DEBT SETTLEMENT VS BANKRUPTCY

[Anonymous]

My dad owes about $14,000 on credit cards, most of the money owed is from family members charging on his cards.  Anyways they are not paying him back like they are supposed to and he is struggling with his money to the point that he can't afford normal everyday needs & he is taking money out of his savings to avoid being late on the credit cards.  He is 75 yrs old in poor health and him worrying all the time about money is making things worse for him.  I'm trying to figure out what I should tell him to do.  I've spoken to Care One Credit & they offered to give him a debt settlement of $265/month for 5 years.  I'm just wondering if this is a good idea or if I should just convince him (due to his age) to just try & file bankruptcy and just be done with it.  Any advice will be greatly appreciated.

Thanks,

Monica

[chasmith]

You don't say how many cards...

Chances are you could do as well as Care One and negotiate accommodations.  You need to point out that your dad is retired, and has a limited (and probably at least partially judgement proof) income.  The cards will be cut off from future charging in any event, and it sounds like he doesn't have future credit needs.

[Anonymous]

Thanks for responding.  He has 7 credit cards & he's finally to the point that he doesn't even care if his credit score is affected.  Credit card companies will offer a settlement by calling them directly instead of using a debt settlement company?

[chasmith]

It's possible to negotiate settlements with any creditor, you have to convince them it's in their best interest.  The problem with credit counseling / debt settlemt companies is they takef ees first, and some are scams, they take payments, never send them to creditors and debtor gets sued anyway. Getting this resolved will be hard and probably needs you to act for your father.  Here's an idea how I would suggest doing it:

Gather up all the statements to be absolutely sure what you're dealing with.  Be sure what he can can pay monthly.  ($14,000 over 60 months without interest would be $233, at 5% $264.20, loan calulator is here http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx).  Figure what the payment over 60 months at 0% would be for each card.

Get a limited power of attorney from your father to deal with these creditors.  You should be able to get a form online or in an office supply store.  Having this gives you something to prove you have the right to deal for him, companies may refuse to deal with you otherwise.

Write to the correspondence address on each card, I would send CMRR and also First Class.  Letter would be something like this:

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Dear CCC:

I am writing you for my father, XXX.  XXX is 75 years old in in ill health.  He wants to resolve the balance owed to hs creditors but cannot pay on the current terms, and has given me his power of attorney to act for him. 

XXX proposes to pay his debt to you of $YYY.yy over 60 months at 5% (five percent) interest in equal monthly payments of $dd.cc.  This is the maximum pament XXX can make.  Upon receipt of your written agreement payments will begin.  Until the payment plan is agreed to XXX will not be able to make further payments on this account.

You are instructed to deal only with me under Power of Attorney for XXX.  Please do not contact me by phone, I will accept correspondence at the following address:

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As an alternative to trying this yourself, look in to a non-profit credit counseling firm.  Local seniors groups, AARP, or local legal aid may be able to make a recommendation.