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.
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?