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.
Michael,
I own a construction company and recently have had major Back Surgery. Long story short the Titanium Rod Broke in my back causing me to barely be able to move I found a specialist Dr. That operates out of NYU. I have been in severe pain and most of the nights and days I have been laid up in Bed. I had been working to schedule the required surgery. During the month of January My 27 year old son started feeling really sick so I took him in to Patient First where they discovered he was just a day from going into a Diabetic Ketoacidoucous Coma we spent 8 days in ICU were they found his blood sugar has been bad for a. Long time but diabetes was missed in many appointment. We finally felt better because we now knew with the proper medicine he could get better. Saturday February 4th ge had a dr appointment we overslept Saturday morning or so i thought i went in to wake him up and he passed away in his sleep. I am devastated and have be beyond words my Home Depot commercial citibank credit card $20,000 limit i have been devastated and need help if i can get on their Hardship program would help me more than i can say. Is there anyway you can help me? My name is Brian Madrid my cell phone is [edited} can you please call me oi let me know i would be so grateful.
Sincerely
Brian Madrid
I am so sorry for your loss Brian. I will contact you and set up a time for us to go over your finances and see if you can meet the monthly payment on a hardship plan with Home Depot.
Michael,
Thanks for your detailed analysis. It all makes sense – and doesn’t make sense – at same time. … I’m currently paying $1,600 a month on 18 credit cards and another $1,050 on a prosper loan $11,000 left from original $36,000 loan. So, counting prosper I’m paying about $2,700 a month, with about $1,000 per month interest. My total debt, including prosper, is $70,000 and we obviously are making no headway. I would like to pay my debts, and think I could, if I could freeze my accounts and work out reasonable payment plans. My wife and I make about $150,000 a year, but putting 4 kids through private schools and college has dug us a very deep hole. We have talked with national debt relief, and the only thing I don’t like is the idea of not making payments. I can’t deal with hourly calls and harassment. We have considered a refinance in our home, but we don’t have enough equity to pay off the debt, and I know what when you leave a few accounts unsettled. It sounds hopeless, I know. We have both taken 401k loans and used them to fix our house so we can either sell or refinance. It’s taken about $15,000 to get house up to its $111,000 appraisal worth. We have $50,000 left to pay on our mortgage. Any ideas?
Call in for a consult this coming week at 800-939-8357 ext 2. You can also email me at the same address you get this comment notification from (if you are a subscriber). We can a schedule a time on the phone through email.
hi michael, my husband and I hit hard financial times several years ago, but just in the last several months stopped paying our credit card bills. We could no longer afford them. I want to try to settle them. To date, I have not spoken to any of them but am approaching the 180 day mark in March. I have read how you should not accept the banks first offers, but when do you know when to accept? Citibank sent me an offer in the mail to settle with a lump sum or 3 payment plan at 40% of the balance of one of my cards. i never contacted them, they just sent me the letter. I called them and asked them if they would take a lesser amount if I paid it as a lump sum and they said that the 40% was as low as they would go. Should I accept the 40% or keeping trying for less. Also my other creditors who I have not reached out to yet are Bank of America, two Synchrony credit cards, two Chase credit cards, Navy Federal Credit, (Home Depot (also Citibank holder). The total indebtedness is about $70,000. Can you give me any guidance on the different creditors? Thanks for any help.
What are the balances on each account?
If you could get this all over with quickly, could you access the cash to settle fast?
If you are stuck saving monthly only, how quickly are you able to save up to pay the settlements?
Hi Michael,
I currently have 3 credit cards in my name that I had before my husband and I got married equaling roughly $20,600 Sadly our son has special needs and with the cost of therapy he needs 5 days a week and specialists along with keeping a roof over our heads, we can only make the monthly payments on these cards and its just becoming too overwhelming. I am current on all my payments and have never missed a payment ever and don’t wish to purposely miss payments.
