favorable to your credit. Short term, say this year, maybe a a couple point difference.
I asked about your near term credit goals for the next 2 to 3 years because your answer may mean I have additional feedback for you to consider.
What happen is our regular bills doubled which is making it very hard to make credit card payment and get groceries. Are household income went down because a job program she was has ended and now she had a medical problem preventing her from getting a job. As for me, I am also disabled. We are both on Social Security, we are not married. The BK Attorney told us just to stop paying the credit cards because we are both on Social Security which is not garnishable and we are not collectable and let the have a judgement against the house. We have a low balances with some high minimum payments, if we could get them to cut the interest and the minimum payment in half we could continue paying the bill, there is a very small chance she could get more money if she doesn’t die before her ex-husband dies. 6,000 5,000, 5000 hers, mine is 4,000, 4,000 . Another thing he told us, is since the house was discharged under the old bk. He said stop paying and use some that money to pay the credit cards tell the bank kicks you out. The house is underwater. What do you think we should do?
If your credit cards are not yet 4 or so months overdue, call the debt relief hotline 855-340-0589 and choose the first option to speak with a counselor. During that phone call you will be looking into how much your interest rates can be cut, and therefore you monthly payment lowered, by working with a nonprofit counseling agency.
Post an update with that you learn and lets go from there.
I keep receiving a post card from a credit card hardship program. I do not know who is sending these postcards, and I pay more than the minimum on all of my credit cards. Can this be a phishing scam?
It is more than likely a company soliciting potential customers for debt relief services. What is the name of the company soliciting you with the mailers?
Thank you for your prompt response. The postcard has no identifying information as to who the sender might be. The postcards keep urging me to call before “it’s too late”.
“Act now before its too late”, is just a sense of loss marketing tool.
They may not be offering any type of hardship payment at all. It may be a company offering some form of debt consolidation, or settlement plan.
If you are current with all your bills, and not struggling to keep your payments up, you can ignore solicitations to do something other than what you are doing. I would.
Hello, Michael!
I just stumbled upon you last night and am so grateful for your space. Thank you! This morning I woke up to an alert from Chase, reminding me that payment is due in 10 days, so I wanted to get your advice on my situation.
Card: Chase United MileagePlus Explorer Card
Card Opened: September 2011
APR: 14.24%
Balance: $13,321
Minimum Payment: $289
Payments are current (one late, and called to get late fee removed after payment posted).
A year ago, I realized it was time to tackle the debt. I decided to stop using this card (only a handful of charges have been on this in unique situations) and also paid off another Chase card, which only had a balance of $1500, but an APR of 29.99%. That card is paid off, and I plan to close it though I know Chase convince me it should stay open.
For the “big card”, I met with a lawyer earlier this year to consider bankruptcy. He said he wanted to think about it, as I wasn’t a for sure file now situation as it may not be best to have bankruptcy hanging over my head at my age (I’m just 30). I also tried applying for every 0% balance transfer cards, and unsurprisingly, I could never be approved.
I’ve been living in New York but am currently visiting family in California. As of mid-October, I am in between jobs, and will likely get something in the 45-50k range (60k would be ideal), once I do secure employment, which will be back in New York or here in California or elsewhere. Right now I have no income, so thought it could be good timing to enroll in a Hardship Program – though with no income, perhaps I wouldn’t be approved? Last month, I made my $300 payment and this was the first payment I made since I’ve been unemployed. At that time, I wondered if I should pay or not, so I called Chase on my due date. I said I couldn’t pay my bill, asked about the credit card hardship, got transferred, spoke to someone else reciting all the fine print. When they got to the part that I would forfeit all United miles, I decided I wasn’t ready to move forward. I could make the minimum payment last month and I still can this month. I have a few thousand to hold me over until I’m employed again, though don’t want that all to go to my credit card as I will be moving somewhere new and have money saved for the expenses of establishing myself somewhere new.
Besides my “big card” that I ambitiously want to pay off in about a year (pending future paychecks), I have a student loan with a minimum payment of $130 a month, with a grandfathered APR of 4.25%. I’ve got $10k there, but am fine with that being on the extended payment plan, it’s the credit card I am determined to eliminate.
I think I am leaning towards a credit card hardship program, to allow for the (hopefully) 0% APR, but have many questions and am certainly open to your suggestions if bankruptcy or offering a settlement would be better for me.
1) If I want to do the credit card hardship program, would I have to be late on payments?
2) Would I only be approved for the program if I had an income? (My checking account is with Chase… they can see my balance isn’t zero).
3) Would I for sure lose my United miles? I asked the agent on the phone if I were to book an itinerary and go into the hardship program before the departure… would the itinerary be cancelled? They said to call customer service to ask, which I’ve yet to do.
4) Is there a way to negotiate with Chase to enroll in the Hardship Program without closing the card? Perhaps that would avoid the forfiture of miles. If I do have to close the card, would they ever approve me for it again?
