topic Re: CC debt reduction advice in Credit Cards

CC debt reduction advice

Anonymous — Thu, 01 Aug 2013 00:42:27 GMT

My brother is asking me about debt reduction because he thought I went through it, but I actually had my credit cleaned up. I was wondering if people have advice/opinions on this. I don't want him to make a mistake so I want to try to get some information from people that may have done this and might have some good advice.

He has about 80k in CC debt and can only pay the minimums... He said the one place he called said that they can try to reduce his debt by 50%. They will charge him 30% of what was reduced as a fee. They will pay off the remaining balances and then he will pay them each month a payment to pay off what they invested to pay off the remaining CC debt.

Re: CC debt reduction advice

Anonymous — Thu, 01 Aug 2013 00:49:42 GMT

You might want to review this thread.

http://ficoforums.myfico.com/t5/General-Credit-Topics/FTC-webpage-Knee-Deep-in-Debt/td-p/382598

Hopefully others can chime in with more detailed advice.

Re: CC debt reduction advice

SnackTrader — Thu, 01 Aug 2013 00:56:23 GMT

My personal advice would be to not search for the easy solution. If it sounds too good to be true, it usually is.

The rest of this should not be considered advice, but rather ideas. In the end he needs to find the best solution for him, and I have no personal experience to go off of here. But things he could do include:

cut ALL non-essential services, or reduce them to the basics (cable, cell phone, Internet, etc).
consider if he can live in another location at a cheaper cost (much easier if he rents than if he owns of course).
Stop going out to eat, movies, amusement parks, anything like that.
He needs to make a budget and stick to it!
If he doesn't earn enough to get out of debt even after all of that takes place, he may want to consider calling his credit card companies and see if they are able to help him.

Others have ideas?

Re: CC debt reduction advice

cclee — Thu, 01 Aug 2013 01:03:53 GMT

He should contact the non-profit Consumer Credit Counseling Service, their number is 1-800-388-2227, they can locate a local agency. Those places that say they are going to reduce his debt, are just going to stop (or have him stop) paying on the cards for a few months and then negotiate a pay off, his credit will be trashed and it is something that he can do all on his own for free. Don't pay a dime to a debt reduction company.

Re: CC debt reduction advice

myjourney — Thu, 01 Aug 2013 03:06:59 GMT

@Anonymous wrote:
My brother is asking me about debt reduction because he thought I went through it, but I actually had my credit cleaned up. I was wondering if people have advice/opinions on this. I don't want him to make a mistake so I want to try to get some information from people that may have done this and might have some good advice.

He has about 80k in CC debt and can only pay the minimums... He said the one place he called said that they can try to reduce his debt by 50%. They will charge him 30% of what was reduced as a fee. They will pay off the remaining balances and then he will pay them each month a payment to pay off what they invested to pay off the remaining CC debt.

Just don't jump to fast

Do the research before making any moves

Best wishes

Re: CC debt reduction advice

SoulMaster — Thu, 01 Aug 2013 04:39:21 GMT

Dave Ramsey's Total Money Makeover book has worked for millions of people. I didn't use it, I filed a BK to avoid IRS=Jail kinds of problems... That said, I follow a lot of the advice in that book now that I'm post BK. (Budgets, emergency funds, savings, his car plan, etc).

Obviously, I completely ignore the part about not using credit!

Still, great book, and the Snowball plan is a great psychological mind-hack. (Though you do pay a bit more in interest over the long term).

Good luck to your friend,

-SM

P.S. If it's going to take more than 2 years 4 months for him to pay it off, he may want to consider BK7 (if he qualifies). BK should be used only in a last resort, from what I read in your OP your friend isn't bankrupt. And I use 2 years 4 months as an example because that's the time from filing to a 700 credit-score, if you do it right.

Re: CC debt reduction advice

djc1puno — Thu, 01 Aug 2013 04:44:44 GMT

Yes but even if you get to 700 after 2-3 yrs getting approved by the big prime banks will be difficult...but i agree bk should be last resort

Re: CC debt reduction advice

compassion101 — Thu, 01 Aug 2013 06:39:45 GMT

Yeah but 80k is alot. If his income is under 100k without a house that he has alot of equity in, BK is an option to seriously consider.

Re: CC debt reduction advice

Anonymous — Thu, 01 Aug 2013 07:27:18 GMT

If your brother has property, he might want to get an equity loan on it. Chances are those credit card companies are going to try obtain a lien on those properties through a judgement if he falls behind anyhow (one of the worse case scenarios).

Depending on his income and the feasibility of paying back that debt, he may want to consider filing bankruptcy. Do talk to an attorney. There are many free non-profit legal aid associations. Google search for one in your area.

That debt reduction company is offering an awfully bad deal. Assuming they reduce debt by 50%, but they charge 30% of what's reduced. Your brother is still on the hook for 65% of those debt. Maybe he could just fall behind on the payments for those cards, and then negotiate a settlement with the banks directly. This approach will save him more money, but at the same time it will floor his credit scores from all the lates and charge-off notations.

Re: CC debt reduction advice

Anonymous — Thu, 01 Aug 2013 14:19:34 GMT

Thanks for all the replies. I dont think BK is an option for him with the money he makes. He is not overspending on 'luxury' items becuase he cant afford to having all this debt. He is just trying to come to a logical decision on how to handle it. He also doesnt have enough equity in his home to get a loan. Tough call, but having seen the info on these debt reduction 'scams', I wouldnt go down that route and have informed him of my opinion

Re: CC debt reduction advice

Anonymous — Thu, 01 Aug 2013 15:48:40 GMT

Consumers with high interest credit cards can contact a non-profit Credit Counseling Agency and enroll in a Debt Management Plan (DMP). A DMP is a program in which a credit counseling agency takes outstanding credit card bills, lowers your interest rates to single digits (or 0%) and consolidates them into a monthly payment issued to the credit counseling agency so you are able to pay off your bills. The credit counseling agency then disperses these decreased monthly payments to your creditors. Clients receive information on their program through monthly statements, 24-hour online account access, and continued receipt of credit card billing statements. In this way, a check- and-balance model is provided for the consumer. Some benefits of the program include dramatically reduced interest rates, past due accounts brought current, waived over-limit fees, waived late fees, and in some cases, reduced balances owed to ensure debt liquidation in the shortest possible time frame.