Credit Counseling - help?

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If they have sufficient income that they can pay the legitimate debts that they owe without default, simply by making lifestyle changes, they should do so.

One should not, from a moral perspective, simply choose to stop paying one's debts because they are inconvenient, in order to obtain a settlement later. That act lacks integrity.
 
Greebo said:
They don't need to do this yet. They do need to do this if they get sued. They may be able to avoid it, depending on their complete status.
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Not sure I agree with that Chuck, if the go to a reputable bankruptcy attorney he or she will advise them of what their options are and whether they are candiates for a bankruptcy or perhaps a reorganization. Your right they may be able to avoid it and any bankruptcy attorney worth their salt should evaluate their "complete status"

Greebo said:
You cannot help those who will not help themselves. If they are determined to do what they want without considering your advice, do not waste your time continuing to give it. Otherwise you will get sucked in to their disaster.

If they stop paying the cc they will get threatening phone calls at all hours, they will be lied to, told the police are on the way, told a garnishment has been issued (without a hearing), told they've already lost a suit, and so forth.

It will get very very ugly. If they aren't prepared for how to handle it, they will cave and make their situation worse.
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Dead Bang on Chuck!

Greebo said:
If they have no dings on their credit now and they have equity, finding a bank to refinance them WITH NO EXTRA CASH OUT should be a no-brainer. (It may be a different bank, shop around)

Lowering the interest rate protects the interest of the bank who wants to get repaid. In a BK or FK, the bank stands to lose more than if they work with the customer.
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Again argeed but I am suspecting they have dings.

Greebo said:
If they have sufficient income that they can pay the legitimate debts that they owe without default, simply by making lifestyle changes, they should do so.

One should not, from a moral perspective, simply choose to stop paying one's debts because they are inconvenient, in order to obtain a settlement later. That act lacks integrity.
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If they have sufficient income to pay their legit debts then they likely will not pass the means test for a bankruptcy anyway.
 
AdamZ said:
Not sure I agree with that Chuck, if the go to a reputable bankruptcy attorney he or she will advise them of what their options are and whether they are candiates for a bankruptcy or perhaps a reorganization. Your right they may be able to avoid it and any bankruptcy attorney worth their salt should evaluate their "complete status"



Dead Bang on Chuck!



Again argeed but I am suspecting they have dings.



If they have sufficient income to pay their legit debts then they likely will not pass the means test for a bankruptcy anyway.
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This is probably the only point that we (you vs. me/Chuck) disagree on.

Everybody is selling something. Debt relief people are in the business of selling their services. Credit counselors theirs. Dave Ramsey is selling books and radio shows. And bankruptcy lawyers sell bankruptcies. It's their job to get people through the process of a bankruptcy, so they'll certainly have a slant.

I'm sure that your partner is more above board than most, but it's hard to imagine most people not wanting the extra income that would come from "closing the sale".
 
jason said:
This is probably the only point that we (you vs. me/Chuck) disagree on.

Everybody is selling something. Debt relief people are in the business of selling their services. Credit counselors theirs. Dave Ramsey is selling books and radio shows. And bankruptcy lawyers sell bankruptcies. It's their job to get people through the process of a bankruptcy, so they'll certainly have a slant.

I'm sure that your partner is more above board than most, but it's hard to imagine most people not wanting the extra income that would come from "closing the sale".
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Yes and no Jason, true, when you boil it down everyone has something to sell be it a service, Flying lessons, Data Storage, insurance whatever but when it comes to bankruputcy, several years ago the Federal Gov't really clamped down on it and there is now a means test that you need to pass inorder to be able to file. If you don't pass the means test your petition is going to get bounced or moved to a reorganization and the attorney who files it is going to be subject to disgorgment of fees and if they keep doing it I'd think they would get sanctioned.

Keep in mind I fully recognize that there is often a wide gap between what is ones legal right and what is in manys eyes their moral responsibilitiy. At one time I did creditor rights law so I see both sides of the picture as with most things there is no one size fits all.
 
Yes Adam but simply passing the means test to file doesn't mean one *should* file.