As for settlement, I could hand over half the balance soon, if Chase would accept 50%. Would it be best to try to negotiate this myself and would I have to be behind on payments?
I am excited to be debt free and thank you again for your guidance.
Ashley
It can be a challenge to get your credit card banks to agree to enroll you in a hardship repayment plan if you do not have an income. You can overcome that challenge if you convince them a friend or family member is going to front the money each month to cover the bill until you land on your feet.
I cannot say whether it is certain that you lose the United miles you have. I think it likely you lose them, given the credit card customer service rep has that disclosure in their talk off.
You are not going to see that great of a monthly payment reduction on that last credit card. 222 is as good as it would get, and that is with Chase reducing the interest rate to zero. Is that workable?
How many United Air miles would you lose, and what would it cost to replace those by purchasing tickets?
How long would it take you to come up with roughly 5k to settle with Chase as an alternative to hardship payments?
If this one credit card is the only reason you would have to file chapter 7 bankruptcy, and given the fact you can potentially settle it for 4 to 5 thousand, I would not be a fan of bankruptcy for you. Not over what amounts to 5k.
Chase has not been a black list bank, like how American Express treats prior card members who default, settle for less, or who include their accounts in bankruptcy.
You will be able to settle your credit card directly with Chase,or with the collection agency they first place your account with. And likely for a good amount less than 50%. You will not want to settle too soon. The best settlement deals often come between 150 and 180 days late, and sometimes right after 6 months late. Read through the first stage settlement sections of the site to get a good understanding of how and when to settle direct with your bank.
I would recommend not having much money in any Chase checking or savings account until after your settlements are completed.
I also recommend reading through the last several critical reports I list here: https://consumerrecoverynetwork.com/debt-relief-program-reports/
Hello Mike,
Thanks for this super resource.
I just completed two five-year hardship plans–one with Chase at 6% for $8000 and and one with BofA at 4% for $16000. I probably could have gotten a better rate i f I’d known to negotiate or navigate the situation better as you discuss here. I was originally advised to consider bankruptcy as in my field–teaching and massage–income tends to be modest. However, I just was not comfortable with that option so I dug in. These were tough financial years as I worked to turn my habits and some challenging situations around.
I have one credit card remaining that I’ve been paying the minimum on–with Citibank, now at 10.9% with approx $17,000.
My goal is to eliminate this debt.
Besides paying the two other debts off, my financial situation is no better than it was.
My question: Would you recommend I call citibank to negotiate for a long-term hardship in order to improve the rate?
My credit is 700+.
Secondly, if Citibank closed (or even if not), I’d be looking to get a credit card to have some credit available as this seems important to maintain a decent credit rating. If you agree with that, would you suggest getting a new card before or after negotiating with Citibank?
Thanks for any thoughts on my situation.
Best,
Citibank is not likely going to reduce the interest rate much more than you have now. I could be too skeptical though. If you can make a good hardship impression, you may get them to go the distance, and even reduce your interest to half or less than what you have now. But some of that decision making is going to come from stuff they see about you on your credit report. And for that reason, I would try to get the interest rate reduction before applying for any other credit.
If you cannot get the interest rate reduced, apply as much of an aggressive debt roll up strategy to this last debt as you can. Keeping the account open would be the best thing for your credit now that two other seasoned accounts with Chase are paid and closed with no regular updates to your credit any longer.
How much over the minimum payment will you be able to make on average each month?
Mike,
Thanks for the response.
The total balance is actually $18000. The current minimum is $340.
After a very low point, I took a restaurant job at night to increase my income. I am on austerity/minimized budgets for just about everything else. I can handle right now $400/month. At this rate, it will take a very long time to pay off. I will call them tomorrow and make my very best case for a longterm hardship. And will hold off on any other credit pursuit until after that as you suggest. If I don’t get better terms, I will have to consider other options–balance transfers? settlements? loans? Thanks for your advice Mike. Again, I appreciate your response.
Let me know what happens after your call with Citibank and lets go from there.
Well, I did my best. I spoke with several people until I got the right department: Citibant Client Assistance Unit who deal with hardship programs and settlements. Their response: Unless I’d had a death in the family or some other traumatic incident, they would not consider–this is their policy– hardship or forbearance until I did not make a payment in full. They said call them after the next payment cycle if I did not pay it in full in order to be interviewed and discuss further.
So much for being proactive. In order to negotiate, I’d have to be vulnerable to getting hit with higher APRs, late fees and credit hit. And who knows what the negotiations with them would look like. Is this an incentive to stop paying in general and negotiate a settlement later? My options seem to be: 1. Status quo, doing all i can to keep up with payments while on austerity 2. Cut payment in order for them to negotiate some kind of hardship–i am very doubtful this would be longterm helpful after this first conversation 3. explore balance tranfers 4. cease payment short term and take the credit hits/calls etc looking at debt settlements months down the road while working and saving as much as possible. I have ten days to research aand contemplate the next step till the payment is due. Any thoughts? Thanks Mike. Despite the challenges, very glad to be moving forward on this and ending this cycle. Best
I would not call it a Citibank inspired incentive to stop paying and look for later affordable payment or settlement opportunities. I would more accurately describe this as bank policy to manage account holders who have life happen, but at a scalable level for Citi.
