Short answer
A bank hardship plan lowers your monthly payment by cutting your interest rate. Banks generally only offer one once you have fallen behind, approval depends on your income and expenses, and a single missed payment usually ends the lower rate.
Key points on this page
- The lower payment comes from a reduced interest rate, typically as low as zero percent and rarely above ten.
- Temporary plans run about 3 to 12 months. Long term plans close the account, freeze the rate, and amortize the balance into the same payment every month over 60 months, which federal regulations generally cap at 5 years.
- Warning: calling your bank about a payment reduction while you are still current telegraphs that you are at risk, and can get your credit limit cut to the balance or the account closed. Save this for accounts you are already late on, or know you soon will be.
- Approval is not automatic. Expect questions about income, rent or mortgage, utilities, phone and groceries. Having too much money left over can disqualify you just as easily as having too little.
- After 3 or more timely payments some banks re-age the account and report it current, which takes the sting out of earlier late payments. Many will not re-age once you are 3 months late, so set this up before 90 days of nonpayment.
- These plans are inflexible. Payments are pulled electronically on the same day each month, and one failed payment usually ends the benefits, so keep a cushion in the account. Smaller banks, credit unions, store cards and fuel cards often will not offer a plan directly, but will accept one through a credit counseling service. No hardship letter is needed.
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.
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.