Bankruptcy drops a nuclear bomb on your credit report. Worse, it sticks with you for life. You must, forever, answer "yes" when asked, 'Have you filed for bankruptcy?"

Very very often, one CAN recover from these messes - even 100k CC debt messes - without BK.

Now if one is sued, of course, one is going to lose - and once you lose, well you may HAVE to declare BK just to hang onto your life in some degree - but if you don't GET sued you can always strike deals.

BK should be, IMO, a defensive measure, not an offensive one. After all, the creditors haven't (usually) done something *wrong* by lending money or wanting to get paid. The debtor who cannot pay is not in possession of the moral high ground. BK should always be the last resort, not the first.
 
I thought DR says your Credit Score doesn't matter anyway, since in his world you only need a credit card to buy his stuff.
 
sure but if you are going to follow the path of not needing credit in your life then why do you care what the credit report says?
 
tonycondon said:
sure but if you are going to follow the path of not needing credit in your life then why do you care what the credit report says?
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Because severely negative items on your credit report *can and do* have an impact on non-credit related activities. It can impact the cost of car insurance, your ability to rent an apartment, even your ability to get a job or a security clearance.

And by the way, wrt your little "cc to buy his stuff" crack - DR lobbied long and hard to get the CC companies to let him take only DEBIT cards. They wouldn't go for it. His policy is that you SHOULDN'T use CC's to buy anything from his site - but it's not enforceable.
 
will those things be impacted if you have NO credit history?

and yea, sorry, i couldn't help it. I know DR has helped a lot of people and thats a good thing. I use my credit card responsibly, pay off the balance every month, and enjoy the flexibility it allows me. I also enjoy the excellent credit score it has allowed me which has led to apparent ease in renting an apartment, cheap car insurance, and a nice low interest rate on my home.
 
tonycondon said:
will those things be impacted if you have NO credit history?
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Car insurance? If you have no credit score you should be able to call up your agent and raise hell.

Apartment rental? Show the landlord a bank statement.

Bankruptcy, job security, etc? Hell no.

You file bankruptcy and it doesn't matter if your CR no longer shows it (after 10 years), for the rest of your life you MUST answer "YES" to the question, "Have you ever filed for bankruptcy?" - or you are committing fraud.
 
i agree with you that bankruptcy is not something to take lightly. i guess you just have to weigh the consequences of not filing vs. the consequences of having to check yes for the rest of your life.
 
tonycondon said:
will those things be impacted if you have NO credit history?
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Greebo said:
Car insurance? If you have no credit score you should be able to call up your agent and raise hell.

Apartment rental? Show the landlord a bank statement.

Bankruptcy, job security, etc? Hell no.

You file bankruptcy and it doesn't matter if your CR no longer shows it (after 10 years), for the rest of your life you MUST answer "YES" to the question, "Have you ever filed for bankruptcy?" - or you are committing fraud.
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It's not just car insurance, it's also home insurance (varies by state). I first ran into it in Texas - there is a state-mandated procedure if one has no credit history. It won't prevent you from getting insurance, but it won't be as cost favorable as having a great credit score (BTW, the "insurance score" is different than the "credit score" - different factors involved). I anticipate that each state has a different process for folks with no credit score. (In Texas, some companies won't even give you the best insurance rate with an 800 credit score, you've got to be above 825-830 which is nigh on impossible if you have no term loans such as car loans, etc).

Apartment rental depends on the state and locality. It may factor into the security deposit requirement.

Jobs & security clearance: For USG security clearances, the single biggest factor for denial is derogatory info on a credit report. Separate from the clearance issue, many companies will pull a credit report... if there's derogatory information, it will impact whether you get hired or not. Financial position with the company, HR, or other departments that require high levels of trust will often be denied if you've got credit issues (likewise employment with a bank or as a cashier). No credit history is a bit different, and it varies by company and/or state rules.

Could also impact professional licensing, just like a criminal record might.
 
Debt is as addictive and destructive as any chemical dependency. Until they've decided they have a problem, all the other technical/tactical solutions available (bankruptcy, re-fi, etc.) won't make things better. They will just spend more money they don't have.

