Wells Fargo Foreclosure – Should I Keep Paying Citi Discover and HSBC Credit Cards
hi michael,
thank you very much for the quick response and i am happy to follow your instructions to start a new post! i have pasted my scenario and questions over (below).
i’m at a crossroads here. i lost my job in mid-october last month and am collecting unemployment insurance benefits (very grateful!). i owned a home, but let it go into foreclosure earlier this year because i truly couldn’t afford to keep making mortgage payments (and the house was underwater, i should add). i tried four times to negotiate the payments and my lender, Wells Fargo, lost my paperwork EVERY time and only took me halfway seriously when i just flat-out stopped making payments. at that time (in april), they offered a $50 payment reduction per month! (my mortgage was $1250.) i gave up. i told them i was letting it go, they put the house up for auction october 23rd, nobody bought it so they bought it back (or took full possession). that’s done. my credit is in the crapper, and i accept it.
back to my current situation – i owe a total of about $8000 on three credit cards. prior to losing my job, i paid more than the minimum on each of them. now i am struggling with just paying the minimum and feel like letting them go. my credit is already ruined. should i really keep trying to pay these cc’s off??? i have no idea when i will be re-employed and am certain i will not make my former salary.
should i contact the cc’s and try to settle my payments, explaining my unemployment and also foreclosure of my home? i have next to no money to use as settlement. i couldn’t even pay $1000 right now if (as a collective) they agreed to $1000 settlement on $8000, which i’m assuming is laughable anyway.
can you provide any advice? here are the balances on these cards and APRs:
Citi = $4000 at 0% (that was a 24-month rate due to go up in january 2013 to a rate similar to below)
HSBC = $2750 at 19.99%
Discover = $975 at 22.99% (was 0% up until this month, when the introductory rate expired)
i am at about 97% maxed on the three cards combined. feel like i’m being swallowed.
thanks again,
erina
should i really keep trying to pay these cc’s off?
—erina
Deciding what to do with credit card debts that you can no longer afford after a foreclosure should start with consider what exposure you may have to any debts associated with the home you gave back to Wells Fargo. If there is any outstanding debt owed to Wells Fargo after they took the home back that can impact how you will deal with Discover, Citi bank and HSBC.
Deficiency balance owed to Wells Fargo after a foreclosure on underwater home.
By how much was the home underwater. What did you owe on the mortgage (including any second mortgage or HELOC)?
Were there property taxes still owed and outstanding on the property at the time Wells Fargo foreclosed?
Were there any other debts related to the home outstanding? Id so, who were the debts owed to and what are the amounts?
What state do you live in? Did Wells Fargo foreclose through the courts or through a non judicial process? What date was the foreclosure sale where Wells took the home back?
If you can answer those questions I would be better able to give more than the below general feedback that considers any deficiency balance that could be owed to Wells Fargo resulting from the foreclosure.
What to do about credit card debts with Discover Citi and HSBC
With a fixed and limited income from unemployment benefits, I will sometime suggest people consider doing nothing about unaffordable debts until you are back to work and can better put pencil to paper to establish a settlement strategy to deal with unpaid credit card debts. But lets do an exercise first.
Calculate all of your current monthly expenses (rent, food, utility, gas etc). What is that total? What amount is left after necessities are paid for?
Using the balances you gave for your Discover, Citi bank and HSBC credit cards, I came up with a reduce lower monthly payment of 154.50 if you were to enroll in a debt management plan. Because you are unemployed, with a recent foreclosure and in a really tough spot that would be easy to outline, you may be able to get your monthly payments on the credit cards down to about 139.00. Does this type of payment sound feasible?
What if a debt management plan cannot get your monthly payment low enough to afford?
Settling your Discover Citi Bank and HSBC credit cards.
Lets make some assumptions about settling with your creditors. Below is what I would estimate you would need to come up with to settle with each specific creditor.
Citi bank currently settles credit card debts in first stage collection at about 45% of the balance.
Discover credit cards can be settled in first stage collection at between 40 and 50 percent.
HSBC (depending on the type of account – was yours taken over by Capital One) can settle at 40% in first stage collection.
The above estimates can be impacted by a myriad of things. You can learn more about concerns for trying to settle certain accounts by reading: Accounts to include in debt settlement
Lets round up and say you need to come up with about 4k to settle your credit card debts in the next 6 months. You said you cannot come up with 1k now, but if you are current with your credit card payments, or have just fallen behind, you do not have to have the 4k now. Even if you did, you cannot settle debts too early with any of the credit cards you have.
Is it feasible for you to come up with 4k in the next 6 or so months to settle the credit cards with Citi bank, HSBC and Discover? If not, how long would you project it would take to come up with that amount?
