06-29-2009 04:12 PM
06-29-2009 04:54 PM
Creditwherecreditisdue, I'm assuming your question about not filing for bankruptcy was directed at me.
I've given it a lot of serious consideration and have met with two different bankruptcy attorneys and have decided it is not in my best interest. I would have to file Chapter 13 and with my income and a 5 year repayment plan I would pay back every cent of what is owed on those credit cards over the five years. The attorneys told me I could work out the bankruptcy repayment plan in such a way that I would have more money per month than the budget I'm living on at the moment which would be nice, but I would be on that budget for 5 years. I am planning to pay off the cards over 3 years and then I will have a LOT more money in my budget and I won't have the BK on my CR for the next 10 years.
As far as why I got stuck with the CCs in the divorce and not my ex - she took her student loans (well over 100,000), the two mortgages on the house (along with the house, but it is upside down) and a host of misc. bills that I didn't know anything about. As a side note, she was not able to refi the house into her name and is not making the mortgage payment which is now showing over 120 days past due. If I had the cash, I would make the mortgage payment and then have the court deduct it from the over $3,000 a month being garnished from my wages by the family court, but I simply don't have the cash flow.
But, with each month that passes I am in a better financial situation than I was the month before. I haven't been able to say that for 20 years. Not a day goes by when that thought doesn't put a smile on my face.
06-29-2009 05:56 PM
I am planning to pay off the cards over 3 years and then I will have a LOT more money in my budget and I won't have the BK on my CR for the next 10 years.
A DMP extended over 5 years might also reduce your CC payments and protect your from AA that seems all the rage these days. It wont trash your credit like a BK or debt settlement will and open the door for life after DMP. If you have extra money you could always pay towrds the CCs while in DMP to reduce your time there.
07-02-2009 08:03 AM
To all on forum,
Laying it on the line.
I'm a single mother of a 13 year old and have decided I'd like to get completely out of cc debt asap. For the first time in 50 years I've checked my fico score, and am making a budget.
Although my 13 would still like an allowance, I'm bound and determined to live frugally and pay down everything.
I have a huge question for those of you on the board. Is it better to take the bank's terms of lowering the interest rate to 4.75 and then take the hit on the fico score? I'm guessing that this will lower my debt to something ratio
I just got off the phone with Bank of America. I have two credit cards through them that were initially MBNA cards. One is an NEA card with a 10.35 interest rate, the other was formerly a desert schools federal credit union card with a 19.99% interest rate. I have 13,266 on the first card and 16,900 on the second card. The offered me a reduced payment plan wherein they would lower the interest rate to 4.75 and 5.25 respectively for 60 months. The catch is that it would appear on my fico score (which is currently 633) that the accounts were closed at the customers request.
I have two other cards Dillards/Am Express and Kroger which I use to pay monthly expenses in full because their interest rates are in the 20's
I make 72,400 a year. I am paying $265 a month against a loan against my TSA.
Is it better to take a loan against my TSA (again) to pay off the higher interest cards and keep them open? I'm going to guess that if it's the fico score I care about, it would be better to take a loan againt the TSA (5.5% interest) and pay down the 19.9% credit card. And keep the line of credit open.
If it's the debt I want to get out of, it's the take the deal offered by B of A.
I'm new to even looking at this credit business, but have realized that I HAVE to get it down to zero.
I own a condo that's worth 269,000 on which I owe 75,000. B of A also offered me a loan reduction that would add almost 6,000, but would lower the interest rate to 4.75 from the current 7.76%
Doing is mind boggling for me. But I want to get completely out of debt.
I've even thought of taking the Arizona teachers retirement from the public school at $3,000 or so a month and then get a 45,000 job at a private school or a charter school or some other kind of job just to pay everything off.
Any voice of experience out there who actually likes to think all this through? It's mind boggling, overwhelming, and a relief to actually face it.
Thanks ahead of time to anyone who wants to respond!
07-02-2009 11:02 AM
To all on forum,
Laying it on the line.
Your FICO score does not Matter.
Your FICO score does not Matter.
Your FICO score only matter is you are in the process of securing a credit line, trade line or mortgage, or will be planning in the next year or two to acquire a large trade line or mortgage.
Your FICO score is a snapshot of the data in your credit report of the second they take the snapshot to compile the score.
Do not worry about short term drops in score (as long as the result will not cause penalty interest rates to accrue on existing balances, or completely kill you getting any credit if something bad happened) if in the long run your score will bouncce back much improved.
If dropping an interest rate on one High Balance account from something in the high teens or twenties to a 4.75 rate will help you pay it off faster...do it. You are trying to pay debt off. and that will free up a lot of money to make payments on your balance.