Switching from living "high on the hog" to having the discipline to live like a pauper to fix the problem starts with true understanding and motivation to change.
 
Hello

I passed on the advice here, and thank you.

I don't think they have the stomach for bankruptcy - yet, anyway. Too public. They did listen at least and are interested in legitimate credit counseling. We shall see. This is a combo of a few stupid personal decisions over the years and to cap it off serious health issues that had costs over and above insurance. This wasn't overnight.

I was surprised to learn their credit score is 741. That's not great but it's not bad either. They are covering, barely, but they are paying the bills and then reverting to CC in order to pay for unplanned things. All it would take is another big unplanned expense and things would tip. For instance, another bout of serious health issues.
 
Unregistered said:
I was surprised to learn their credit score is 741. That's not great but it's not bad either.
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Depends on if that's Experian/FICO or VantageScore. There's no such thing as "one" credit score anymore. There's about six that are widely used.

Range on FICO goes to 850. Vantage, 990.

Most scores have been stressed to their breaking points in today's world. On average, people who default on loans have almost identical scores as those who don't.

Sadly I've talked to people in this scenario and the pros just tell them what they already know, but are in denial about. They waste a lot of time and money stalling trying to maintain their lifestyle.

It sucks to be 40-50 years old and suddenly come to the realization that what you can realistically afford is one well-used shared car to get to work, a small apartment, and Hot Dogs and Mac and Cheese. Or "beans and rice" as the Ramsey supporters say.

I hate when I hear "unexpected expenses" because it's usually things that everyone has to pay, not natural disasters and truly unexpected costs of living... Fixing the automobiles one purchases does NOT qualify as "unexpected" in a proper budget, for example. Same thing with home repairs.

And the concern about not being "renters" is ridiculous. They already lost the house, they just haven't done the math yet. It's just a place to live that they're renting from the bank.

They can choose to take control of it or they can hope their creditors don't do it for them. As you've pointed out, one bad beat in the song sheet, and they won't have options anymore.

They need serious professional help. They don't sound mentally ready for it.
 
denverpilot said:
Debt is as addictive and destructive as any chemical dependency. Until they've decided they have a problem, all the other technical/tactical solutions available (bankruptcy, re-fi, etc.) won't make things better. They will just spend more money they don't have.

Switching from living "high on the hog" to having the discipline to live like a pauper to fix the problem starts with true understanding and motivation to change.
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Well said Nate.
 
Greebo said:
You file bankruptcy and it doesn't matter if your CR no longer shows it (after 10 years), for the rest of your life you MUST answer "YES" to the question, "Have you ever filed for bankruptcy?" - or you are committing fraud.
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You usually won't find the question worded that way (if ever). The question will specify years, instead of "ever". After the 10 years, you won't be reporting it to anybody. And if you've been able to secure new accounts and keep them all paid on time, it's very possible to see credit scores in the high 700's again. Might take longer than 10 years, though.

L.Adamson
 
L.Adamson said:
You usually won't find the question worded that way (if ever). The question will specify years, instead of "ever". After the 10 years, you won't be reporting it to anybody. And if you've been able to secure new accounts and keep them all paid on time, it's very possible to see credit scores in the high 700's again. Might take longer than 10 years, though.

L.Adamson
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You can get a high score a few years after bk, never mind 10. That isn't exactly the point. There's a difference between credit *score* (a "How much I love debt" score) and a credit *history*.
 
And, I am back. With some news and a new question.

I hadn't talked to my relatives or their kids (adults) in a while and I learned a few things. They did apparently speak to a bankruptcy attorney last summer. What I didn't know is that as of the time I first wrote my question (June) they had stopped making payments on their 100K in credit cards. They simply could not keep up. They were already down to a frugal lifestyle - no cable, no car payments, no restaurants, no dry cleaning bills, etc. All their money was going to service debt. With an old house in need of repairs when something would break it was either put it on the credit card or use the cash they were spending to pay mins on the credit card to fix it.

What I also didn't know (nor did they) is that their house, in the end, didn't have any equity after all. They put it on the market in an effort to get rid of the mortgage payment and get some money out of it to pay towards their debt. Once they committed to stopping payments on the CC to keep their nose above water they felt they needed to go through with finding a buyer. They found a buyer and barely broke even after paying the realtor.