We were denied a consolidation loan from banks and credit unions as my debt to income is terrible and my husband has roughly $50,000+ in student loans (currently in forbearance) and medical bill collections ($2,000) and unemployment that he now owes back ($3,000)
I have a credit score of the low 700’s and have considered bankruptcy as a last option but would rather not when my credit score is decent, but with the fact that we are stuck between a rock and a hold place, I’m not sure what I can possibly do to get out of this hole besides bankruptcy. I get advertisement from Lending Tree and other companies like them all the time in the mail but have heard horror stories about going with them and getting screwed (to say it nicely)
With the medical bills for our son, they will never go away and we don’t qualify for government help for medical expenses as they don’t factor in any credit card debt, car payments, car insurance, daycare as we are both full time employed. Not sure if really going through with a bankruptcy is the best option or trying to settle with the card companies themselves and explain all the medical bills are adding up, etc. Below are the cards, current balances, APR and max limit. Any advise would be greatly appreciated. Thank you in advance.
Balance APR Max Limit
Chase: $7117 15.74% $8,000
Wells Fargo: $6727 14.49% $10,000
Walmart Master: $6734 24.99% $7,800
Assume you could get the payments on $20,600 down to $391 a month. That payment will stay the same until all the balances are paid in 60 months or less. Is that payment workable long term (your income is consistent)?
What do all unpaid medical expenses add up to right now? Are there any major medical costs you can project will happen, and if so when?
I am currently 19K in debt. All credit card debt. I started missing payments after the birth of my daughter almost 3 years ago. Maternity leave didnt even kick in until I went back to work after just 8 weeks. I kept putting it off and letting the late fee’s add up (stupid of me). Now, I am really ready to face this and get this resolved before it creates any more damage. What do you suggest? I am willing to call every company up to get fee’s waived and total amounts lowered. Or would it be better to go with credit consolidation? Please help. Any advise is much appreciated.
Post the credit card banks and balances. I can provides some estimates and comparisons in reply.
Hi Michael,
I have about $15k in credit card debt and my monthly payment for all of them is $550. I’m having trouble keeping up with all of the payments at this point but haven’t been late. I’m going to have to start paying on student loans soon, which will make it impossible to pay that full amount. About half of my cards are maxed out, which has caused my credit score to drop significantly. Because of this, I don’t qualify for a debt consolidation loan which a decent interest rate (I wanted to pay off the maxed out cards- even paying more than the minimum due is not helping because the interest rates are high).. I looked into a debt management plan which would bring my monthly payments down to $400 (plus management fee). A family member told me to call each creditor and inquire about hardship programs, but it seems they are only for customers that fall behind with payments. At this point I’m not sure what to do. Any advice?
If you can afford the payment that the nonprofit credit counseling agency quoted, that is often now a better route to take than trying to get all your creditors to play along with a reduced monthly payment for the lifetime of the balance. Many banks are not offering direct to customer 60 month hardship plans anymore.
Be sure you can consistently afford the monthly payment. If you cannot, or are skeptical, I typically would not encourage going that route, as you would be spending money on an incomplete solution.
Along with hardship plans and credit counseling, I highly recommend you get informed about chapter 7 bankruptcy and also settling debts for less that what is owed. Once you have looked at how the math ads up for all of these options you are the best prepared to move in the direction that best suits your needs and goals.
Not all cards will offer this plan. First and foremost if a person is having a hardship often three or four months will not correct the situation, and you keep getting charged late fees even though pay the agreed payment no one will get ahead. I do not urge anyone to consider this option unless creditors are also willing to suspend or lower interest rates to allow consumer opportunity to get out of the hardship situation.
Hi Michael,
Will banks ever let you skip a payment due to hardship? I have a Wells Fargo credit card at 25 percent interest and haven’t been able to work much the past couple of months because of illness. The high interest rate and my reliance on the card out of necessity has made my monthly minimum soar.
I also hold checking and savings accounts with them.
