Credit card debt not paid on in a year, repayment plan options?
July 23, 2014 10:21 AM Subscribe
Large CC debt ignored for nearly a year, going to call all collectors tomorrow to try to get a payment plan. Tips?
It's a long story, but my I accumulated about $28k in credit card debt over four cards. We had a serious issue with a new house we bought that put about $20k of it on there. I was also starting a new business that is still going well and is beginning to finally turn the corner (two years in). My wife and I both work for the business. Anyway, I stopped paying on the CCs about a year ago in August. At first it was just a "gonna pay them late" thing as we have been pretty short on money, then it stretched onward and finally this past month I've snapped out of my denial and thought to myself "what have I done!?" I always had good credit till I ruined it with this. I know how stupid this is and I've learned a lot about facing challenges head on from coming to terms with this one.
Anyway, these cc debts have long ago gone to collectors. They called a ton for several months. Some calls still come in. I had ignored it all.
Having snapped out of this foolishness, I am prepared to call them all tomorrow to get back on track. We have not received any court orders or anything like that yet. We do not have the cash to just settle and pay the debts off at the moment.
We could however probably pay up to several hundred dollars a month toward them, collectively.
Does it seem realistic to expect the debt collectors to agree to a payment plan at this late stage? We would stick to it as we've really begun to take this seriously.
In the future, say, in a year or so, we could be able to settle and clear these away.
What should I do when I call? My main objective is to get into payments and divert any oncoming court actions if possible. I don't want to pay more than I have to per month but I do want to satisfy the collectors to the point that they agree to a plan.
Any tips as I head into this?
It's a long story, but my I accumulated about $28k in credit card debt over four cards. We had a serious issue with a new house we bought that put about $20k of it on there. I was also starting a new business that is still going well and is beginning to finally turn the corner (two years in). My wife and I both work for the business. Anyway, I stopped paying on the CCs about a year ago in August. At first it was just a "gonna pay them late" thing as we have been pretty short on money, then it stretched onward and finally this past month I've snapped out of my denial and thought to myself "what have I done!?" I always had good credit till I ruined it with this. I know how stupid this is and I've learned a lot about facing challenges head on from coming to terms with this one.
Anyway, these cc debts have long ago gone to collectors. They called a ton for several months. Some calls still come in. I had ignored it all.
Having snapped out of this foolishness, I am prepared to call them all tomorrow to get back on track. We have not received any court orders or anything like that yet. We do not have the cash to just settle and pay the debts off at the moment.
We could however probably pay up to several hundred dollars a month toward them, collectively.
Does it seem realistic to expect the debt collectors to agree to a payment plan at this late stage? We would stick to it as we've really begun to take this seriously.
In the future, say, in a year or so, we could be able to settle and clear these away.
What should I do when I call? My main objective is to get into payments and divert any oncoming court actions if possible. I don't want to pay more than I have to per month but I do want to satisfy the collectors to the point that they agree to a plan.
Any tips as I head into this?
You could consider a debt management program, under which someone else (a repeat player that doesn't have a dog in the fight) does all the negotiating on your behalf so you never have to actually deal with it. Greenpath helps you create a budget for free and if you decide to use them, the monthly fee is pretty low. It's not a consolidation loan, they actually get the payments reduced and interest stopped accruing. It's worth a call.
posted by janey47 at 10:54 AM on July 23, 2014 [4 favorites]
posted by janey47 at 10:54 AM on July 23, 2014 [4 favorites]
My experience, both as someone who's dealt with credit card debt and someone who's worked for credit card companies, is that they'll be totally willing to work with you at this point. If the debt is still owned by the originating company, they still want money. If it's been sold to a third party, they also want money, but will probably be a lot more willing/able to negotiate than the original company.
So figure out how much you owe, and to whom. Pull a credit report and figure out what's what. Then call and ask if you can talk about a repayment plan. Ask what they'd want to mark the debt paid in full--some years ago, a c/c company said, ok, you owe us $x, but if you pay us $.5x in the next [sixty days, say], we'll mark it as paid. This is especially common with third party collectors, who've generally bought your debt for less than half of the face value. If you can eliminate one or two debts through doable lump sum payments, it might be worth delaying on the others for another month--still call, and say "I can make my first payment on [date]."