They have a place to live and I understand their net savings on their smaller quarters is around 1000 a month less than the house situation was. While it's bad news that they didn't come out of the house sale with cash, they did at least get rid of that debt. They also don't have repair bills to deal with any more. It was an old house and there was always something to fix.

However the problem remains that they are unlikely to be able to pay back 100K on credit cards. It occurred to me that the debt could outlive them - each of them have already lived longer than one of their own parents.

They have not, apparently, been sued yet which is amazing given the amounts and the time that has passed.

So the new question: now that a few hurdles have been crossed, and they have pared down as much as they can, their options are:

1. declare bankruptcy, finally (although no one has sued yet)
2. assuming a kindly relative or relatives is able to partially help, offer the CCs a certain amount on the dollar to pick off each of the cards.

I realize this is a terrible choice. It's not what I would have chosen but on the other hand I wouldn't have gotten myself there. Although that may not even be fair for me to say - it's entirely possible there are some medical bills that piled up and made them fall more and more behind, I don't know. I know they have each had a variety of health issues through the years. I guess it is possible things can keep piling.

Assuming they go for number 1, what happens?
Do they lose control of what could happen to them if they file for bankruptcy?
Does Chapter 13 mean you pay back 100% of the debt, or a certain percentage and if it is a percentage, what is normal?
Is there ever a point in a bankruptcy proceeding where you can say "I want to retract this, I will find another way"? This retraction would only work if one of their relatives decided to step forward to help. I understand their kids are not happy with this situation and I don't see them stepping forward eagerly.

For number 2 - what do credit cards do?
Will they realize that their odds of being paid back are so bad they may as well accept a quarter on the dollar and call it a day? Or less - a dime on the dollar? What is normal?
Would the creditors rather that the debtor did go through Ch 13 bankruptcy - is that usually better for creditors?
How much negotiation room do you have with credit cards?
Do bankruptcy attorneys do this kind of thing all the time (meaning negotiate with credit cards in lieu of bankruptcy).

This is a frustrating and sad situation. I know that they want to put this behind them as much as they can. It won't leave them with much in their golden years other than a clean slate. God forbid one of them should need long term care.
 
Lets start backwards with option 2. It would be foolish for a "kindly relative" to pay down the debt. Yes the credit card company may compromise the debt but your relatives credit is and will continue to be in the sewer. Bankruptcy attorney do this kind of negotiation its called a "workout" The creditors don't file bankruptcy they will write off the debt. Of course if the creditor is too small it may force them into bankruptcy but that is not likely to happen with a credit card. Believe me relatives "stepping forward " are not doing these debtors any good.

Option 1 filing bankruptcy. Your relatives should have done this long ago. Way before they sold the house. You mention chapter 13. Why 13 versus a 7. Chapter 13 requires a reorganization plan and from what you have posted it does not look like your relative will be able to put together a plan that will be sustainable. Chapter 7 really looks like it wold be more beneficial to them. Believe it or not a Ch 7 may actually help their credit score. People in Bankruptcy do not lose control they will lose their credit cards but they are probably shut off anyway. There is no standard percentage for a ch 13. Your relative really need a bankruptcy attorney.
 
They need to educate themselves about their options, and you need to rid yourself of any thoughts that you are in any way responsible for their actions or lack thereof.
 
This is very sad. But common. And in some demographics the new normal. I spend a lot of my time these days with clients like your family. Often, people will delay seeking professional advice until they have tried everything else, including liquidating their retirement accounts trying to keep credit accounts ( including their mortgage loan) current. For some it's denial; for some it's an extension of hope in the face of the facts. I'm glad your family has survived the initial turbulence.
 
