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Negotiating Debt

June 4th, 2008 at 11:22 am

This has been a journey and for the last six months,it has been a living hell. I had never had a credit issue in over 20 years and then the housing market crashes and like thousands of people; we have found ourselves in a personal finance dilemna. What to do and how to handle it?

There are several things that people do, some file bankruptcy, some go through debt management programs, some settle their debts with their creditors for less and some just take the approach of "do nothing and it will go away". Throughout this process I called "debt settlement companies" and did consider using a few of them. Then one of them told me to go ahead, try to settle myself and I would be "sued". I saw that as a fear tactic and felt that if they could do it, I could do it. I consulted with a bankruptcy attorney and he advised me that creditors don't want to hear from anyone but their customer and you could actually increase your risk of being sued by hiring a third party. So I sat down, added up my debt, took an amount of about 45% and decided that is what I would need. I also knew in order to be successful I would need to settle everything within 180 days before they were charged off. So I borrowed, received money from family and sold personal possessions and saved and budgeted every dime I could.

Now here I am, down to my last creditor and I only have about 60 days left on that account to settle it. I don't have enough money so I have cleaned out my shed, cleaned out my basement and am advertising a few items in the local paper. I'm selling some office equipment I had stored away and a rototiller. That should give me about $1,000 and will help with the process. My car is still broken, but right now this is priority. I have another used car to get me around until I can afford to fix my primary car; although that is in the garage right now with a warranty item that was replaced last year. I have two cars, one is a summer car and it's 9 years old and my primary car is 8 years old.

With all the creditors I dealt with, my hardest creditor to deal with has been Discover. They called frequently, sometimes 4 times a day. I would talk to them in the morning and they would call three more times before the day was out. They were difficult to deal with; they would always ask the same questions even though I knew they had notes. Then when you were done and I had told them I did not have a normal wage and couldn't make monthly payments, they would ask if they could charge my account for the amount due (like they didn't hear a word I said); they would then ask if they could speak to another family member and etc. Then they would say they were going to get someone to help stop the calls and they would transfer me to another collection person and put me through the whole thing again. I knew the routine so I would hang up when they tried to transfer me. I was very intimidated by them, I lost sleep and was a nervous wreck after talking to them. This is what they do, in the beginning when you are late they will agree to settle at 85%, then after about 90 days they start talking 60% and then one person told me Discover never settles for less than 60%, well about 10 days before chargeoff (charge off usually occurs at 180 days) they dropped to 50% of the total balance. I was able to settle my account at 50% just before charge off and that was a big tool they used to settle, "if you settle now you won't be reported as charged off, it will be an R-9 "settled" which is better than a charge off. So I made sure I settled before charge off. However, I pull my credit 10 days later and it is reported as a charge off by Discover. I called them and they said it is my problem and I have to dispute it with the credit bureau. So just one more nasty and one last insult.

What I have learned here is that if you are having a "true hardship" most creditors are sympathetic and will work with you. Citi called me and told me they were sorry I was in such financial distress and they offered me a settlement at 38%. I believe it is an industry secret rarely discussed, but debt settlement is real and available to people who cannot pay their debts and are in financial crisis.

My hope in blogging about this experience is that it will help others who are overextended and need to bring their lives back into control and financial stability versus filing bankruptcy.

What are the affects on my credit after this? My credit score is 630 and I think that after 12 good months, I will probably be back up, at least over 660. I have 11 negatives on my report and 32 positives, because this is the first time in my life I have had a problem, I will probably recover faster than some people will.

I was hoping to have this all done by the end of June, but that won't happen. I'm short about $1,500 to settle with my last creditor, my car is broke down, my son is graduating from high school, my daughter is getting married and I have some additional expenses I did not expect, i.e. some travel expense and dental expense. So it will be difficult but I will find a way.

I will be broke, but I will be credit card free.

12 Responses to “Negotiating Debt”

  1. aevans1206 Says:

    Broke but credit card free is so much better than the alternative. I wish I could send you something to either help out with the wedding or the graduation! I'll send good happy thoughts and hugs instead!

