topic Re: 20K in CC Debt and trying to be Proactive in General Credit Topics

20K in CC Debt and trying to be Proactive

Anonymous — Thu, 24 Mar 2022 01:44:04 GMT

Long story short, Covid, some devastating personal life events, and other obstacles have helped me rack up around $20,000 in credit card debt between 3 cards. I know I will eventually default on this amount and paying the minimum with interest is unsustainable as well. So my question is what should I do?

I've put about 15 hours of research into this which has landed me on this forum. I started off calling non-profit debt consolidation firms that negotiate with creditors and you pay a monthly fee for their services. However, I've read mixed reviews/opinions on these companies and if they actually really do anything.

I have also just recently talked to a company **Mod Cut - Removed per myFICO TOS** that was helpful and coached me on how they could help me with the default process with an attorney and negotiate a better settlement. They were actually very nice and helpful explaining everything. For me, it seems like a good option for a relatively small upfront fee of $400 and a back end charge of the percentage they save me in the settlement. Using them would have me grant one of their lawyers power of attorney to act on behalf in negotiations with credit agencies/collectors. I'm unsure if this is a good idea.

As with anything nowadays, I did some research on them and they have an A rating with BBB but I read a few negative reviews on Trustpilot stating that getting a local attorney might be better (in much harsher words) and recommended checking out this forum to get advice about debt situations.

So here I am. And in the age of this internet it's hard to know who's legit and if they're telling the truth about their experience. In conclusion, any advice is appreciated on how to deal with this debt. I haven't missed a payment ever yet and am merely trying to be proactive and prepare myself for the inevitable default or a way to avoid it completely without drowning in interest. My credit score is not my main concern now and it's the debt itself. Thanks in advance for any help.

Re: 20K in CC Debt and trying to be Proactive

pizzadude — Thu, 24 Mar 2022 02:12:28 GMT

Hi @Anonymous, welcome to the forums - I removed your duplicate post in the Bankruptcy forum, please do not post the same message across different forums. Also I've removed your reference to the credit repair company you mentioned in your post.

Regarding your situation, can you share your approximate interest rates / balances / creditors ? I understand that your main concern is the outstanding amount but any settlements will have a significant negative impact on your credit for years to come. Have you looked at any options to consolidate / refinance into a personal loan or similar?

Re: 20K in CC Debt and trying to be Proactive

Anonymous — Thu, 24 Mar 2022 02:32:51 GMT

No problem. I'm new here so my apologies for any minor rule violations.

My approximate interest rate and balances are currently:

$4500 at 20% interest

$6500 at 10% interest

$9000 at 12% interest

I have looked at some options to consolidate/refinance but my general conclusion was I wasn't going to be getting a good rate on the loan or would even be loaned the total amount to pay everything off. Where would a good place to look into this be?

I understand defaulting would effect my credit score. I have reached out to one credit card company to discuss hardship services but their automated system is bringing up anything for me to pursue in order to get the card shutdown and pay something per month.

Quite simply, I have been proactive and trying to manage this I would assume much better than the average person but it's getting to the point where I'm trying to prepare for a default since paying all of this back isn't feasible for me. Thus, I'm being proactive and trying to understand the whole process and work with a company that can help me with a settlement with my creditors when that time comes so I don't become the average person who defaults, gets a judgment against them a year or so later, and then is in a precarious position.

Finally, I haven't missed a payment yet on any of my cards but the debt load and interest charges are really making it impossible. I'm not looking for sympathy and obviously it's not the best financial situation so I'm mostly just trying to make the best out of bd situation and make sure it doesn't turn into a nightmare down the line. As stated before, the debt amount is more of headache to me than my credit score since I have no plans on moving, financing a vehicle or anything major, etc. for years.

Thanks for your response and I look forward to more information from you and/or the rest of the board here. I appreciate your time.

Re: 20K in CC Debt and trying to be Proactive

FireMedic1 — Thu, 24 Mar 2022 09:10:35 GMT

Can you place who the Creditors are next to the accounts listed?

Creditor name/Credit Line/ Balance/APR

Re: 20K in CC Debt and trying to be Proactive

moto4man — Thu, 24 Mar 2022 09:59:11 GMT

@Anonymous wrote:
Long story short, Covid, some devastating personal life events, and other obstacles have helped me rack up around $20,000 in credit card debt between 3 cards. I know I will eventually default on this amount and paying the minimum with interest is unsustainable as well. So my question is what should I do?
I've put about 15 hours of research into this which has landed me on this forum. I started off calling non-profit debt consolidation firms that negotiate with creditors and you pay a monthly fee for their services. However, I've read mixed reviews/opinions on these companies and if they actually really do anything.