Ask if they can forgive interest/late fees if you agree to automatic withdrawls, or if you stick to your payment plan for a specified period of time. If you go on a payment plan, ask them to lower/freeze your interest rate while you're on the plan. These are both things that happen easily--I was a front-line call centre rep, not even in collections, and I could do some of this stuff. Ask if your account can be marked as current after a specific number of payments, which will help pull you out of your credit score tailspin.
I suspect you'll be surprised by how willing companies are to work with you at this point. Calling, being polite, and saying that you'd like to try to make it better goes a remarkably long way.
posted by MeghanC at 11:09 AM on July 23, 2014
So figure out how much you owe, and to whom. Pull a credit report and figure out what's what. Then call and ask if you can talk about a repayment plan. Ask what they'd want to mark the debt paid in full--some years ago, a c/c company said, ok, you owe us $x, but if you pay us $.5x in the next [sixty days, say], we'll mark it as paid. This is especially common with third party collectors, who've generally bought your debt for less than half of the face value. If you can eliminate one or two debts through doable lump sum payments, it might be worth delaying on the others for another month--still call, and say "I can make my first payment on [date]."
Ask if they can forgive interest/late fees if you agree to automatic withdrawls, or if you stick to your payment plan for a specified period of time. If you go on a payment plan, ask them to lower/freeze your interest rate while you're on the plan. These are both things that happen easily--I was a front-line call centre rep, not even in collections, and I could do some of this stuff. Ask if your account can be marked as current after a specific number of payments, which will help pull you out of your credit score tailspin.
I suspect you'll be surprised by how willing companies are to work with you at this point. Calling, being polite, and saying that you'd like to try to make it better goes a remarkably long way.
posted by MeghanC at 11:09 AM on July 23, 2014
I actually worked with Greenpath (which janey47 mentions above) about 10 years ago, and it was very helpful, though I hadn't gotten to the collections point.
Though they charge a monthly fee if you end up using their debt management services (for me, it was much less than the interest they saved me, so I still came out ahead), you can get free counseling, and they can help you figure out your options and coach you on how to talk to the credit card companies if you want to try to negotiate on your own. I found negotiating on my own to be extremely frustrating, but I think the companies are more willing to work with people who have already missed payments, so perhaps you will have better luck.
posted by ktkt at 11:36 AM on July 23, 2014 [1 favorite]
Though they charge a monthly fee if you end up using their debt management services (for me, it was much less than the interest they saved me, so I still came out ahead), you can get free counseling, and they can help you figure out your options and coach you on how to talk to the credit card companies if you want to try to negotiate on your own. I found negotiating on my own to be extremely frustrating, but I think the companies are more willing to work with people who have already missed payments, so perhaps you will have better luck.
posted by ktkt at 11:36 AM on July 23, 2014 [1 favorite]
What jurisdiction are you in?
Do not agree to do anything in a phone call. Be sure to get everything in writing.
Collections agents are generally willing to work with you if you are willing to negotiate - they would rather get something than nothing. If you find that they are being difficult, try telling them that you are considering bankruptcy. It will really get their attention. $28K is enough debt that bankruptcy is credible option. That puts you in the position of being able to ask, "Would you rather accept a sixty percent settlement or zero per cent from a bankruptcy?" "Would you rather accept a series of installment payments or nothing whatsoever from a bankruptcy?"
Good luck. You WILL get through this.
posted by Multicellular Exothermic at 1:31 PM on July 23, 2014
Do not agree to do anything in a phone call. Be sure to get everything in writing.
Collections agents are generally willing to work with you if you are willing to negotiate - they would rather get something than nothing. If you find that they are being difficult, try telling them that you are considering bankruptcy. It will really get their attention. $28K is enough debt that bankruptcy is credible option. That puts you in the position of being able to ask, "Would you rather accept a sixty percent settlement or zero per cent from a bankruptcy?" "Would you rather accept a series of installment payments or nothing whatsoever from a bankruptcy?"
