What Your Creditors Don’t Want You To Know
First of all I am not a lawyer or a legal expert, just a consumer like yourself who got in over my head due to unforeseen circumstances. I cannot give legal advice and I am not responsible for anything that happens if you choose to follow my system. However, I have done exactly what I am telling you about, and lots of my friends did the same thing, and we all got out of debt, and got on with our lives.
This will not work if you have a good income and are just trying to get out of paying, or if you are a bad money manager and just don’t pay on time. But if you are legitimately having a hard situation that has caused the problem, it might be the Godsend you are looking for without having to go to a lawyer or a debt counseling agency. (and spend more money you don’t have)
If you do all the things I say, you should be able to get all your debt amounts lowered by virtue of lower interest rates and lower payments.
In addition, your credit score will be ok, not great, but ok. If you file a bankruptcy, even a chapter 13 which just reorganizes your debts, your score will suffer tremendously. And if you go to a debt counselor and they negotiate a lower payment with your creditors for you, they will charge you a monthly fee for doing so. Also here is the bad news about them. They are often late themselves, making your credit worse. In my former job I looked at credit all day long, and I would see that over and over.
The reason is simple. The debt counselors work on a billing cycle. They take your money and divide it up to pay your creditors the amounts they have negotiated with them, on a certain day each month. But this does not coincide with the date due in every case. Also the original creditors often change the date due to collect a little more interest, and this can throw off the cycle even more, with the result being that your negotiated payment is late again, causing more late fees and more dings on your credit report. So here you thought your problems were over, and you have more late payments to contend with.
Also, to any future creditors, a debt consolidation plan is exactly as bad as a chapter 13 bankruptcy! Again, you went to a debt consolidation agency to help yourself and it looks just as bad on your credit report as if you filed for bankruptcy! These are some of the reasons I decided to try and work out a solution by myself.
My story is probably a lot like yours.
First I fell and hurt my back and had medical bills up the yin yang. Then my company went bankrupt so my job disappeared.I could not find a new job, and my back hurt so much I can’t sit or stand for long periods of time anyway. This made finding work impossible. With no job and medical bills piling up, I had no way to pay the bills but to charge them. Meanwhile, the housing prices in my city took a nose dive so all my equity evaporated, and due to not working, I eventually had to quit paying and my house was foreclosed on.
I did not go on any wild spending sprees, buy anything unnecessary or even some things I needed. In fact, I quit spending all together, except for food and necessities.
But while all of this was happening, my creditors started looking at the fact that I was late on a payment here or there and took the opportunity to raise my interest rate in some cases up to 30%, even when I was not late on theirs! And when I was late, the late fees were $29 or $39 which in some cases put the balance over the limit and I got charged $29 or $39 again for being over the limit. This snowballed with the result that thousands of dollars got added to what I owed. You can see how this would happen, when creditors are adding $78 per month!
Fast forward a few months and I was late and over the limit on everything, without buying anything new.
The phone was ringing all day long with collectors hounding me, threatening me, and being generally unpleasant. I was just about to go to a debt counselor, but when I looked into the cost and remembered that they are often late themselves, I decided to just talk to my creditors myself and see what I could do.
If this sounds like you, my solution just may work for you. My phone doesn’t ring any more from collectors and I don’t get letters any more either. My credit score is not good, but it is not nearly as bad as it would have been if I had filed bankruptcy or gone to a debt counselor or simply let everything go to collection. I have learned to live without credit cards, and you can too.
The reason you will be living without credit cards is that if you are able to get all of your balances lowered and your interest rates lowered, your creditors will take your cards in exchange for letting you pay the reduced payments, but in 3-5 years you will be free of debt and you will not have filed bankruptcy. Filing bankruptcy hurts your credit score a huge amount and should be avoided at all costs.
Bankruptcy lawyers will often tell clients that it will not hurt that much and they will recover quickly. This is simply not true. In my former job I saw over and over that bankruptcy drastically reduces your chances of getting a good loan. And it stays on your credit report for all the world to see, for 10 years! Not seven years, ten years!
But if you work with your creditors and get your balances to zero, your score will be so improved by the end of the time period you work out, that you will be able to get credit cards again.
First of all, write a letter or call, or both, explaining all the reasons why you are late and cannot pay the amounts they are asking for.. Ask to have the rate lowered back to what it was. Here is a tip that will save you time. Write one letter explaining your situation and make copies. Then you can use the same letter over and over.
If you can pay a small amount per month, see if they will accept that. Two of my creditors lowered my interest rate to 0% and stopped all late fees in return for having my payments taken straight out of the bank every month.
If that does not work, write a letter again, repeating your hardships and asking them to stop calling you and attach a Profit and Loss statement. This is a simple document that you can prepare yourself.
Make 3 columns on a piece of paper. At the top label the first column “month,” the second one “income,” and the third one, “expenses.” List the amounts in each column for the last 6 months at least. This will give a clear picture of your financial situation.
By doing this, in every single case, I was able to get my interest rate lowered and the fees for being late stopped, and the overlimit fees waived.
Another thing that you can say to them is that you are trying to avoid fining bankruptcy. Creditors know that if you file a bankruptcy they will get very little and it will take quite a while to get it, so they will be more willing to work with you if they think you might do that.
Also, if you have proof of the hardships that caused this to happen, attach the proof. A few doctor bills, a bank statement showing no deposits, the letter dismissing you from your job, or the phone number of your former employer, whatever will show that your hardship is real.
The thing that you must absolutely do is communicate with them! You cannot just hide and pretend it is not happening. You must tell them what is going on and be polite when you are talking to them. If one of THEM is not polite, call back and talk to someone else. I have sometimes had to call several times and even ask to speak to the supervisor, but in all cases, I was able to speak to a nice person about the situation. Be nice, and calm and explain what has happened and ask for their help. You would be amazed what can happen when you ask nicely.
If you just try to avoid them, they will not be inclined to help you and may even try to punish you by garnishing your wages. And their calls will not be nice ones. But if you are genuinely having a hardship and show that you are trying to pay something, they will try to work with you.
Another thing that might happen is that the creditors might offer you a settlement if you will just pay it off. I have had them offer me a settlement amount of 11% of what I owed just to get it over and done with! That is because if they cannot work out a payment plan that conforms to the federal guidelines on credit, and they have to write off the debt, they will sell it to another company for pennies on the dollar, less than 10 cents for every dollar owed in some cases.