Help, Credit experts! What do you do with THIS real case?

Question

The person who came to me for help: $40K income, healthy, in debt US$140K (yes, one hundred forty thousand dollars) ($60K student loans in forbearance, $7K auto loan, the rest unsecured debt: $50K is maxed out credit card debt, mostly at default 30+% rates and the rest is loans from friends. About $1K in tax liability.). Some debts are freshly (30 - 60 days) delinquent, but none has gone to collections yet. No previous BK, charge-offs, collections or judgments. All 3 Credit reports have no serious errors, FICO scores unknown. Person is motivated, has already shown me recent credit reports and bills, cut up credit cards, developed detailed list of assets (car + $3K in illiquid assets + $1K cash) and liabilities, and is writing a monthly budget.

What do you advise?

Is the Consumer Credit Counseling Service Debt Management Program the best solution? What are your successes or failures with the CCCS DMP? Costs and benefits? Please answer the questions I've asked. Thanks.

Answer 1

I have never had a client of mine successfully complete one of the debt consolidation programs. I have seen these companies take money from people, not negotiate debts for them, and generally ignore the consumer when they get sued on the bad debts. These debt management programs are the same thing as filing a Chapter 13 bankruptcy, except with bankruptcy you have laws protecting you against creditors and you can be sure you aren't throwing your money away. You have no protection when dealing with debt consolidation companies. It's a huge risk.

Since this person has a regular income, he/she is a good candidate for Chapter 13 bankruptcy. After 3-5 years paying into the Chapter 13 plan, the unpaid unsecured debt will be legally discharged. It will be no harder on their credit reports and score than negotiating debt through a debt relief agency.

Answer 2

This situation sounds awful...it's an indictment of our credit system that this person was enabled to accumulate $50k in revolving unsecured credit. As far as I'm concerned, Bankruptcy is the best option to get out from under this crippling debt.

Realistically speaking, the current debt will take AT LEAST 20 years to pay back...it's crippling. The best bet is to file BK, get the unsecured debt removed after 3-5 years, and then pray that the expensive education ($60k) will someday result in a job that has a decent income.

Answer 3

Sounds like a duplicate non-firing handgun, proper? The the very first thing she demands to do, such as you stated, is take it again and ask for her a reimbursement. Depending upon wherein she lives, even an "as-is" signal does not always fly. Perhaps you will have to pass along with her? If they decline to do ANYTHING to support her, she could also be out the money. You might dossier swimsuit in small claims court docket, however relying upon the pass judgement on, she might simply get a rapid "caveat emptor" and a abstract dismissal. The something you CAN do, nevertheless, is inform your entire peers approximately how this lady was once offered anything that was once fully undeserving (and hazardous) for the use the vendor represented. Your buddy received suckered, undeniable and practical, whether or not deliberately or now not. That's one of the most motives I am by and large uncomfortable purchasing anything from a pawn keep till and until I've visited a number of occasions and gotten to understand the employees. There's one on the town that I revel in touring each and every so probably, while a pair which are out in Myrtle Beach, SC scare me... Not the least rationale of which is they use sexual innuendo of their promoting (D1ck's Pawn, and you'll suppose the innuendo they use...) And sure, I might STRONGLY advocate that you just discuss with the pawn keep WITH her while she is going again. There's consistently a threat that the salesman noticed a lady and notion he might break out with promoting the copy as a truly gun. If so, smash his day.

Answer 4

It sounds like the person understands what they need to do to change their spending patterns and reverse their current situation, so CCCS may not be their best option. CCCS will show up on their credit bureau report and can lower their FICO score However, if they are unable to keep up with current minimum monthly payments, CCCS can help them negotiate lower minimum payments. Unfortunately, many credit card companies won't negotiate minimum payments or lower APR rates on the accounts unless the account is delinquent, which will harm the person's FICO score. It's worth a shot for the person to contact each creditor directly, explain their situation, and see if any are willing to negotiate changes in minimum payments and APRs.

Good luck to them!

Answer 5

I would go with CCCS. I used them several years ago and was debt free in 36-months. They are a free service and will work with the lenders to lower both the monthly payments and the interest rates.

The only down side is that the accounts will show as "Included in credit counseling" on the credit bureaus and this will make it hard to get approved for additional credit. But if your are in credit counseling you have no business trying to get additional credit.

Answer 6

Just a note on one aspect of this... the studet loan lender will most likely not accept a change in terms offer from a CCCS... I can tell you that. They may send the form to the lender but they will send a rejection letter. If the CCCS does not take note of the rejection letter and sends what they feel is their acceptable offer on amonthly basis... the student loan will fall behind and can turn into an additional mess for the borrower.

Answer 7

CCCS might be the best option, but first I would call all these people I owe debt to and try to get better terms, before they go delinquent, with a deal you might be able to keep that off your credit record. at least until they get out of the hole. stretch you student loans to 20 years. Keep payments current and work at paying off one card at a time. God luck

Answer 8

I would never recommend a counseling program. Those places just charge you to lower your rates and pay your bills for you with your money. They can hurt your credit as bad as a bankrutpcy.

You can do it yourself with a little discipline. I would suggest credit repair. Learn all you can about it. Start at the site below.

Answer 9

Well...................bankrupty is not a bad deal,