I have also just recently talked to a company **Mod Cut - Removed per myFICO TOS** that was helpful and coached me on how they could help me with the default process with an attorney and negotiate a better settlement. They were actually very nice and helpful explaining everything. For me, it seems like a good option for a relatively small upfront fee of $400 and a back end charge of the percentage they save me in the settlement. Using them would have me grant one of their lawyers power of attorney to act on behalf in negotiations with credit agencies/collectors. I'm unsure if this is a good idea.

As with anything nowadays, I did some research on them and they have an A rating with BBB but I read a few negative reviews on Trustpilot stating that getting a local attorney might be better (in much harsher words) and recommended checking out this forum to get advice about debt situations.

So here I am. And in the age of this internet it's hard to know who's legit and if they're telling the truth about their experience. In conclusion, any advice is appreciated on how to deal with this debt. I haven't missed a payment ever yet and am merely trying to be proactive and prepare myself for the inevitable default or a way to avoid it completely without drowning in interest. My credit score is not my main concern now and it's the debt itself. Thanks in advance for any help.

Without knowing your financial situation as a whole, 20k isn't that bad in this day and age. Sure it's a daunting number when things are in a dark place in the present time. However, There are ways of attacking this that will ease the pain. The first thing I would recommend is... save your money with the debt consolidation con artists, and invest several more hours into forums/threads such as these. There are many, many, people around here that are more than willing to help for no other reason that they like to. Take advantage of it, you will learn more and save yourself thousands if you listen intently. At the end of the day, your answer still may be to "default". But there are things that can be done to put a band aid on it and head yourself in the direction of repair sooner rather than later. Take heed my fellow FICO member.

Re: 20K in CC Debt and trying to be Proactive

Anonymous — Thu, 24 Mar 2022 12:20:52 GMT

Sure.

$4500 at 20% is MasterCard through CitiBank

$6500 at 10% is Visa through a Credit Union

$9000 at 12% is MasterCard through a Credit Union

Re: 20K in CC Debt and trying to be Proactive

Anonymous — Thu, 24 Mar 2022 12:22:21 GMT

Thanks for the reply. Do you have any recommended threads I should read on here?

I understand a lot of debt consolidation is a scam and they don't even do anything but is literally all of it a scam? Are there really no outside groups that can help you better than you can help yourself?

Re: 20K in CC Debt and trying to be Proactive

SouthJamaica — Thu, 24 Mar 2022 14:31:55 GMT

@Anonymous wrote:
Long story short, Covid, some devastating personal life events, and other obstacles have helped me rack up around $20,000 in credit card debt between 3 cards. I know I will eventually default on this amount and paying the minimum with interest is unsustainable as well. So my question is what should I do?
I've put about 15 hours of research into this which has landed me on this forum. I started off calling non-profit debt consolidation firms that negotiate with creditors and you pay a monthly fee for their services. However, I've read mixed reviews/opinions on these companies and if they actually really do anything.

I have also just recently talked to a company **Mod Cut - Removed per myFICO TOS** that was helpful and coached me on how they could help me with the default process with an attorney and negotiate a better settlement. They were actually very nice and helpful explaining everything. For me, it seems like a good option for a relatively small upfront fee of $400 and a back end charge of the percentage they save me in the settlement. Using them would have me grant one of their lawyers power of attorney to act on behalf in negotiations with credit agencies/collectors. I'm unsure if this is a good idea.

As with anything nowadays, I did some research on them and they have an A rating with BBB but I read a few negative reviews on Trustpilot stating that getting a local attorney might be better (in much harsher words) and recommended checking out this forum to get advice about debt situations.

So here I am. And in the age of this internet it's hard to know who's legit and if they're telling the truth about their experience. In conclusion, any advice is appreciated on how to deal with this debt. I haven't missed a payment ever yet and am merely trying to be proactive and prepare myself for the inevitable default or a way to avoid it completely without drowning in interest. My credit score is not my main concern now and it's the debt itself. Thanks in advance for any help.

1. You should not use that company and should not give anyone a power of attorney.

2. Your situation is not bad enough yet to warrant drastic measures.

3. IMHO you should get a second job, and use the snowball method towards your existing credit card debt:

Snowball method is:
1. Stop using cards.
2. Pay off smallest balance first, then next smallest, and so on.
3. On other cards pay minimum + something each month.
As each balance turns to zero, that will free up your remaining monthly cash to apply to the next smallest balance.

