Alternatives to bankruptcy?

[sadiebug]

I contacted a "debt relief agency" a few weeks ago to see if they could work with us to figure out a debt consolidation plan. They told me that we made about $1000 less than we needed to in order to qualify for their assistance and they recommended that we consider filing for bankruptcy.

I really don't want to file for bankruptcy. We owe the money and would like to work out a plan to pay off the debt that we owe. The agency that I spoke with worked on a "get out of debt in 5 years plan" and we didn't qualify for that. Are there any other agencies out there that will work on a 6 or 7 year plan or are there other alternatives to bankruptcy out there? Please help! Thanks!

Sadiebug

 

[englishteacha]

I recommend the book "Financial Peace" by Dave Ramsey. There's lots of good, practical advice on how to get out of debt. It might give you a place to get started.

 

[KKB]

Consumer Credit Counseling --they are a nonprofit agency. They will contact your creditors to get interest lowered or removed and set up a payment plan.
Dave Ramsey book is good idea, too. They are on sale on his website right now.

 

[bumbershoot]

With everyone else! CCCS and only CCCS, and get Ramsey's book. Could also visit llnoe.com (livinglikenooneelse dot com) to read normal people talking about Ramsey's plan, see how it works in real life, not just abstractly in a book. Has changed our financial life around just since July.

 

[wdwfan16]

It sounds like you need to increase your income to make this work. A second job for one of you or have the SAHP, if there is one, get a job.

 

[seashoreCM]

Don't feel bad if you go bankrupt and stiff some finance companies that charge exorbitant interest rates.

Bankruptcy can also be used to spread out payments more, and simulate a consolidation loan.

Bankruptcy (just proposing it) can induce finance companies to cut their interest rates.

 

[KKB]

Don't feel bad if you go bankrupt and stiff some finance companies that charge exorbitant interest rates.

Bankruptcy can also be used to spread out payments more, and simulate a consolidation loan.

Bankruptcy (just proposing it) can induce finance companies to cut their interest rates.

Don't feel bad if you go bankrupt? Great attitude. Don't get me wrong--sometimes it is the ONLY option. But NO ONE does it to stiff companies out of their money.

 

[Virgderon]

KKB, I bet you have never been in this position. Sadly, many good people that have never missed a payment in their lives become unemployed or have other devastating things happen and suddenly can't pay their bills.

The credit card companies response to this is to charge unreasonable fees, jack interest rates up to 29% and basically make it impossible to pay off the debt.

Sadly, the only recourse is to ruin your credit. If you don't pay your bill for 2 or 3 months, that will get their attention and they will negotiate a payoff plan or settlement for you.

I used to be shocked that people would walk away from their obligations. Now I understand the venom and anger toward the finance companies. They happily take the governments bail out money while screwing over the people that money was meant to help.

I agree, Seashore. Sadiebug does not need to feel bad.

Sadiebug, you are facing unpleasant choices. You will ruin your credit either way, but you can either stop paying on your credit cards, and force them to deal with you on a settlement or a plan, or you can file Chapter 13 bankruptcy, which is sort of like doing a credit counseling plan that is enforced by the court.

Before you destroy your credit, consider your needs for the next 5 years. Buy a car now if your car won't make it 5 years. You will have a hard time buying a car with bad credit. Most repayment plans and Chapter 13 plans last 5 years.

Do NOT cash in 401ks. 401k money is protected in a bankruptcy.

All my best to you. It will be tough, but you will survive. Check out www.creditinfocenter.com for tips on how to negotiate with credit card companies if you decide to go that route.

 

[KKB]

KKB, I bet you have never been in this position. Sadly, many good people that have never missed a payment in their lives become unemployed or have other devastating things happen and suddenly can't pay their bills.

The credit card companies response to this is to charge unreasonable fees, jack interest rates up to 29% and basically make it impossible to pay off the debt.

Sadly, the only recourse is to ruin your credit. If you don't pay your bill for 2 or 3 months, that will get their attention and they will negotiate a payoff plan or settlement for you.

I used to be shocked that people would walk away from their obligations. Now I understand the venom and anger toward the finance companies. They happily take the governments bail out money while screwing over the people that money was meant to help.

I agree, Seashore. Sadiebug does not need to feel bad.

Sadiebug, you are facing unpleasant choices. You will ruin your credit either way, but you can either stop paying on your credit cards, and force them to deal with you on a settlement or a plan, or you can file Chapter 13 bankruptcy, which is sort of like doing a credit counseling plan that is enforced by the court.