Would it be better for me to request skipping a month, or just not pay and then ask for a hardship plan? How likely is it that WF will work with me, especially considering they know how much is in my other accounts? Thanks for any insight.
Wells Fargo is not one of the better banks at offering long term hardship. I would call and consult with a counselor and get a quote on what your monthly payment can be reduced to through a non profit agency. It’s a free call at 800-939-8357, ext 1.
What is the balance on the Wells Fargo credit card?
My balance is currently $7400.
You may be able to get the reduced to something like $140 a month through a credit counselor.
Thank you!
I owe 5000.00 to capitol one. About 1500 of that I would say is interest. I have been on a hardship program for the past three months sending in 50.00 per month. I called them to let them know that I cannot afford the 50.00 but would be able to send 20.00 a month. I am not working and have cancer and my funding for chemo has even not been extended for 2017. They told me that the 20.0o would not help and to not send it in but if I could pay the past due (about 500.0o or send 145.00 and then was told 93.00 it would not offset my being past due but would help.
I am contemplating two options, not to do anything and hopefully after a while they might be able to accept 1000.00 as settlement (which my sister is willing to give me) or offer them 75.00 a month for 60 months with no interest (if they would do this) and also to “reage my credit info)
what do you suggest. I can do one of the following only, 75.00 a month till debt over, or 1000.00 to clear it up or do nothing. I have about two more years before previous bankruptcy disappears from my record, if I do nothing with this charge my record will linger longer.
They will typically not be able to approve $75 a month for 60 months because that fall short of the balance by $500. I am not seeing Capital One do the 60 month plans at zero interest like other banks still may.
You cannot settle a 5k balance with Capital One for 1k. They just don’t approve settlements for 20%. You may be able to get them to agree to something around 40%, or a touch lower.
Nothing about your Capital One account should impact when your bankruptcy will fall off.
How would you suggest I go about asking about a settlement for 40% or less.
My lateness has already affected another small account I have (700.00 limit and I am at 646 with Amazon) They sent me letter today that they decreased my limit to 660.00 due to credit review.
Two sources for how to settle with Capital One would be reviewing the debt settlement article series (hit the debt settlement tab at the top), and this page about settling with Capital One.
Hello Michael,
I just read your article while searching for options. I have never been late on any payment. I have 6 credit cards that I can pay without trouble. Due to an “elective” medical procedure (it wasn’t really elective, just not covered by insurance), I took applied for a loan through Lending Club Patient Solutions. I was offered only 1 option: Comenity for a 24K revolving loan (credit card) at 0% interest for $1000 per months for 24 months. (The full limit of 24k was paid to my doctor for my medical procedure). That’s supposedly a promotional rate for paying the full balance in 24 months. BUT, the minimum payment IS the promotional amount, and when I called, they said that I had no option to pay a lower amount. I asked: “Why does it say that interest will be charged if the balance isn’t paid within the Promotional Period?” Can’t I just choose to pay a lower monthly amount that DOES have interest?” I was told:” I don’t know” and “No”. I was told: “If you send in a lower amount, a late payment fee will be assessed”.
Should I call back and ask to speak to another department in this case? I want to pay the bill, but after my medical procedure 3 months ago, I had complications. Instead of returning to work in a week, as I had planned, I have been unable to return to work at all. I’ve been on an unpaid Leave of Absence, and if I don’t recover soon, I may not have a job at all. Even so, my significant other will cover my expenses, it’s just the amount of this 1 monthly payment that is killing me financially. If I could pay them $400 or even $500 per month, I would be fine. I wouldn’t even mind if the interest added more to the overall debt, I just need to monthly payment to be less. Any advice would be greatly appreciated.
Thank you,
Amanda
Have you made any payments yet, and if so, hoe much have you paid?
Do you have a copy of the credit agreement?