Re: 20K in CC Debt and trying to be Proactive

Anonymous — Sun, 27 Mar 2022 01:13:29 GMT

@SouthJamaica wrote:
@Anonymous wrote:
Long story short, Covid, some devastating personal life events, and other obstacles have helped me rack up around $20,000 in credit card debt between 3 cards. I know I will eventually default on this amount and paying the minimum with interest is unsustainable as well. So my question is what should I do?
I've put about 15 hours of research into this which has landed me on this forum. I started off calling non-profit debt consolidation firms that negotiate with creditors and you pay a monthly fee for their services. However, I've read mixed reviews/opinions on these companies and if they actually really do anything.

I have also just recently talked to a company **Mod Cut - Removed per myFICO TOS** that was helpful and coached me on how they could help me with the default process with an attorney and negotiate a better settlement. They were actually very nice and helpful explaining everything. For me, it seems like a good option for a relatively small upfront fee of $400 and a back end charge of the percentage they save me in the settlement. Using them would have me grant one of their lawyers power of attorney to act on behalf in negotiations with credit agencies/collectors. I'm unsure if this is a good idea.

As with anything nowadays, I did some research on them and they have an A rating with BBB but I read a few negative reviews on Trustpilot stating that getting a local attorney might be better (in much harsher words) and recommended checking out this forum to get advice about debt situations.

So here I am. And in the age of this internet it's hard to know who's legit and if they're telling the truth about their experience. In conclusion, any advice is appreciated on how to deal with this debt. I haven't missed a payment ever yet and am merely trying to be proactive and prepare myself for the inevitable default or a way to avoid it completely without drowning in interest. My credit score is not my main concern now and it's the debt itself. Thanks in advance for any help.
1. You should not use that company and should not give anyone a power of attorney.
2. Your situation is not bad enough yet to warrant drastic measures.
3. IMHO you should get a second job, and use the snowball method towards your existing credit card debt:
Snowball method is:
1. Stop using cards.
2. Pay off smallest balance first, then next smallest, and so on.
3. On other cards pay minimum + something each month.
As each balance turns to zero, that will free up your remaining monthly cash to apply to the next smallest balance.

At this moment, the methods you mentioned aren't feasible for me. 6 months from now could be a very different story but for now I can't contribute to paying off these debts. Thus, I'm wondering if it's best to default, file bankruptcy, or if there is a more nuanced method to take a hit to my credit score but end up paying a lot less in total.

Re: 20K in CC Debt and trying to be Proactive

SouthJamaica — Thu, 24 Mar 2022 17:21:47 GMT

@Anonymous wrote:
At this moment, the methods you mentioned aren't feasible for me. 6 months from now could be a very different story but for now I can't contribute to paying off these debts. Thus, I'm wondering if it's best to default, file bankruptcy, or if there is a more nuanced method to take a hit to my credit score but end up paying a lot less in total.

1. Defaulting is not an option. It is an option to call each lender, and try to work out a hardship plan for their card. This will probably wind up being a more nuanced method of taking a hit to your credit score, but paying less in total, and doing less damage than defaults would do.

2. Bankruptcy usually costs money, money you could apply to the payments instead. Bankruptcy is great, but has a long term effect. Since things might be better in 6 months you might want to think twice about that.

3. I'm sorry getting a 2nd job to supplement your income is not an option.

Re: 20K in CC Debt and trying to be Proactive

pizzadude — Thu, 24 Mar 2022 17:48:05 GMT

@Anonymous wrote:
Sure.

$4500 at 20% is MasterCard through CitiBank
$6500 at 10% is Visa through a Credit Union
$9000 at 12% is MasterCard through a Credit Union

What are your minimum payments on each ? 10% and 12% interest rates aren't that bad for revolving accounts.

Re: 20K in CC Debt and trying to be Proactive

Anonymous — Thu, 24 Mar 2022 19:55:25 GMT

Total minimum payments among the 3 cards comes out to around $450 a month. The issue is I end up getting charge over $200+ in interest a month and thus continuing to pay the minimum payments seems to be just throwing money down the drain.

Re: 20K in CC Debt and trying to be Proactive

pizzadude — Thu, 24 Mar 2022 21:23:49 GMT

@Anonymous wrote:
Total minimum payments among the 3 cards comes out to around $450 a month. The issue is I end up getting charge over $200+ in interest a month and thus continuing to pay the minimum payments seems to be just throwing money down the drain.

You could pay this off via a consolidation / personal loan, for example - $20K over 5 years at 12% would be $445 / month. I'd explore this option if you haven't already.