Before you destroy your credit, consider your needs for the next 5 years. Buy a car now if your car won't make it 5 years. You will have a hard time buying a car with bad credit. Most repayment plans and Chapter 13 plans last 5 years.

Do NOT cash in 401ks. 401k money is protected in a bankruptcy.

All my best to you. It will be tough, but you will survive. Check out www.creditinfocenter.com for tips on how to negotiate with credit card companies if you decide to go that route.

Years ago I used CCC--the beauty of it is that you do NOT ruin your credit. While similar to Ch. 13, it is FAR better for your credit report.

7 years ago we had to declare bankruptcy due to a business failure. It was the most difficult financial decision we have ever made but entirely necessary. We felt VERY bad about having to do it.

OP was looking for ways to avoid bankruptcy. CCC will advise her if bankruptcy is her only choice (as our attorney advised us with regards to our business). And they can negotiate eliminating interest...even interest that has already accrued. So your advise is a bit one sided...OP does not necessarily need to stop paying bills or declare bankruptcy--FIRST she needs to talk to CCC

 

[Virgderon]

Right, but it sounds like she did talk to a CCC. The "debt relief agency" sounds like a CCC. She did not qualify for a 5 year plan- she is asking if anyone does a 6 or 7 year plan.

As far as I know, they do not, because the longer the repayment plan, the less likely it is that people will stick with it.

Because of the extended time period to repay their debts, their credit card balances do not change significantly over a period of many years and the consumer feels like they have just fallen into yet another type of trap. Approximately 65 - 70% of the people who enter a CCC program are unsuccessful and fall off before the program is complete. These aren't very good odds....

 

[finz2left]

Head over to creditboards dot com. They are VERY knowledgeable!

 

[KKB]

Right, but it sounds like she did talk to a CCC. The "debt relief agency" sounds like a CCC. She did not qualify for a 5 year plan- she is asking if anyone does a 6 or 7 year plan.

As far as I know, they do not, because the longer the repayment plan, the less likely it is that people will stick with it.

But SO many "debt relief agencies" abound (particularly those that ARE for profit)...hard to say
PS good advice from you above, btw

 

[tinachris]

Consumer credit counseling is the way to go. Like previous posters have stated, they will work with you to determine what is the best plan of action for you. Like you, my husband and I wanted to pay off the debt we owed as we felt that was our responsiblity. My husband and I did this approximately 3 years ago and have about another 1 1/2 years left to pay off our debt. There was no income requirement and our agency had a limit of 5 years to paying off the debt. They worked with our creditors and had our intrest reduced dramatically so that the principal would actually begin being paid off. When we met with them, they thought we couldn't afford the payment each month, but we have (as what they thought we needed in the budget was way more than I actually spend- an example of this is they budgeted $100 for groceries a week--I spend around $30-70). While it has been tough at times, it is the best decision we ever made. Good luck! Christina

 

[Virgderon]

KKB, you are right. The "debt relief agency" sounds like a CCS, but it's possible that it is not. I forget the web site, but there is a list out there of reputable CCC companies- maybe because they work with the government? I wish I could remember how to find it.

In this tough economy, many people are trying to do a CCC plan just to reduce their interest rates. Some of the credit card companies are getting hip to this, and make it very tough to qualify for the plan, or refuse to work with CCC agencies at all. Barclays Bank is a good example. They will often ignore the CCC agency and try to get the consumer to work with them directly.

Or, if you call the credit card company directly, they will direct you to a CCS that they work with. You may not get the best interest rates and terms this way. Its kind of like sleeping with the enemy.

Just like anything else, its a good idea to shop around with CCC agencies.

 

[lovesmurfs]

It must be Consumer Credit Counseling Service, not any look-alikes or any old credit counselor. It is NOT a bankruptcy option, and they work with you and your budget, and with your creditors and collectors to pay the fees.

DO NOT follow PP advice about a car and go further into debt now. In or out of bankruptcy court, that will not show good will toward paying your debt.

Dave Ramsey's book is amazing (boards are at http://www.llnoe.org/), as is Your Money Map by Howard Dayton (Crown Financial Ministries - www.crown.org). Step by step -- you didn't get into debt overnight, and it's not going to get better overnight. Best wishes.