If you found a balance transfer offer be sure and calculate all costs, as the math may not add up to much long term benefit. And if you balance transfer, but later think of settling an unseasoned account whose balance is wholly made up of a balance transfer, those do not negotiate nearly as well as seasoned accounts with original creditors, or fist line debt collection agencies.
Let’s say you did want to settle the debt with Citi bank, as opposed to accepting one of the lower payment hardship plans they will likely offer after your first or second missed monthly payment. How much money can you put your hands on in the next 6 months (get creative, borrow from family/friend, sell a bike, etc)?
Mike, Thanks for your perspective. The challenge for me is that I have tapped many of those resources to pay off the two previous debts–sold car, staying extended periods at cut rates at friends’ and family’s places, getting fronted funds from family waiting on funds owed to me etc–and need the income I have to get my own place and move forward. I’ll brainstorm and talk to more folks and consider my options then lock in best I can. The main goal for me is to get a plan in place that I can manage so that I can focus on other important parts of life. Unfortunately, I still have this sick feeling when I think of the conduct of many of these financial institutions and am certainly compromised having conducted my finances in this manner.
You likely will be able to settle this for less than the balance owed after some time of non payment. Read through the first stage debt settlement sections of the site starting here: https://consumerrecoverynetwork.com/credit-card-debt-settlement-program/.
If you are not making payments, and the hardship payment options are not in the cards, saving up to settle for roughly half the balance, and as quickly as possible, is the next step to consider for many. You will learn two critical time frames and how to view them, when you read through the debt settlement sections. If you do not settle with Citi bank prior to 180 days non payment, you will likely be negotiating the account with a debt collector after that.
Hardship payment plans are fairly non confrontational, as you know. Debt negotiation is more of a pressure situation, but the pressure is what it is, and can be managed by getting informed, and keeping your eye on the ball (the amount you need to accumulate over time to finally settle the debt).
Hi Mike, I am caught in a bad situation through a business deal gone very wrong. I currently have 12 credit cards that I am paying now totaling about $130k, down from $155k. Total I pay per month is around $3k. I am only able to pay the minimum payment and have been on time each month for over 3 years now. However, with the CC payments as high as they are per month & no end in site, it is strangling the growth of my business. I am operating at about 85/15 debt/incime; with no cash flow to help my business grow I can only maintain. Another issue is that the credit cards are all personal CC’s & in my parents name, they went on the hook for me (although at the time we didnt know it was CC), alot of bad business was done without our knowledge. Anyway, I stuck with the business & am now stuck with the payment and no real end. A hardship plan has been a consideration of mine, but do you think that it will be enough? Or is Bankrupsy the best option? Any help or advise would great.
You have options if you are able to make those payments still. With your folks being the ones with the credit cards in their names, they are going to be a big part of the decision and implementation.
List the creditor names and approximate balances (round to the nearest thousand).
You could perhaps get the monthly payment down to 2700-ish.
You could settle these debts quickly, or at least some of them quickly, and others can be settled one by one over the course of as much as a year or two.
Your parents will be the ones filing bankruptcy. They may not qualify for chapter 7, but if they do, that is going to look real good. If they can only do chapter 13, lets compare settling with that.
Do your parents property? A regular income? Savings?
I look forward to helping you come to grips with whats next with all this, and moving on to a positive future.
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.
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)?
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…
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.
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.
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?
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
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
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).
…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!
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.
I am continuing my saga from https://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!
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.
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
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: https://consumerrecoverynetwork.com/credit-counseling-services-help-lower-credit-card-payments/
Is 670-ish a month out of the question right now?
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?
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.
When an account is written off what are the possibilities for preventing movement to a collections agency?
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?
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?
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.
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.
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: https://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.
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.
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.
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.
I have 5 credit card that they offered me a settlement ,but my problem is I cannot afford to make the payments on 5 different cards . How can I go about get all in one payment. I am divorced having medical issues and have been out of work . I have just recently gone to work par time and living with my family.
Any advice?
Marie – I am going to need more information to go on in order to offer the type of feedback you are looking for.
Who are the 5 credit card accounts with (who is collecting)? What are the balances and settlement/payment amounts?
Post your answers in a comment reply and lets go from there.
Can you give me an estimated payment if using a DMP to pay off approx $26,000?
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: https://consumerrecoverynetwork.com/credit-counseling-services-help-lower-credit-card-payments/. The last installment covers cautions about credit counseling.
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!
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 888-317-8770 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.
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.
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.
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.
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)?
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.
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?
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.
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: https://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: 888-317-8770.
When it comes time to look at any and all student loan options you can qualify for, check out https://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.
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?
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 888-317-8770 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.
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.
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.
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.
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.
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.
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?
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.
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
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.
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.
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.
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
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.
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
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.
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?
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?