Re: 20K in CC Debt and trying to be Proactive

CCrew — Fri, 25 Mar 2022 03:05:02 GMT

@pizzadude wrote:
@Anonymous wrote:
Total minimum payments among the 3 cards comes out to around $450 a month. The issue is I end up getting charge over $200+ in interest a month and thus continuing to pay the minimum payments seems to be just throwing money down the drain.
You could pay this off via a consolidation / personal loan, for example - $20K over 5 years at 12% would be $445 / month. I'd explore this option if you haven't already.

I don't know I'd consider that an option? Trading a 10% card for a 12% loan, rolling over an existing 12%. Only place being saved is on the one higher interest card. All to end up with a payment that's within $5 or so of what's being paid now. Not to mention to stay away from a PLOC that doesn't charge origination fees. I'm not saying there's a better way because at those card % rates it's hard, but I can't see where the positive is vs potential pitfalls.

I'd almost recommend contacting the creditors for what they have for hardship plans.

Re: 20K in CC Debt and trying to be Proactive

805orbust — Fri, 25 Mar 2022 03:10:00 GMT

I'd like to add that it may be time to dig deep on this one. $450 sucks I know, however for example if you could come up with $650 a month towards Cc bills, you could knock that lowest balance (which luckily is your highest interest rate) to zero in about a year and a half. Then you've got $650 to devote to the minimum payment on the next plus even more principal, and it will all go away in short order.

@SouthJamaica mentioned the debt snowball. Instead of concentrating on reasons it won't work, perhaps take a step back and see if you can at least start it up, even at a smaller level. Dave Ramsey has some great YouTube vids on this. In addition, if your financial inflow changes in 6 months, you'll be able to speed it up. Maybe cancel cable, get a more reasonable cell phone plan, sell stuff,, eat a menu of rice and beans... obviously the how is up to you, however you'd be surprised at what you can find in your budget. I understand "wanting" at times to throw in the towel, but you may very well be able to do this!

Re: 20K in CC Debt and trying to be Proactive

tnhomestead — Fri, 25 Mar 2022 04:59:10 GMT

So about 700 a month pays it all of in 36 months. Figure in 6 to 12 months you could possibly get a loan to cover the rest at a better rate. Or kill your credit for 7 years. Just something to think about, good luck

Re: 20K in CC Debt and trying to be Proactive

FireMedic1 — Fri, 25 Mar 2022 08:14:22 GMT

@Anonymous wrote:
Sure.

$4500 at 20% is MasterCard through CitiBank
$6500 at 10% is Visa through a Credit Union
$9000 at 12% is MasterCard through a Credit Union

Try again. Need to see the util %. Are they maxed out or close to that point. It helps with a plan.

CitiBank/Whats the Credit Line?/4500/20%APR

Re: 20K in CC Debt and trying to be Proactive

Remedios — Fri, 25 Mar 2022 20:14:19 GMT

@Anonymous wrote:
Long story short, Covid, some devastating personal life events, and other obstacles have helped me rack up around $20,000 in credit card debt between 3 cards. I know I will eventually default on this amount and paying the minimum with interest is unsustainable as well. So my question is what should I do?
I've put about 15 hours of research into this which has landed me on this forum. I started off calling non-profit debt consolidation firms that negotiate with creditors and you pay a monthly fee for their services. However, I've read mixed reviews/opinions on these companies and if they actually really do anything.

I have also just recently talked to a company **Mod Cut - Removed per myFICO TOS** that was helpful and coached me on how they could help me with the default process with an attorney and negotiate a better settlement. They were actually very nice and helpful explaining everything. For me, it seems like a good option for a relatively small upfront fee of $400 and a back end charge of the percentage they save me in the settlement. Using them would have me grant one of their lawyers power of attorney to act on behalf in negotiations with credit agencies/collectors. I'm unsure if this is a good idea.

As with anything nowadays, I did some research on them and they have an A rating with BBB but I read a few negative reviews on Trustpilot stating that getting a local attorney might be better (in much harsher words) and recommended checking out this forum to get advice about debt situations.

So here I am. And in the age of this internet it's hard to know who's legit and if they're telling the truth about their experience. In conclusion, any advice is appreciated on how to deal with this debt. I haven't missed a payment ever yet and am merely trying to be proactive and prepare myself for the inevitable default or a way to avoid it completely without drowning in interest. My credit score is not my main concern now and it's the debt itself. Thanks in advance for any help.

I understand that credit score isn't your concern right now, debt is.

With that said, what you're describing is planned default and the way that would happen is you would start missing payments till account is put in charged off status.

At that point in time, you become a free game for lenders/collection agencies.

If they believe they can collect, they will take legal action. After that, money will be recovered via wage garnishment/bank account liens.