Hi Michael
My husband and I have been struggling with credit card payments. I have 2 that I am about 3 months late on. Capitol One $3600 and Barclay $4600. My other cards are up to date. I was thinking of calling them for a hardship plan. How bad will that hurt my credit? I am already as stated 3 months behind and I have a bankruptcy still on my report. I dont know what my best option is. I just cant get ahead and with those balances I feel I will never pay them off.
After falling 90 days late, and if monthly payments are not something I am confident I can keep to, I would be prone to want to save up and settle the accounts. Partly because the credit damage is already done, but mostly because I want a solution that ends the monthly budget pains.
I have pages up about settling with Capital One and Barclays.
Hello Michael,
Another friend referred me to your site and I must say there are a wealth of useful information here. Basically, I would like to have an expert confirm my understanding before proceeding.Is it right that if I enroll in DMP: 1) I would be allowed to pay off early thru either bigger monthly payments or lump sum settlement. 2) With the lump sum method I can expect to usually pay around 35% of the amount still outstanding in the DMP program as opposed to original pre-DMP amount. For example, original amt owed was $10000. While in DMP it was brought down to $8000, so the 35% would be based on $8000. 3) when I settle with a lump sum does my credit score take a further hit or would it actually improve it since it’s acct paid off? Actually, how would the card companies report the lump sum payoff to credit unions, and are the terms the company use to report the payoff open to negotiation between customer and card companies if it is unfavorable to score rating. Can a customer obtain a more favorable reporting terms used in reporting to the credit unions?
I appreciate any expert advise you can give me. Thanks.
1. You can pay off your debt faster in a DMP. Many people do. It is not necessarily settling though. You are simply paying the full balances owed more quickly by using a bonus at work, a tax refund, or something similar.
2. No. You will not be settling anything for less while you are actively enrolled in a DMP.
3. Whether or not your credit bounces back from settling a debt for less than what is owed will vary from one person to the next.
You appear to mostly be talking about settling debt for less, and not about enrolling in a debt management plan with a credit counselor.
I compare the two debt relief options more fully here: https://consumerrecoverynetwork.com/question/how-to-compare-credit-counseling-with-debt-settlement-for-lower-monthly-credit-card-payments/
Your concerns about credit reporting suggest this article about how debt relief options impact your scores and access to financing would be worth a read.
Michael,
Thank you for your expert insights. I read the above link for the debt relief option comparisons. I am glad you went through the trouble of attaching this link. It’s incredibly informative and I am glad I was able to read it.
I think I will go with the DMP through a credit counseling agency. However, if you will I would like to clarify, or rather, confirm one point with you: Before starting a DMP and in order to obtain a better interest rate from the banks. It’s advisable to start the program AFTER one has fallen behind on 1 or 2 payments?
Thanks you so much.
‘
NO. I encourage you to start working with a credit counseling agency without missing payments! The credit counseling companies have preset deals with your banks. They can do things to get your monthly payments lower that you and I sometimes have to miss payments before we can do (if we can do).
Michael,
Thanks for your reply. In regards to answer #2:
“2. No. You will not be settling anything for less while you are actively enrolled in a DMP.”
Does this mean if for any reason later on I drop out of DMP, Debt settlement would still be an option to me? Of course, I am planning to stick with DMP to its conclusion. I am just trying to understand what the big picture is in case things get worse unexpectedly, I will know what other recourse will be there.
Thank you.
You can typically negotiate a settlement with a creditor that was in your DMP, but whom you stopped paying prior to completing it. That is fairly common.
Michael,
I owe several credit cards and am current on all of them but having a hard time staying current on payments specifically due to Chase’s high interest rate which is 25.24%. I really think falling behind on my payments is an inevitability pretty soon down the road. If Chase is willing to lower their interest rate then that would leave me with enough breathing room. I read about hardship programs on your site’s postings. So I was wondering if I could negotiate a hardship program with just Chase to get their interest lower’d. I also read some where that Chase could find out that I was negotiating with just them and not with the other credit card companies and would therefore refuse to negotiate, is this accurate? Would I really have to negotiate with all the cc companies just in order for Chase to negotiate? All the other cc are charging in the low 10’s interest rate and is manageable at this time. So, I really need only to have Chase lower its interest rate in order for me to remain solvent. Thank you very much.
