Trying to decide whether bankruptcy or DMP is the better way to go

[Anonymous]

Hi all. This may be long, so please bare with me. I am looking for a reputable DMP to enroll in. My credit score went from 760 in May 2014 to 540 in September 2015. Basically, in May 2014, my fiance' and I moved from a cheaper less desirable area to a slightly more expensive, more desirable part of the city. On paper, we thought we could manage. However, that was not the case. There was a $300 rent increase and about $150 electric bill increase since we were on the top floor of the apartment building. Basically, we used a lot of credit to help supplement our income Not to mention, I had a medical concern come up and used credit to pay the bill as I have a high deductible plan with my employer and had not met my deductible. Our income is about $67k between the both of us. We did move into a more affordable place, but again in a less desirable area in June 2015. It cut the rent $200 and the electric bill dropped significantly, But Our CC debt is now about $20k. We were maintaining the minimum monthly payments and were never late until August. I made half payments on two CC's which resulted in late fees and it has basically snowballed from there. The minimums are now in the $80's-$120's, a lot of them because the interest free period expired. We have not used ANY of the cards since August.

We have been making small payments here and there, but it's not really helping and now one of the cards has cut the limit right to the balance causing a over the limit fee. I should mention that we have three children, one of which is in a private school and are in after school programs. We don't have cable, but do have Netflix and Amazon Prime. We do have the internet as my teenager in the private school has an internet class and does a lot of homework online. We ate out ONCE last month, and it was Little Caesers $5 pizza. We take sandwiches to work for lunch. My children take lunch to school. I have put things for sale on Ebay and either I am not pricing the item right, or no ones in the buying market. We explored one of us getting a second job, but we work opposite shifts now, and we don't have a babysitter (no family in the area). We are backed against a wall. So, I began searching for a DMP and found Greenpath. However, they could only offer $790 per month for 48 months. This wont work for us. I was hoping for more of a payment around $400-450. Greenpath was the only one I found and had good reviews. I've heard about Care One Credit but their reviews are all over the place. Can someone direct me to another DMP that is reputable and some advice on how to handle our current situation?  Or would bankruptcy be the better route?Thanks!

[mattmyFIC0]

I replied to your previous post with some info

[CH-7-Mission-Accomplished]

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@Anonymous wrote:

Hi all. This may be long, so please bare with me. I am looking for a reputable DMP to enroll in. My credit score went from 760 in May 2014 to 540 in September 2015. Basically, in May 2014, my fiance' and I moved from a cheaper less desirable area to a slightly more expensive, more desirable part of the city. On paper, we thought we could manage. However, that was not the case. There was a $300 rent increase and about $150 electric bill increase since we were on the top floor of the apartment building. Basically, we used a lot of credit to help supplement our income Not to mention, I had a medical concern come up and used credit to pay the bill as I have a high deductible plan with my employer and had not met my deductible. Our income is about $67k between the both of us. We did move into a more affordable place, but again in a less desirable area in June 2015. It cut the rent $200 and the electric bill dropped significantly, But Our CC debt is now about $20k. We were maintaining the minimum monthly payments and were never late until August. I made half payments on two CC's which resulted in late fees and it has basically snowballed from there. The minimums are now in the $80's-$120's, a lot of them because the interest free period expired. We have not used ANY of the cards since August.

We have been making small payments here and there, but it's not really helping and now one of the cards has cut the limit right to the balance causing a over the limit fee. I should mention that we have three children, one of which is in a private school and are in after school programs. We don't have cable, but do have Netflix and Amazon Prime. We do have the internet as my teenager in the private school has an internet class and does a lot of homework online. We ate out ONCE last month, and it was Little Caesers $5 pizza. We take sandwiches to work for lunch. My children take lunch to school. I have put things for sale on Ebay and either I am not pricing the item right, or no ones in the buying market. We explored one of us getting a second job, but we work opposite shifts now, and we don't have a babysitter (no family in the area). We are backed against a wall. So, I began searching for a DMP and found Greenpath. However, they could only offer $790 per month for 48 months. This wont work for us. I was hoping for more of a payment around $400-450. Greenpath was the only one I found and had good reviews. I've heard about Care One Credit but their reviews are all over the place. Can someone direct me to another DMP that is reputable and some advice on how to handle our current situation?  Or would bankruptcy be the better route?Thanks!

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Do not file bankrtupcy if your debt is 20K and your income is 67K.  You only owe about 4 months' worth of income.  It is not worth wasting your get-out-of-debt free trump card to discharge such a small amount.  With three kids and medical issues, you could get stuck with a million dollars in medical bills that you can't later discharge.

List the cards you have and the balances.  I would probably let one or more of them go to collections.  You an always settle it later.

Are you paying tuition for that kid in private school?  If you are, I hate to say it, but private schools are a luxury.   Depending on what it's costing you, that might be a case to cut.