Good luck. You WILL get through this.
posted by Multicellular Exothermic at 1:31 PM on July 23, 2014
Agree with ktkr and jamey47; working through/with a credit counseling non-profit is a great idea. The National Foundation for Credit Counseling (NFCC.org) is the best source to find trusted local (or Internet-based) credit counseling services. Please be sure any credit counseling agency you select has an A/A+ rating with the Better Business Bureau and that they are an accredited member of NFCC.
(For background, several years ago I was in IT support for the US Trustees, the agency of the U.S. Department of Justice responsible for overseeing administration of bankruptcy cases and private trustees. At the time I learned a lot about credit counseling and debt management.) Credit collection agencies really make things difficult for consumers; you can get a highly qualified expert to assist you in dealing with them. Credit Counseling agencies can help you negotiate with the proper people yourself, and/or set you up with a low cost debt management plan where you pay the agency and they pay all your debts. FWIW, one agency in Minnesota charges $25/month for that plan.
posted by apennington at 1:49 PM on July 23, 2014 [2 favorites]
(For background, several years ago I was in IT support for the US Trustees, the agency of the U.S. Department of Justice responsible for overseeing administration of bankruptcy cases and private trustees. At the time I learned a lot about credit counseling and debt management.) Credit collection agencies really make things difficult for consumers; you can get a highly qualified expert to assist you in dealing with them. Credit Counseling agencies can help you negotiate with the proper people yourself, and/or set you up with a low cost debt management plan where you pay the agency and they pay all your debts. FWIW, one agency in Minnesota charges $25/month for that plan.
posted by apennington at 1:49 PM on July 23, 2014 [2 favorites]
check out careonecredit.com. i worked with them and they were great. a credit counseling/debt consolidation agency is really the way to go. you pay them a monthly fee and they just deal with it for you. the fee is really worth it (as long as it's not redonk. ours was like 45$).
posted by misanthropicsarah at 3:05 PM on July 23, 2014
posted by misanthropicsarah at 3:05 PM on July 23, 2014
Get a copy of How to get out of debt, stay out of debt, and live prosperously
It's not a very long book. You should be able to read some of it before you start calling tomorrow.
And then, yes, call them. They will be happy to work with you. Be polite, be respectful, be honest, be cooperative. They may have constraints on how flexible they can be. So, write down how much per month in total you can pay, make a list of your debts and start calling. Try to keep the total within what you can reasonably afford.
They deal constantly with people they had to track down who are also trying to avoid them, lie to them, you name it. If you are honest and cooperative and making a good faith effort, you may be the highlight of their day. I have had some arrangements on several debts after they went to collections and anytime I have talked on the phone with them, they have been more than gracious.
posted by Michele in California at 3:58 PM on July 23, 2014
It's not a very long book. You should be able to read some of it before you start calling tomorrow.
And then, yes, call them. They will be happy to work with you. Be polite, be respectful, be honest, be cooperative. They may have constraints on how flexible they can be. So, write down how much per month in total you can pay, make a list of your debts and start calling. Try to keep the total within what you can reasonably afford.
They deal constantly with people they had to track down who are also trying to avoid them, lie to them, you name it. If you are honest and cooperative and making a good faith effort, you may be the highlight of their day. I have had some arrangements on several debts after they went to collections and anytime I have talked on the phone with them, they have been more than gracious.
posted by Michele in California at 3:58 PM on July 23, 2014
Not a specific suggestion but rather a link. Are you familiar with Michelle Singletary, personal finance columnist from the Washington Post? I love her stuff and can't recommend her enough. She even has a weekly chat where you can post questions like this and get her free expert advice. (Of course, AskMeFi is pretty great, too!) Here is a recent article on getting rid of debt: her tone is serious but advice is well-intentioned. Good for you for taking this first difficult steps and best of luck making it happen!
posted by smorgasbord at 5:11 PM on July 23, 2014
posted by smorgasbord at 5:11 PM on July 23, 2014
I would call a consumer debt advocacy organization for advice. In my jurisdiction, various Bar groups have them.