  2. managinglife Says:

    Thank you for sharing your experiences with us. I truly appreciate you providing me real life examples to my DS on the pitfalls and rewards of negotiating debt. He is is more aware and I even heard him educate one of his friends about credit card use. Thank you!

  3. Carolina Bound Says:

    I admire you for the way you are tackling your problems. What you have learned from this experience will truly enrich you in your post-debt life!

  4. creditcardfree Says:

    You really are an inspiration. It's one thing to tackle debt payoff, but to tackle it in the midst of creditors calling your home and insulting you at the same time is to be commended.

    I had a sister in law file bankruptcy and I had told her before it was possible to pay it off herself and make negotiations. I wish I knew your story then.

    Keep up the great work!


  5. KellyB Says:

    Thanks for sharing your story, you may never know how many people you helped! I'm impressed with the way you handled everything - selling off what you could so you were able to pay off your responsibilities. Good for you, you're almost to the end of it and hopefully once it is behind you you'll be able to move forward knowing you can be financially responsible. Best of luck and enjoy your son's graduation and daughter's wedding!

  6. koppur Says:

    I did settlement about a year and a half ago. One CC would not settle, so I am still paying that stupid one off. The other 2 were good. And the 4th, BoA, gave me nothing but problems. They refused to settle, then agreed to, then changed theri mind again, etc. I had lawayers calling me every day from them, even when I told them that they had to speak to the settlement company I was using because I had signed power of attorney over to them. They sucked and I will NEVER get another BoA sponsored CC again, nor will I do any business with then ever again. Good luck on your last payoff!

  7. boomeyers Says:

    Thank you for sharing this valuable information! It is nice to know there is a step you can take before bankruptcy!

  8. lost in debt Says:

    I'm so glad I have a place to blog about this experience and I've met so many nice people here that have given me hope and encouragement. Thank you for all the kind words and support, it means a lot to me and has helped me to keep moving forward. Some how blogging about this experience has helped keep me sane throughout some very difficult days and nights.

  9. lost in debt Says:

    Koppur,

    From your comments I'm assuming you hired a third party to help you settle your debt. That is what I was warned about by the BK attorney I consulted. BOA was the first creditor to settle with me and they settled at 38% over a four month payment plan. I think there is some truth in what the attorney told me; creditors only want to deal with the customer and hiring a third party increases your risk of being sued and etc. I'm so sorry it didn't work out for you, maybe if you are still having problems and are overextended, they would talk to you? The lawyer I talked to said he wouldn't talk to my creditors only if I got sued because them minute he talked to them for me, they would assign a lawyer to my case.

  10. HelpMeFriend Says:

    "My hope in blogging about this experience is that it will help others who are overextended and need to bring their lives back into control and financial stability versus filing bankruptcy."

    I sure did learn from your post. I was one of those who, sat and did nothing, let the phone ring, ignored the letters, and it all caught up with me. I am only $3,000 in debt on my credit cards, but that is a lot to me, who makes less than $200 every two weeks. It is amazing that I pay my rent and lights, let alone phone and credit card bills.
    I fixed my credit once. You thought I would have learned the first time.

  11. momoffour Says:

    OK...I am now caught up on where you are in your financial situation. I am so proud of you!! That you did this yourself is even more inspiring!! GREAT JOB!! I have one question. I am not exactly sure how many days late I am. I have an approx idea. The debt settlement person I am using has told me not to worry about it, he will contact me when it's time, and to NOT speak to my creditors when they call. He also assured me that once I retained his service they would cease calling. I DID retain his services and they have NOT stopped calling. I am now thinking his telling us to "NOT speak to the creditors who call" is his trick to avoid us settling directly with them. He had me believing if I spoke to them I could screw up any "progress" he has made in working on my accounts. So...my question to you is: did you call your creditors to find out when charge off was going to occur? I would love to take care of this myself and not have to pay out any more money to someone else. I just want to be DONE!!!! and you almost are. You should go on Oprah
    Thanks for any advice~

  12. Missy Says:

    I just found your site after searching for help with credit card debt.

    I appreciate the way you are working to try to pay off debt, without declaring bankruptcy. Your posts are very informative, and I'm sure I'll return, as I've got a long way to go to pay off all the debt I've accumulated.

    Great site!

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