It is not true, in my experience, that Chase will not allow you to lower your interest rate with them if you are not trying to do the same with your other accounts. And the same goes for settling with Chase for less, while keeping another account current.
You do sometimes have to fall behind with payments before you can have a productive interest rate discussion with Chase.
Hello Michael,
Due to an abrupt loss of the majority of my income source, please enlighten me on the following:
1. Chase around $30,000, Late on one payment and pretty soon a 2nd payment. 27% interest rate
2. At&t around $29,000. Never missed payment but about to. 17% interest rate
3. B of A. $5500. Never missed payment but about to. 13% rate
4. US Bank. $10000. Never missed payment but about to. 0 promo till Oct, 2017
5. Discover. $3000. Never missed payment but about to. 19% rate
6. Citi. $3600. Never missed payment but about to. 13% rate.
7. California bank and Trust. $7500. Never missed payment but about to. 12% rate
*All card accounts are under only my name.
My two considered options:
Option 1.
If I were to approach any card company with DIY lump sum settlement:
1. I have heard you could end up paying between 35-50% of the owed amount.. Realistically how much reduction should I be negotiating for? Or, going with a pro would yield a better result than DIY in my case.
2. Do I need to have missed payments before approaching them and if so how many missed payments.
3. Would I in anyway be able to have them not report negatively to credit bureaus. If so, how would I go about asking for this request. Or, in a lump sum settlement your credit score would be affected and if so to what extend.
Option 2.
Since I could still be able to come up with around $1200/mo to pay for the cards. How likely would I be able to get a 0% interest rate 5 yr long term hardship program with all the above companies.
My foreseeable financial future for at least the next 2 years would not change from my current predicament. As of right now, combined with my wife we are grossing $3100/mo, but this income is shaky and could take a big hit as well. We don’t have to pay rent only the other usual bills and necessities of life.
Option 3.
The s**t hits the fan and I file for bankruptcy. I don’t own a business so which bankruptcy would afford the best protection for personal/real assets. I live in California and in the event credit card companies sue me to come after assets. I have only 2 old cars under my name. However, my wife does solely own 2 condo rentals acquired DURING our marriage free and clear. CA being a community property state, I heard my wife’s properties could be liened upon or even sold thru court judgement to satisfy my above personal card debts, is this accurate?
Thank you for your kind guidance.
1. Fill in the talk to Michael form in the right column. When I see that I will email you to set up a time to connect on the phone. I will want to get a feel for your ability and inclination to negotiate. There are times where the outcome is better with a pro, but the flip side of that can be true too.
You absolutely need to be late with payments in order to settle for the best rates. How late can vary from account to account. More often than not, 5 or more months late is the baseline.
There is no way to do debt settlement without hurting your credit. How much credit score pain you will experience will vary from one person to the next. Assume you will not be able to get any credit until after all of your settlements are complete.
2. It would be unlikely to get 0% interest with all of them. Chase is the most flexible out of your list, and Discover the least.
3. You should talk over your situation with an experienced bankruptcy attorney in California. Are you living in one of the condos? What is the value on that one?
I can cover more of your exposure if a collection suit is filed when we speak on the phone. I think you heard or read something that has confused this a bit.
Ok. Michael I will fill out the Talk to Michael fields and look forward to connecting with you. Thank you so much.
It was good to talk with you on the phone this morning David. Let me know how things go after talking with the credit counseling agency, and what the monthly payment quote is on the DMP.