Once those accounts are charged off, you might be offered a settlement. You won't have much luck for years in terms of knocking down the amount you owe, typically untill you're out of SOL for state in which you live.

Once dust settles, you will start worrying about scores, the effect they have these days on just about everything... utilities, mobile providers, rent, car rentals, background checks etc but it will be too late.

I'm not advising you to worry about scores, I'm letting you know that just letting things go doesn't lead to peace. It leads to years of phone calls, different entities reporting, not making any decent progress for years, horrible rates if you need to borrow money.

Re: 20K in CC Debt and trying to be Proactive

Anonymous — Sun, 27 Mar 2022 01:16:25 GMT

@FireMedic1 wrote:
@Anonymous wrote:
Sure.

$4500 at 20% is MasterCard through CitiBank
$6500 at 10% is Visa through a Credit Union
$9000 at 12% is MasterCard through a Credit Union
Try again. Need to see the util %. Are they maxed out or close to that point. It helps with a plan.
CitiBank/Whats the Credit Line?/4500/20%APR

Utilization rate is at 95%+ for each one.

Re: 20K in CC Debt and trying to be Proactive

SlideOrInsert — Sun, 27 Mar 2022 01:19:34 GMT

"I know I will eventually default on this amount and paying the minimum with interest is unsustainable as well... it's getting to the point where I'm trying to prepare for a default since paying all of this back isn't feasible for me... At this moment, the methods you mentioned aren't feasible for me. 6 months from now could be a very different story but for now I can't contribute to paying off these debts."

is this because of lowered/loss of income? if that is the case then you have to do what you have to do, but I would hire a proper bankruptcy attorney before I would pay a fee to any other agency.

"The issue is I end up getting charge over $200+ in interest a month and thus continuing to pay the minimum payments seems to be just throwing money down the drain."

or is it because you just don't see the practicality of paying off the debts because of the interest? as others have said, the blended interest rate for your accounts is ~13%. you say you're already paying $450 per month with just the minimums. with that fixed payment schedule you're looking at 6ish year payoff. bankruptcy follows you for what, 7-10 years? if you could even bump that up to $650 per month by means of budgeting or additional income you're only looking at a 3ish year payoff.

	20	4500	12	9000	10	6500
month	pmt	balance	pmt	balance	pmt	balance
1	-200	4375	-250	8840	-200	6354
2	-200	4248	-250	8678	-200	6207
3	-200	4119	-250	8515	-200	6059
4	-200	3987	-250	8350	-200	5909
5	-200	3854	-250	8184	-200	5759
6	-200	3718	-250	8016	-200	5607
7	-200	3580	-250	7846	-200	5453
8	-200	3440	-250	7674	-200	5299
9	-200	3297	-250	7501	-200	5143
10	-200	3152	-250	7326	-200	4986
11	-200	3004	-250	7149	-200	4827
12	-200	2855	-250	6971	-200	4668
13	-200	2702	-250	6791	-200	4506
14	-200	2547	-250	6608	-200	4344
15	-200	2390	-250	6424	-200	4180
16	-200	2229	-250	6239	-200	4015
17	-200	2067	-250	6051	-200	3848
18	-200	1901	-250	5862	-200	3681
19	-200	1733	-250	5670	-200	3511
20	-200	1562	-250	5477	-200	3340
21	-200	1388	-250	5282	-200	3168
22	-200	1211	-250	5085	-200	2995
23	-200	1031	-250	4885	-200	2820
24	-200	848	-250	4684	-200	2643
25	-200	662	-250	4481	-200	2465
26	-200	473	-250	4276	-200	2286
27	-200	281	-250	4069	-200	2105
28	-200	86	-250	3859	-200	1922
29	-87	0	-250	3648	-200	1738
30			-450	3234	-200	1553
31			-450	2817	-200	1366
32			-450	2395	-200	1177
33			-450	1969	-200	987
34			-450	1539	-200	795
35			-450	1104	-200	602
36			-450	665	-200	407
37			-450	222	-200	210
38			-224	0	-212	0

at the end of 2018, with a blended interest rate of 18% I was at 30k revolving debt of 36k available. my score was in the low 700s with no derogatories. I acquired a personal loan at about 11% for 36 months. I spent 2019 making over the required payments on the loan. during those 12 months I was able to grow the credit limits on all my cards. in the beginning of 2020 I was able to take advantage of a 0% promo on one my cards and payoff the loan by moving the remaining balance. total interest and fees paid was about $2300. if I had gone with the snowball method I easily would have paid 2-3x that in interest.

point is, maybe there is somewhere feasible in between the bankruptcy cliff and paying a mountain of interest in getting out of debt.