Although I am curious what your FICO score is?
really important: You need to start doing math yourself.
The 19.99% card you can probably pay off with a signature/personal loan from your bank or credit union that will drop the rate considerable.
The 10.35 rate card? Not really worth it to "close" it for a 4.75 rate Unless you do not want to keep it
Assuming no new charges and a minimum payment of 300 a month....it would cut in half your interest each month, but honestly you can just addd an extra 50.00 a month to compensate.
now if Bo A will re open each account...that a good thing.
But honestly none of your balances are comparatively that high. You could easily secure other consolidation type loans to pay them all off at a lower aggregate rate.
Personally I think someone who makes 72K a year and has almost 200K in equity in their home should not have any loyalty to a 19.9% card.
I would shred that one and find some other lender out there willing to help you.
In all honesty:
!- if you have a family member who can sponsor you into NFCU or USAA do it.
2- If not join Alliant Federal credit union.
In either case you will probably qualify for ccs with lower interest rates and for personal loans of lower rates in general. Take them and pay off then cancel your underperforming cards.
And then you can close both B of A acounts.
Credit cards are like employees of your own personal company. If they are not working for you, Fire them.
You can find a lot of information and loan calculators on bankrate.com
07-02-2009 11:18 AM
... I have 13,266 on the first card and 16,900 on the second card. The offered me a reduced payment plan wherein they would lower the interest rate to 4.75 and 5.25 respectively for 60 months. The catch is that it would appear on my fico score (which is currently 633) that the accounts were closed at the customers request.
If you do this you will crush your FICO score and most likely make yourself totally non-credit worthy except for possibly the most sub-prime of the sub-prime lenders. (Your UTIL will be much more that 100%. The impact on your FICO score - which for the most part equals creditworthiness - will be devistating.) With your income and home equity there has to be a better alternative. Consider a re-fi or a consolidation loan from a CU.
07-02-2009 11:27 AM
I would disagree that she should take the 4.75 deal and close the account. That would hurt her score and then raise her interest rates on other cards possibly. I think the best thing may be to use her equity or as you said get a consolidation loan.
Just don't be to quick to take a deal that you don't know all the repercussions to your score and other cards.
07-02-2009 11:48 AM
I would disagree that she should take the 4.75 deal and close the account. That would hurt her score and then raise her interest rates on other cards possibly. I
I told her not to take the deal on the 10% card and that she should be able to find alternate lower financing on the 19%.
Now if she was unemployed or had horrible credit already or was recently underemployed thats a completely different story.
07-02-2009 12:53 PM
Thanks so much for your comments! My fico score is 633. Not great, but not terrible.
I'll take some time to do the math, and mull it over a bit more. I have to wait a few weeks to get the required signature from my employer,(Jan 1st new requirement) but I'm thinking of taking a 5.5% loan against the TSA for 14-15,000 and taking 2,000 reimbursement from my flex plan would pay off the 19% card. Becauses both cards are from B of A, I coud then request that they transfer the line 17,000 line of credit over to my other NEA 10.35% card and keep paying as much as I can to get that 13,000 paid off. Because of the new law that went into effect in Jan, I have to wait a couple of weeks until the school district staff is back on board, in order to get the required signature. I guess that's sort of like taking a second mortgage in that the lower interest rate is a secured loan as opposed to signature credit card loan. I know Susie O would caution against moving unsecured loans into secured loans, but I'm healthy, have the option of retiring and still getting an income, and it would greatly reduce the % rate.
I asked the TSA folks is they report the amount loaned as if it were credit, they said no. Then once my debt to credit ratio is better (13,000 in actual loans on a 30 limit would look much better) I'd guess I could get some other card with a low introductory rate for transfered balances.
I have an old reliable car (2000); don't plan on getting a new one. I don't plan on moving. But I do want to get out of debt w/in 5 years.
Because I've begun the loan modification process w/ B of A on the house loan, (to reduce the 7.69 interest on the 75,000 loan to 4.75...although they tack on 5-6k origionation fees to bring the loan to 81k)
Once that loan goes through I could consider a second morgage or low interest cc card. But I'm still pretending I'm poor and will live like a church mouse until the cc and TSA loans are payed off.
My son is in the last year (8th grade) of a private school. He would much rather go to a good public school rather that the Jesuit College Prep that is just down the street from us. If I let him do that, I think I can definately use that tuition payment to get out of debt within the next 2-5 years before college costs come up. (By that time, I'm going to help him find full scholarships!)
It is a daunting task to undertake this plan, but I need to make one and stick to it! I really do appreciate the comments and advise.
I'm glad to hear that you don't think 30k is too much debt! It's a huge chunk to me.