 

[Virgderon]

Lovesmurfs, I stand by my advice to look at the car situation before you go into bankruptcy. You can't go to work if you don't have a car. You can't pay off your debt if you can't get to work. If you are in bankruptcy, you won't be able to get a car loan.

I hear what you are saying about the bankruptcy court not liking it, but the bankruptcy court is not going to drive you to work every day.

 

[Chicago526]

CCCS is not a catch-all term for all debit relief or credit counseling companys. CCCS is a company in it's own right, supported in part by the United Way. This is one of the very few credit counseling services that are above the board and not a scam. The OP is from CO, here is a link to CO's CCCS program.

http://www.cccsnc.org

If after speaking with them, bankruptcy is still the last, best option, then there is no shame in it. You can't get blood from a stone, if you don't have the money, well then you don't. All you can do is learn from your mistakes and try to do better moving forward.

I also 2nd the advice of reading Dave Ramsey's books, no matter which route you go with, CCCS, bankruptcy, or working with your creditors on your own. He's got one of the best and most simple get-out-of-debt-and-set-up-a-budget plans I've seen. And don't confuse "simple" with "easy". It's simple to understand and set up, but it may not be easy to stick to at first, depending on how many bad financial habits you need to break.

Whatever happens, good luck!

 

[sadiebug]

I will contact CCCS here in Colorado next week. The original company that I talked to was one that I was transferred to by one of my credit card companies, and although they were very nice and helped me look at our current budget, I definitely want another opinion before we even think of filing for bankruptcy.

We have had some very bad habits in the past, and we thought we'd start digging ourselves out of debt this year once my DS was out of full-time daycare. We were going to pay off my car and then apply the car payment money and daycare payments we weren't making anymore to the credit card bills. Unfortunately, I lost my job in September and although I was fortunate enough to get hired on somewhere else within just a few weeks, I also took a big cut in pay. In addition to the cut in pay, my daycare bill did not go down as my new hours don't mesh with school hours at all, my medical insurance went up and I now have to pay for parking since the bus isn't an option with my new hours and the daycare schedule. I guess you know what they say about the best laid plans!!

 

[bumbershoot]

Head over to creditboards dot com. They are VERY knowledgeable!

Though they do have the tendency to try to weasel out of debt. Whereas with Ramsey, if you spent it, you should pay for it. Little bit nicer, karmically. There is no reverse golden rule, where "they are treating me bad so I'll treat them worse", like is being suggested by some.

I will contact CCCS here in Colorado next week.

We have had some very bad habits in the past, and we thought we'd start digging ourselves out of debt this year...

Good!

Definitely check out Ramsey and llnoe.com, then. Absolutely the best. I avoided it for so so long, despite seeing Dis'ers rave...silly silly me for avoiding it.

 

[Virgderon]

The "reverse golden rule" statement above is a tiny bit insulting, since I am assuming you are referring to my posts and a couple others.

Here is what happens with credit cards:

You open one with 10% interest.

Miss a payment, and your interest rate climbs up to lets say, 17%.

Oh, they charge you 36 dollars or so for being late too.

Miss a couple more. Call company and nicely try to work something out. Interest rate climbs up into the 22% range.

Card goes over the limit because of the new fees and higher interest rate. Credit card company charges over the limit fees.

Interest rate climbs up into the 29% range.

Call credit card company. Their representative informs you that they can't help you because you aren't behind enough yet.

I don't have any problem with paying what you owe, and a reasonable rate of interest. But the credit card industry doesn't play fair.

It is absolutely fair and ethical to ask them to work out an equitable payment plan.

If the credit card company would not like to work with you, what is the alternative but to settle or walk away? If you had the money to pay on time, you would not be in this situation.

We aren't talking about people who can afford to pay their bills but choose not to. We are talking about people who have lost their jobs, or had serious health issues and got thrown into a vicious cycle.

If that opinion makes me a weasel, then so be it. My husband has endured 2 layoffs in 8 years. This year we had to leave our home and travel across the country to get him a job. I lived in a nice house. Now I live in an apartment, and I am grateful that we can pay our bills.

I chose to attack the credit card problem in a business like way, and find the best way to deal with my debt. Everyone is getting paid, but I used CCS on those that would accept the payment plan, and will be settling with a credit card that did not choose to work with me.

By the way, the credit card that refused to put us on a payment plan? The bank that laid my husband off, and asked him if he wanted to go work in Banglagore, India.