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What to do Payment Plan/Debt Settlement?

July 1st, 2008 at 02:55 am

I am down to may last creditor and I am also down to the last money I have. I have approximately $4,000 that was given to me to use for debt settlement. My last creditor wants $4,100 right now to settle my final debt. This is my dilemnia; I only have $4,000 right now, my clutch is going in my remaining car (my last blog explains second car is probably being totalled), my tenant gave notice she is moving out of my second home so I need to give her back $1,600 for her last months rent and deposit, I need to purchase a wood pellet stove before winter ($2,000) or I'll never be able to afford fuel for the winter and I need to move. My house may not sell and if it doesn't, I have to find a tenant before winter and I won't be able to rent the house for what I owe monthly, I'll be short about $150 a month; better than a full mortgage payment and paying to heat an empty house.

So my last creditor has offered me two options to choose from; first would be 0% financing for 5 years on my balance. This means the nightmare is over, one small payment until it is paid in full (giving a better credit rating) and the ability to use my reserves for necessary car repairs and the wood pellet stove. The second option is debt settlement of $4,100 (55%) which will clean out my cash reserves leaving no emergency money and will pay off my final credit card debt.

I have additional funds coming in the form of an insurance check on my totalled car, which I wanted to use to pay off my remaining vehicle. I may have to trade my remaining vehicle next year as it is 9 years old and is very expensive to repair and it seems to be having more problems now, so next year I will be able to trade the car and not be tipped on my equity or I could use the insurance money to fix the clutch and buy the wood pellet stove and do the debt settement.

I'm leaning toward the 0% financing for 5 years and I'll pay more monthly to pay it off early. This way I will have money in the bank and be able to take care of expenses coming. It will leave me with a more positive credit rating on this card, but I will still owe $7,500 in credit card debt; I had wanted to get rid of all credit card debt, but I guess this is better than having the possibility of not being able to fix my car or heat my home this winter. It will take me a few more years to be credit card free, but the nightmare will be over and my credit will start recovering.

What would you do?

12 Responses to “What to do Payment Plan/Debt Settlement?”

  1. sounderella Says:

    I would probably take the 0% and pay it off that way if money is so tight. Just take whatever/any extra you have and put it towards that every month. I think $342 a month would be able to take care of it in 12 mths.

    My question would be, how much do you owe on the 9 yr old car and what is your monthly payment like?

  2. Lost in Debt Says:

    I only owe $5000 on the car (money I borrowed for my sons college and used my car as collateral) - payment is $249 per month at 8% interest.

  3. Ima saver Says:

    I would take the 0% offer . Good luck!!

  4. sounderella Says:

    Ok then yeah take the 0%, pay your car off with the check, and use that car payment towards your c.c. Maybe it will last you another year so you can pay off the card??

  5. CouponAddict Says:

    You stated that the 4K was for debt settlement. I would find a way to come up with the $100 and get that monkey off your back. Have a yard sale, Babysit, Donate Plasma, Return recent unused (unneeded) purchases to the store.

    The other option is good, but you said the $ was for the debt settlement so dont second guess yourself so close to the finish line. If you get this final debt gone I am sure you would do whatever it took to stay debt free and find a way to pay for upcoming expenses.

    Good Luck!!

  6. Lady T Says:

    I would take the 0% offer, no doubt about it! I just want to say I've followed your blog since you started it, and I think you are a very strong, amazing woman. You have been through a long, extremely difficult ordeal and now it's almost over (even if you take the 0% deal, you are still very close to being done)! I wish you all the best for your debt-free future!!! Smile

  7. NJDebbie Says:

    I agree with Lady T. I remember reading your initial blog and I could almost feel your despair at that moment. Kudos to you for making the best of it and staying strong. I would take the 0% interest on that $4000.00 debt since you will need to use the funds for necessary things. You are an inspiration. Stay strong and good luck. Smile

  8. cptacek Says:

    I don't think the option is $4100 at 0% or $4100 now, is it? You said that $4100 was 55% of what you owe, in other words, you owe $7500, and they are offering for you to pay it off for $4100, right? If that is the case, I would pay off the $4100 any way you can.

  9. Lost in Debt Says:

    You are righ cptacek - two options; pay the whole bill of $7500 at 0% financing for 5 years or $4100 as a settlement.

    I decided that I needed what money I had left to fix my car and put in a wood pellet stove before winter and get 3 ton of pellets. Maybe I am panicking but I don't know how most Americans are going to afford heating costs this winter; myself being one of them. So I am planning ahead because I have two houses, no tenant and nothing is selling.

    I talked to Sears yesterday and they agreed to a $1350 down payment to bring my credit current and $125 a month at 0% financing until paid in full. So my remaining balance is approximately $6,100. I will definately try to pay this off as soon as possible. I still am selling some personal things; having another moving sale and trying to find more work.

  10. helpmefriend Says:

    If you take the 0%, you have to pay $8,200 right. You said that it was half off for the settlement. If you can't come up with another hundred dollars and pay that off, you can always find a way to make the car go, or take a bus. There may be someone out there that is in desperate need of a house and willing to pay the extra $150. Also, is your current tennat due this months rent back? The deposit only goes back if the house is in great shape and they way it was when they moved in.
    Good luck.

  11. momoffour Says:

    Sent you an email earlier..before I got caught up on you. You truly are an inspiration!! Your instincts are so good now, and I am so happy to read of your good decisions. You are truly my hero...and I hope someday my good sense (HA...and cents) can inspire someone else to take control of their financial life

  12. FreeFromCreditors.com Says:

    It is also a good option to explore alternatives to bankruptcy, debt settlement, debt consolidation, ect., by finding out what it would take to make yourself judgment proof. Being judgment proof makes it so you don't have to payback any creditor a penny unless you want to.

    The term judgment proof is most commonly used in tort law contexts to refer to defendants or potential defendants who are financially insolvent. Even if a plaintiff were to secure a legal judgment against an insolvent defendant, the defendant's lack of funds would make the satisfaction of that judgment difficult, if not impossible, to secure. In such cases plaintiffs might move for wage garnishment based on the judgment. However, if the debtor is retired or collecting Social security or other social welfare this is not possible, there are also other ways debtors can protect non-exempt wages from garnishment

    Judgment proof is not an official defense. If sued, the defendant does not claim "judgment proof" the same way they would claim assumption of risk or contributory negligence; rather, judgment proof kicks in after the judgment has been rendered, and it is time to collect.

    Once you are judgment proof creditors can sit around and cry all they want and still collect nothing. After enough time has expired you can offer your creditor pennies on the dollar. Eventually the creditors will decide that it is better to take the pennies then to sit and receive nothing.

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