This thread strikes close to home. My now ex wife and I bought a home at the top of the market (2006), that was also at the top of what we could afford. We struggled for the 4.5 years we owned that house. We were offered 30K by our mortgage company, which would have paid off a lot of debt for the keys to walk away. She didn't want to take it, and we stuck it out to the bitter end when i lost my really well paying job and went from making 5K/mo after taxes to 1800/mo on unemployment. Long story short, i had to file for BK, as the mortgage was in my name only, and still let the house go in the BK.
 
sferguson524 said:
This thread strikes close to home. My now ex wife and I bought a home at the top of the market (2006), that was also at the top of what we could afford. We struggled for the 4.5 years we owned that house. We were offered 30K by our mortgage company, which would have paid off a lot of debt for the keys to walk away. She didn't want to take it, and we stuck it out to the bitter end when i lost my really well paying job and went from making 5K/mo after taxes to 1800/mo on unemployment. Long story short, i had to file for BK, as the mortgage was in my name only, and still let the house go in the BK.
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I'm sorry to hear that. Hope you're doing alright now.

After seeing what my mother-in-law went through when her husband was sick and later died I have no sympathy for banks. None.
 
AdamZ said:
Believe me relatives "stepping forward " are not doing these debtors any good.
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With all due respect to the esteemed counselor, I would offer a very carefully limited difference of opinion. I agree wholeheartedly with Adam if the relatives are siblings or more distant.

If the relatives are parents, I'd look at it a bit differently. At $1000 a month savings from prior situation, they could eliminate the debt in ~10 years (depending on interest rate). Yet they might (or might not) live 10 years longer. If they need extra money to live on or kick-start debt reduction, I might well be inclined to help support PARENTS through a gift. They supported you when you were younger....

You've got to be careful that you don't bust the gift-tax limits in doing so. Or make things worse from the perspective of a workout. Absolutely NO co-signing.

I would not take them on - not even parents - as "dependents" without good counseling from an experienced legal counsel in elder care and bankruptcy. There are all kinds of traps one can get into in doing so.

My final thought *if* they are elderly parents is that you should not only consult with bankruptcy counsel but ALSO counsel experience in elder care. There are all kinds of questions that arise with respect to estate planning, assisted living, and other such things that could be affected by a particular course of action. Attorneys experienced with elder care & estates are well worth the money spent.
 
Gerhardt said:
I'm sorry to hear that. Hope you're doing alright now.

After seeing what my mother-in-law went through when her husband was sick and later died I have no sympathy for banks. None.
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I'm doing great now. My divorce will be final in 24 days, but who's counting.
 
At least for me, I would need a lot more detail to answer your questions about ch13. What is the total nut due, have the cards continued to rack up unpaid int, what is the monthly due(all revolving), what is their income situation, what are their liquid assets? These are all things the BK atty will need, and so will the court.

As far as a kindly relative stepping in, this is a bad idea for a lot of reasons. If the kindly relative starts writing checks on the debt, it can be considered assumption of debt and that can get them involved in having to assume responsibility. Of course, there are a lot of 'howevers' involved. A lot of them. If the kindly relative gives money to the debtor, and the debtor gives it to the CC company, it can raise red flags in a BK court about where/how/why they are getting 'income' from another source. Like I said, lots of 'however'. But in general it's a bad idea unless the kindly relative feels financially obligated to do so. If that's the case, then both parties need to sit down with a family law atty and get things down on paper. It could easily turn into a situation where kindly relative gives $9000 to the debtor, and next week they are off to their once in a lifetime month long trip to Tahiti.

As far as credit counseling companies, many of them are actually run by a subsidiary of the CC to which the debt is owed. Their function is not to lessen the payments, or work out a compromise, but to get the debtor to put THEIR debt payment ahead of all the other debt payments, or to get them to pledge assets toward the payment. I would never advise anyone to go to a credit counselor, even though there are a few who are completely independent and may be able to do a good job. If that is the case, you are still paying the counselor for advice you can get from Ramsey's book, or even from the CC agency directly.
 
docmirror, interesting, thanks. Maybe that is why the kids haven't stepped in.

I'm not close enough to the situation to know the answers. I hadn't planned on being the kindly relative although if the credit cards were negotiated way down and someone came to me and said "do you have a few grand" I may have considered it. Sounds like it's a bad idea all the way around though or at least not my problem.

It's a shame because at one time I thought they were in the chips. I wonder what caused this and how long it's been piling up.
 
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