Need advise for parents with large debt, business, and house

[Anonymous]

I've been reading the posts on here and I have learned so much from every one of you. Now I need some information from the wise members of myfico to give me some feedback on what my parents should do in regards to their debt. My parents bought their first home in 2001 (still living there) and they decided to open a small grocery business store in 2003. For the last 3 years or so, they've had a decrease in sales with the business, which resulted in charging more onto their open credit cards. It has gotten so bad to the point that we have gotten together as a family to talk about this issue and try to find out ways to help pay all their bills on time each month. Here is more information on my parents situation, and any help from any one of you will be greatly appreciated!! One last thing, my father also works full time in addition to the store, so their annual income before tax is about $53,000 (from the business and the side job).

My parents have a total of 7 credit cards with credit limits ranging from $5000 - $20,000 on each card, and I can only assume that they are all close to being maxed out. 

* 1 BOA credit card 

* 1 Wells Fargo credit card

* 1 Advanta credit card (I'm not sure what Advanta is)

* 3 Chase (2 of them are credit cards and 1 is a line of credit)

* 1 credit card through their local credit union

My parents also have their first mortgage of $2500 per month, and a second mortgage of $800 per month. In addition, they also have a monthly lease for the small business for $1000 per month. Along with all the utilities from home and the store. After all the monthly expenses, they end up short most months which is causing them to pay late on all their credit cards. I can only assume that all the credit card companies for their cards has increased all the interest rates, which is making it even harder for them to bring down the balances. 

It seems that the only options for them at this time is to call each credit card company and ask to be put on a hardship program. If that doesn't work out, then call up a credit counseling agency and see what they can do as far as lowing the apr on all cards and lowering the mininum payment, or they can file bk, which would be their last resort.They really don't want to file for bk because they don't want to loose their home.. if they do file for bk, will they loose their house?

Please help, and thanks for reading

Tiffanie

[GregB]

I can only give you a small bit of help on this.

Advanta is a Credit Card Company specializing in small business. Due to a large number of defaults from those customers, they closed all Credit Cards May 30. That means your parents can't use it anymore. Any balance that they had will need to be paid down with the same minimum payments that existed before they closed.

Something is out of balance here. Perhaps something has changed like business has gotton REALLY bad - like mine has. $53,000 yearly income before tax will only let them pay taxes plus the first and second mortgage and leave only a few thousand a year for everything else. I hope the first mortgage includes taxes and insurance!

Unless they increase income, it seems there would not be enough left to pay the credit cards off even at zero interest.

[Anonymous]

I don't know anything about a business BK, but with Chap. 13 BK I believe you're able to keep your home and car.

[Anonymous]

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@GregB wrote:

I can only give you a small bit of help on this.

Advanta is a Credit Card Company specializing in small business. Due to a large number of defaults from those customers, they closed all Credit Cards May 30. That means your parents can't use it anymore. Any balance that they had will need to be paid down with the same minimum payments that existed before they closed.

Something is out of balance here. Perhaps something has changed like business has gotton REALLY bad - like mine has. $53,000 yearly income before tax will only let them pay taxes plus the first and second mortgage and leave only a few thousand a year for everything else. I hope the first mortgage includes taxes and insurance!

Unless they increase income, it seems there would not be enough left to pay the credit cards off even at zero interest.

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GregB,

Your right, the amount of money my parents are making per month is basically paying only the first and second mortgage, and the lease for the store. They are paying all the other stuff like utilities, credit cards,  and food with what's left over. They are also getting help from myself and my younger sister off and on, but I'm afraid we won't be able to help much longer because we have our own bills to take care of. I really don't want them to file bk, but I just can't think of any other options that would work better for them. That's the reason why I've decided to turn to the fico forum for some advise.

[haulingthescoreup]

Without a sudden extra source of income, all I can think of is BK or a DMP (debt management program.) These are different from debt negotiation programs, which have you destroy your credit by racking up lates, in hopes of making your creditors cave.

You might want to read the link from the FTC consumer website that's linked in my siggy below: Knee Deep in Debt.

But without a significant increase in cash flow, it might have to be BK. I hate that for your folks --I'm sure that they had a dream that just didn't work out.

[Anonymous]

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@haulingthescoreup wrote:
Without a sudden extra source of income, all I can think of is BK or a DMP (debt management program.) These are different from debt negotiation programs, which have you destroy your credit by racking up lates, in hopes of making your creditors cave.

You might want to read the link from the FTC consumer website that's linked in my siggy below: Knee Deep in Debt.

But without a significant increase in cash flow, it might have to be BK. I hate that for your folks --I'm sure that they had a dream that just didn't work out.

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Thanks for the info, I will most definitely check out the link you provided!