Foreclosure and credit card debts in default lead to bankruptcy
I asked the foreclosure related questions above because the answers may suggest filing bankruptcy even if you can afford the 140.00-ish a month on the debt management plan, or can raise 4k in under a year to settle the credit card debts.
If there is any debt overhang resulting from the Wells Fargo foreclosure, and you are as tight as con be on money each month while unemployed, saving up for bankruptcy instead of paying credit cards may be the “common cents” thing to do.
Thanks for starting the new page with your comment from the other post. If you can answer my above questions in a comment reply below I will have more feedback and can offer additional things to consider.
Anyone dealing with a similar set of circumstances is welcome to post questions, concerns and participate in the discussion using the comment box below.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
thank you SO MUCH for your thoughts, michael! you are doing a great service here to so many people who are struggling and afraid. i really appreciate you. i’ll contact the counselor, per your advice. it certainly can’t hurt. you’ve give me a little peace of mind about what my options are.
thanks again!
Erina – Your welcome. The program with a credit counseling agency will not be one where you are settling with Citi, Discover, or Capital One. If the monthly payment is one you can afford, it will pay off your debt. No collection calls, no risk of lawsuits, no real credit score damage etc. They can fill you in on the details.
I am glad that I was able to give some piece of mind. You are where you are at right now. It wont stay that way. No matter what though, you do have answers and solutions to the financial part of your current situation.
If you have additional questions later, pop in and post them on this page.
hi michael,
thank you for posting my question. i will try to answer your questions as best i can below, as follows:
– the home is located in Oregon and has a current estimated value of $163,000
– i bought the home in august 2009 at $189,900
– i stopped paying my mortgage in 11/2011 (last payment was made in 10/2011). at the time, i owed about $180,000
– Wells Fargo put the house up for auction at the county courthouse steps (that’s my understanding, but i don’t fully get the process) on 10/23/12; they set the price at $194,310 and nobody accepted that minimum bid so it stays with them.
– as of 6/2012, i owed around $10,000 in default mortgage payments (that was my last official letter with numbers laid out)
– in 7/2012, i told Wells Fargo i had completely vacated the home and they were free to take possession
– my monthly mortgage was $1250 (including mortgage insurance, home insurance, and property taxes (which were $1700 annual)
– i had no HELOC or any other debts tied to the house
i would also like to add that i do have a car loan which i still owe about $10,700 on. if i declared bankruptcy, i would be worried my car might be repossessed.
i get the maximum for UE insurance in Oregon which is $441 (net) per week. my bills per month are about $1200, not including the cc debt. i moved back in with my mother who has been very kind, not charging me any rent though i do pay some utilities which are included in my bills amount above.
there is one credit card i did not include with the other three. it is recent as of october (GE Capital) with a maximum $500 limit, which i used to help cover vet expenses for my cat. in fact, i spent close to $2000 (all cash except $500 on that card) in total to save her life (which i don’t regret) and that all happened right before i lost my job. it would be a different story if she became sick today, sorry to say. i have 0% interest on it for the first six months, so i thought i’d pay the minimum $25 until the APR goes up (to 19.99%) and then pay off the balance in march or april when it’s $350.
by the way, did receive a notice from HSBC a couple months ago that they were taken over by Capital One.
as far as rounding up $4,000 over the next six months? i don’t think i can unless i am gainfully employed and bringing home at least $2200 net. i COULD pay $140-ish per month on a settlement plan.
i have heard filing bankruptcy costs somewhere around $2000+ with attorney fees, but have not looked into it. my brother recently had to do this (his cc debt was 9x mine and he has a family of 4 to feed as the sole breadwinner versus just little old me!). he does not think my cc debt is bad enough to merit bankruptcy.
with more information here, what are your thoughts? thank you again for reviewing my “case”. 🙂
Erina – Thanks for the additional details. They help to paint a clearer picture. Your ability to come up with the roughly 140.00 per month to pay Citi, Discover & HSBC (now owned and serviced by Capital one) means credit counseling as an option is open to you. You can call a credit counseling service and get that monthly payment estimate down to the penny at 888-317-8770. The call is free. Just be ready with an outline of your bills.
I am with your brother on trying to avoid bankruptcy when dealing with smaller debt loads. You only get to play the chapter 7 bankruptcy trump card once every 8 years. Holding back from that when an alternative is workable makes sense. My concern will be any debt overhang from the Wells Fargo foreclosure. If that debt were to stalk you to the point of being sued, unless your income has increased, bankruptcy would start to make more sense in order to kill off the foreclosure deficiency and Discover, Citi and Capital One too. You can certainly cross that bridge later.
I would encourage you to start with a call to the toll free number I gave. Get a comprehensive view of what that plan looks like. If you have questions after that please post a follow up comment.