Credit Counseling - No More Interest- How?
June 12, 2006 4:38 PM   Subscribe

How do I get my debtors to allow me to pay them off on a payment plan and no further interest charges?

I have approximately $400,000 in debt, not including several pieces of real estate.

I have no liquidiy due to family medical issues, but do not want to declare bankruptcy although I have no money "for the short term" (say, 6-9 months) even to make minimum payments.

I want to make a deal with the creditors that I am not running away, that they should close the accounts and not charge any more interst going forward, with low minimum payments to be made until it gets paid off (or for a one year period, lets say.)

I am not concerned about ruining my credit; its ruined itself over the last 3 months.

I do not want to declare bankruptcy either.

How would I do this? is it best to go to a place like BuCCs or to do it alone? (using a service would make me only need to pay one bill each month instead of 30?)

or to ignore them until it is 120 days past due and then settle?

or let the bills rise until they write them off?

Besides all other moral concerns about owing the money, I do not want my entire family getting phone calls and would not not particularly love process servers at my door.

Since I am posting this anonymously, let me generously beg y'all kind souls not to take this question off topic or discuss its (im)morality.

yes I am aware that just because a credit cousieling service is "nonprofit" that does not mean they are there to help you. (and yes I am aware that many of these agencies are sponsored by the CC comanies themselves.)

What is the best way to get on a payment plan, while stopping all accruing interest?

My health is being severly ruined by this (headache, stomachahes from stress) and I really want to do this tomorrow....
posted by anonymous to Work & Money (12 answers total)
I was going to ask if you could explain why bankruptcy is not an option, but since it's anonymous....maybe you can email an admin to have them post followup info?
posted by nomisxid at 4:58 PM on June 12, 2006

Do you have enough equity in your real estate holdings to cover your debt or a significant portion thereof? That might be part of the solution.
posted by JekPorkins at 5:02 PM on June 12, 2006

Not including real estate? Does this mean you also have several pieces of real estate, each with mortgages on them?

Let's see, $400,000 in unsecured debt, additional mortgage debt... no money for 6-9 months to make even minimum payments... I think you're a prime candidate for bankruptcy. Unless you have extremely real prospects of a truly excellent job coming up in 6-9 months, or old miserly Aunt Harriet is really on her last legs this time, there is no frigging way you're going to dig yourself out from under that debt. Especially since a large chunk of it is probably at credit card rates.

Face facts. You either

-- lived the American dream, or
-- got sick

and you lost. In the game of financial responsibility, you have failed. Whether it is due to your own actions or circumstances beyond your control is immaterial. Declare bankruptcy.
posted by jellicle at 5:51 PM on June 12, 2006

The best I can tell you is that you should deal with a consumer credit counseling service. They are in a better position to make the kinds of deals you'd need to make. Unfortunately, I don't have a specific one to recommend, but this FTC site has advice on picking one. Hopefully someone else can chime in with a specific company.
posted by kingjoeshmoe at 5:57 PM on June 12, 2006

For that much debt, you need an expert and merciless negotiator whose sole interest is in getting you the best deal possible (this immediately exludes any credit counseling service funded by lendors). In short, hire a shark attorney.

I agree that it would be helpful to know your reasons for avoiding bankruptcy. Under the circumstances, it should get you better repayment terms, and faster recovery, than whatever you can negotiate on your own. Bankruptcy forces lendors to permanently halt all collection scumminess, and settle for splitting whatever pennies are left over after assuring that you have reasonable living expenses; on your own, you have no such reassurances.
posted by nakedcodemonkey at 6:12 PM on June 12, 2006

Immediately -- get to a reputable credit counselor. Short of that, I'd wager that bankruptcy is your only option. The sheer amount of debt makes it very unlikely that your creditors will negotiate with you individually, I suspect.

I wish I could offer something more positive, as your situation certainly sounds...bleak. But you are seeking options, and seem very realistic.

Good luck.
posted by davidmsc at 6:25 PM on June 12, 2006

Bankruptcy will not be the end of the world; it's never too late to start over. Be good to yourself and your family and come clean. Yeah, in the short term it's going to be bad, but your long-term prospects will be much better the sooner you act. Take care of yourself.
posted by lilboo at 7:40 PM on June 12, 2006

I'm nthing the bankruptcy recommendation. Short of nakedcodemonkey's recommendation, I don't think you have a chance in hell of even making a dent in a debt that large, with minimum payments or otherwise.

Declaring bankruptcy looks bad on your credit record, sure, but if your score's already in the toilet, that part doesn't matter so much.

Be well, and good luck.
posted by timetoevolve at 9:54 PM on June 12, 2006

As I understand it, what you're talking about is pretty similar to declaring bankruptcy, except that if you declared bankruptcy the creditors would probably have to write off part of the debt. So it seems to me that the creditors have an interest in cutting you some slack, if it means they'll get the full payment eventually. In other words, you do have a bargaining position.

Maybe a lawyer or accountant who specializes in personal bankruptcies would be able to help, or at least advise you on whether what you want is a realistic goal.
posted by hattifattener at 10:47 PM on June 12, 2006

If you want to go with the likely outcomes, bankruptcy is your better choice. You at least get to keep your house that way.
posted by electroboy at 6:37 AM on June 13, 2006

I disagree with the bankruptcy bandwagon being driven through this thread. I would come up with a plan that is suitable to you for each of your creditors. I would then call one of the smaller ones and explain your plan. Tell them you have $xxx amount to pay them per month (term) starting on x date and you will pay for x periods in settlement of your debt. Explain briefly why you cannot pay now. Tell them you are not good with interest and principle calcualtions, that this is simply a what I can afford calculation and all you are going to pay. They will balk, but explain to them the alternative is bankrupcy, legal fees and time.

IF they agree, great and move on to the next creditor. If they do not agree, move on anyway but try changing your pitch a little. I would try them all. As you get one or two to agree, tell the others that you have 30% or whatever number of the debt plan agreed upon. Tell them that the sooner they agree the more of the available pool they will have.

This sounds like a good case for a debt restructuring plan similar to a prepackaged bankrupcy plan that just doesn't get filed yet all agree to in their best interests.
posted by JohnnyGunn at 11:30 AM on June 13, 2006

Also, please note that if your creditors do "write off" some debt, the IRS can -- and will -- consider that amount as taxable income and send you a tax bill.
posted by OolooKitty at 9:37 PM on June 13, 2006

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