IANYL TINLA, this is not my area of law.
For example, you should find out whether, in your jurisdiction, it makes sense to be more or less proactive about this. The damage to your credit is done. Will the credit card companies be more inclined to slash your debt in private negotiations with you or in courtroom negotiations (with your advocate?) This could come down to a very local question and you need local expertise for your answer. In New York City, there are specific consumer debt courts, generally fairly consumer friendly, and credit card companies who do bring suit have a strong incentive to settle with fairly generous discounts (I've seen down to 20% of the original debt, and apparently there are fairly predictable amounts depending on the credit cars and issuer, tables which would be roughly known by a local practitioner who is always in and out of the consumer debt courtroom) and payment plans, partly because judges seem pretty lenient about granting extensions to debtors. On the other hand, a usual condition of the settlement is that if even a single payment is late, the creditor is entitled to judgment for the entire original debt plus interest and penalties. That can hurt people really badly.
It is so important to have competent local legal advice. You can look on www.lawhelp.org to find legal help with consumer debt by zipcode. Even if you end up negotiating on your own, you will be much more empowered and knowledgable. If you decide not to, they can give you advice on how to keep an eye out for unscrupulous collections behavior - from inappropriate pursuit to pretending to serve notice and getting default judgment against you and probably lots more gross things.
There are organizations to help with this if you can't afford a private lawyer, with staff and volunteers who are really committed to working in these areas. There may be hoops to jump through but it's worth it.
posted by Salamandrous at 6:31 PM on July 23, 2014 [1 favorite]
IANYL TINLA, this is not my area of law.
For example, you should find out whether, in your jurisdiction, it makes sense to be more or less proactive about this. The damage to your credit is done. Will the credit card companies be more inclined to slash your debt in private negotiations with you or in courtroom negotiations (with your advocate?) This could come down to a very local question and you need local expertise for your answer. In New York City, there are specific consumer debt courts, generally fairly consumer friendly, and credit card companies who do bring suit have a strong incentive to settle with fairly generous discounts (I've seen down to 20% of the original debt, and apparently there are fairly predictable amounts depending on the credit cars and issuer, tables which would be roughly known by a local practitioner who is always in and out of the consumer debt courtroom) and payment plans, partly because judges seem pretty lenient about granting extensions to debtors. On the other hand, a usual condition of the settlement is that if even a single payment is late, the creditor is entitled to judgment for the entire original debt plus interest and penalties. That can hurt people really badly.
It is so important to have competent local legal advice. You can look on www.lawhelp.org to find legal help with consumer debt by zipcode. Even if you end up negotiating on your own, you will be much more empowered and knowledgable. If you decide not to, they can give you advice on how to keep an eye out for unscrupulous collections behavior - from inappropriate pursuit to pretending to serve notice and getting default judgment against you and probably lots more gross things.
There are organizations to help with this if you can't afford a private lawyer, with staff and volunteers who are really committed to working in these areas. There may be hoops to jump through but it's worth it.
posted by Salamandrous at 6:31 PM on July 23, 2014 [1 favorite]
This thread is closed to new comments.
This would be easier if they were all with the same collection agency. I'd start by working out a number that you could pay per month; then divide that among the four credit cards according to how much is owed on each.
So now you'll have four monthly payments in mind. Go lower on each as your first offer to each creditor, as they'll likely come up: if you offer them the most you can pay as an opening salvo, then you'll have no negotiating power.
I imagine your credit score is now shot to the point where you're probably unable to get a consolidation loan. If you don't think your score is that bad yet, you might want to try going to the peer-to-peer lenders -- the worst that they can say is no. (memail me for a referral link to Lending Club if you're interested; I've currently got a loan there, and if I refer someone there who is accepted for a loan I'll get $100 off my next loan payment.) If you CAN get a consolidation loan, then you have a lump sum which you can use to settle your debts as an alternate option.
posted by tckma at 10:48 AM on July 23, 2014 [1 favorite]