[Anonymous]

So, I was wrong and underestimated my accounts. I'm more of $26k and not $20k. I hate doing this, but here I go:

Amex: $914

Paypal: $2500

Amazon $3315

BOA $4380

Walmart $4805

Barclay $1781

Chase Slate: $1942

Chase Freedom $465

Best Buy: $3742

Capital One: $2513

I'd like to go the DMP plan route and close a few and ONLY keep the Amex, both Chase cards, and my BOA and Amazon as it is my oldest account. I know this is bad, and I hate it. Yes, we pay tuition for his private school, it's normally about $12k per year, but we get a discounted rate due to my job so it's 9k per year. 

[Pway]

I hate to say cuts have to be made and that costly tuition needs to be cut.  Yes that is a luxry, I understand that education is important but with your situation that should be cut.  With an additional 9k a year from cutting that tuition bill you could get ut of debt in about 2 years or less.  You could avoid bk and a debt reduction plan.

[Anonymous]

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@Pway wrote:

I hate to say cuts have to be made and that costly tuition needs to be cut.  Yes that is a luxry, I understand that education is important but with your situation that should be cut.  With an additional 9k a year from cutting that tuition bill you could get ut of debt in about 2 years or less.  You could avoid bk and a debt reduction plan.

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I will look into this but I believe I signed a contract, especially getting this discount. I need to find my paperwork.

[CH-7-Mission-Accomplished]

Just remember, you have signed contract with each of those credit card companies, and they will sue you ... in all likelihood the school won't.  That wouldn't be good PR.

Also, a lot of private schools will make accomodations if you tell them you are having financial difficulties.  It would be worth the inquiry.

Your debt levels are enough to be uncomfortable, but honestly, these are not that high.  You owe about the same as an average auto loan amount.

I don't personally know how debt management plans work, but if they let you cut your payments and slash your interest while in the plan, that would be the way to go.  If you can't handle it financially, you can later file BK if you need to.

There is a certain disconnect here with paying $750 a month for private school tuition when that would more than allow you to pay off your debts.  I can only imagine what a tough decision that would be to tell your child, etc.  But sometimes kids just need to learn about some of life's lessons, like having to live within your means.

I'm not judging you, please don't think that.  I'm just play devil's advocate and ask you to sit down with your spouse, make a budget, see where you can cut, what you can sell, if there is any way to make some more money.

Also, some private schools let you earn the tuition amount by volunteering.  Is that an option for part of the tuition?

[Anonymous]

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@CH-7-Mission-Accomplished wrote:

Just remember, you have signed contract with each of those credit card companies, and they will sue you ... in all likelihood the school won't.  That wouldn't be good PR.

Also, a lot of private schools will make accomodations if you tell them you are having financial difficulties.  It would be worth the inquiry.

Your debt levels are enough to be uncomfortable, but honestly, these are not that high.  You owe about the same as an average auto loan amount.

I don't personally know how debt management plans work, but if they let you cut your payments and slash your interest while in the plan, that would be the way to go.  If you can't handle it financially, you can later file BK if you need to.

There is a certain disconnect here with paying $750 a month for private school tuition when that would more than allow you to pay off your debts.  I can only imagine what a tough decision that would be to tell your child, etc.  But sometimes kids just need to learn about some of life's lessons, like having to live within your means.

I'm not judging you, please don't think that.  I'm just play devil's advocate and ask you to sit down with your spouse, make a budget, see where you can cut, what you can sell, if there is any way to make some more money.

Also, some private schools let you earn the tuition amount by volunteering.  Is that an option for part of the tuition?

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Thanks. And I appreciate it. In order to bring all my accounts current, I have to pay $1662, which I of course do not have. Regarding the private school, My paperwork mentions no refunds, but doesn't state EXPLICITLY that I can't pull him, or this or that will happen. Guess it's a gray area. I'll be calling the school tomorrow because it would help. The only thing that bothers me is they take the tuition out automatically, meaning if it's a contract and I pull him out of the school, they may keep trying to collect. Then I'll have to look into closing my account. Don't think it will go that far, but at this point I am thinking of anything and everything that could happen.

[StartingOver10]

You can block the funds from being taken out. I agree with Ch-7 Rebuilding, the amount of debt is relatively small but the private school tuitition is high (relative to income). 

Speak to the school first, for protective measures then speak to your bank to block whatever auto withdrawal the school makes on your account.

Contact the creditors where you are behind and make payment arrangements. Normally you have to get beyond the frontline CSR's to the hardship department (different names at different companies).  Tell them you want to work out payment arrangements and then do it. From what I have done in the past (quite a while ago now though) they worked with me by reducing the interest rate and the payment amounts for 6 months and then I had to contact them again for another 6 month temporary adjustment. It is better than a bk for your particular situation. 

[bstone]

You mentioned wanting to keep several cards, while its been a while, when I was in college I worked for a DMP in sales. Most creditors require the accounts to be closed if they grant concessions like reduced rates, fees, etc. So a DMP probably isn't going to help achieve your goals either.