Hi Michael,
I’m about $40,000 in debt right now and only make that much for my annual salary. About $23,000 is with credit cards and the rest are personal loans I took out with the credit union, Upstart and Borrowers First. I regret taking those out now since they don’t have hardship programs at all. After paying them, my car payment, rent and other necessary bills, there’s literally nothing left for the credit cards. I can’t even afford a hardship program with all of them. I’m in one with Chase, but that’s all I can afford. Comeniry is calling telling me to have my lawyer call them. I don’t know if this is legal or a scare tactic. I don’t qualify for debt consolidation. I also can’t file bankruptcy because my dad cosigned my car loan. I feel stuck with no options, and am afraid at some point the credit cards are going to sue me. I have nothing they can take so maybe I don’t need to worry?
You can file for chapter 7 and still make your auto loan payments so that your Father’s credit is not hurt by it. Talk with an experienced chapter 7 bankruptcy attorney, and if you learn something that would prevent you from filing, fill in the talk to Michael form in the right column and I will email you to set up a phone consult. We can then look at what settling with the credit cards and personal loans will look like.
Hi Michael,
Can you please explain the capital one hardship program and how it can affect your credit score. I was told that after 4 months of on time payment, the credit rating will revert back to R1 status. Any information on this program would be appreciated. Thank you.
Are you more than 30 days late already? By how much? Did Capital One tell you they would reage your account and bring it back to an R-1?
Hi Michael, I am currently considering “debt settlement” with National Debt Relief (Freedom Debt Relief); however I have a few concerns about moving forward…I currently have approximately 50K in credit card debt over 5 credit cards (this is in addition to my normal life expenses as well as monthly payments to my Ex-husband). I am not behind on any accounts to date but things are extremely tight and I desperately need to increase my cash flow! I have recently been laid off but I am receiving severance pay until the end of Jan ’17. I have an ok credit score of 730. I am concerned about letting my accounts, which have always been in good standing default in order to move forward w/ the debt settlement process (as suggested).. I am also concerned about the potential tax implications that I’ll face in regards to the forgiven debt (I believe I will be solvent, which means tax plenaties for me when each debt is settled). Is there any advise that you can offer me as to how I should proceed? Thanks!
Post an outline of who you owe, the balances, and interest rates on each credit card. I can offer a detailed outlook in reply.
Michael,
Does it hurt my chances of settling a debt later if I have accepted a hardship plan and later can’t make the hardship payments?
Generally speaking, no, you can still settle later on, and sometimes you are setting yourself up for better success this way. But who is the creditor at issue?
Synchrony Bank
There is not much point to a hardship plan with Synchrony if the intent is to settle the account with them later.
Synchrony rarely offers life time of the balance hardships, so you are looking at a short term payment plan.
Hello Michael. I am wondering if you know of any debt management companies that will work with Lending Club. I have a $30,000 loan at 26% , which I took out to care for my grandmother. I had no other options at the time. I am hoping to get the interest cut in half , and found not alot of places will accept Lending Club. Thank you- Vicki
It is not the credit counseling agencies that don’t work with Lending Club, it is that Lending Club will not work with them.
I often recommend settling with Lending Club if you cannot make the minimums. Can you pull together 12k in 10 or so months somehow?
I think I could, but it really doesn’t seem like they will settle. Thank you for the advice.
People settle Lending Club loans every day. It never seems like a lender will settle at the beginning.
Do you want help with this one? If so, call in for a consult at 800-939-8357, ext 2.
Hi Michael, wonderful that I can present my problem in writing after all the research reading I’ve been doing. I’m 77, only have $823 social security and part time nanny job. I have asthma and serious back problems. I enjoy working but am limited. Michael. My credit card debt is over $5000 with $30o minimum total monthly payments. My score is 750 ish but list my roommate who was paying $600 towards $950 rent plus utilities. I’m really scared, and need to stop paying. Please tell me about the absolute reasonable way to accomplish this. Thank you so much Michael.
Stopping payments is as simple as removing any ACH or auto pay authorization. You could explain the hardship you have going on if you like, but it is not necessary if you are not looking to establish some form of lower monthly payment right now.