Clarification of Options, Cap1, Negotiating Down Debt, Using a 3rd Party, Pros and Cons?

[Anonymous]

Hey All!

I won't go into all of the details, but essentially I have two Capital One cards that went way overboard and I'm trying to get things fixed. I went from a nice 770 score to now 500. I've already taken a few steps, but so far I feel like I'm barely making a dent... making more than the Minimum Payments seem impossible currently. I'm looking for some clarifications on the options I have available for me.

Here are some of the things that have occurred:

1. I called Capital One about a year ago when this was originally starting to get out of hand. Based on a very good payment history, they put me on some sort of plan where any overdue charges would be waived with no time limit, till I get back on my feet. Interest would still be added and all.

2. After receiving a few letters telling me they want to help, I called them up (after delaying way too long, wanting to avoid it, etc). At this point, I was behind on several payments (I was making what I could, but they were below the Minimum Payments. Though I wasn't fined for the late fees, I was reported for having multiple missed payments which caused my score to plummet). The person on the other end was extremely helpful and said as long as I paid certain amounts per month, it could stop me from going more behind. I was essentially paying off bills from 4 months ago.

I'm still doing this, but it seems at this rate, I'll perpetually be 4 months behind.

I've gotten all the letters and heard about debt counseling. My biggest concern is if a 3rd party can negotiate away some of my debt and I pay through them, when it's paid off, do I lose that account? Cap1 are my oldest accounts and if they end up getting cancelled, that'll be another huge hit. Granted, I'll be able to get ahead of my debt, but I'm just wondering what the best approach is.

So TLDR: If I have a company negotiate my debt down, does that account close on repayment or does it remain open?

I know I should probably avoid all Loan Offers as with my score, it would probably kill me even if I do get accepted for one.

One company I received a letter from was Credit Associates which seems to have great reviews on BBB and Consumer Affairs but any other companies people have worked with successfully would be great.

Thank you!!

-g

[Remedios]

Hi and welcome to the forums! 

Attempting to negotiate a settlement will most likely lead to account closure, because you're basically asking them to write off portion of your balance.  I am somewhat surprised they haven't closed them already if you've been trailing by 120 days for extended period of time. 

Once the account is paid, CR will be updated to paid for less than owed. 

That will also have negative impact on your scores, but seeing how you already have a lot of delinquencies on those accounts, I am not sure how much impact it will have. 

As far as loans go, I do not see it happening without it being a predatory interest loan. You might solve one problem and cause another. 

You should look into budgeting and making unnecessary cuts first. 

If I may, what are the balances, limits and minimum payments on those cards? 

[Anonymous]

Hey Remedios,

Thanks for the input!

The only reason why I think they've kept it open is because I've had the accounts for so long and for years haven't missed a single payment. Coupled with being on their financial hardship plan or whatever it's called (where they waived the fees) may have me in some sort of limbo.

Venture 1 has a balance of 9,919.10 (10k Limit) - Minimum Payment is: $1,100

Quicksilver has a balance of 6,722.66 (6500 limit, so I'm over) - Minimum Payment is $860

We've already cut out a ton already. In fact, my amazing partner has taken over all of our current expenses for the time being. We've been planning to get a house next year and she's going to be the only name on the Lease (her credit is Good).

I'm sort of in limbo with my current jobs. They aren't regular, and have some upswings (which are great when they happen) and a lot of downs. It should be getting a bit better, but it's hard to tell and there isn't a lot of time I have aside from them (but I could always hunker down).

Cap1 on their site is offering for me to create my own payment plan, but I'm confused in that case as I feel like it's similar to just paying off balances from months ago and will forever keep me late as the interest keeps adding up.

I guess I'm just really bummed and stressed by this whole thing. I moved about a year ago and between that and a ton of issues of finding work has led me from having excellent credit to below 500 and it doesn't seem like I can get out of this anytime soon.

I've been debating which will give me less stress and a better chance of fixing my credit in the long run... if I negotiate down and have my oldest accounts closed to start fresh, or having this debt float around killing my credit utilization and taking potentially many many years to pay off.

The former is sounding like the better pay, but I want to do this responsibly and know I'm paying for doing the exact opposite for so long.

Thanks again for any tips, advice, or even just words of encouragement.

-g

[Remedios]

If it was me, I'd negotiate and get it going as soon as possible, especially with only one person carrying most of the burden as far as expenses go at the moment. You dont want this to start affecting your relationship. She'd helping you, so you help her by doing what's financially right for both of you. 

You stated these are your oldest accounts, meaning there are others. Longer this situation goes on with Cap One, more of a risk you have for other lenders to start with AA. 

Most of the damage to your credit is already done, so work on financial recovery and getting out of the debt. 

There will be plenty of time to work on the credit aspect once your situation is more stable. 

I wish you the best and good luck 

[Anonymous]

Thank you so much for your advice. I think you're absolutely right so will start looking more seriously at that path. I know that once I get rid of the debt, I'll probably have more energy and less stress about the situation and it will feel less like digging out of a huge hole and more about building a better foundation versus trying to pick away at it forever. Mixed metaphors, sorry .

With that said, are there any reputable companies that you've heard good things about, and how do these things typically work? I imagine that I will be paying some sort of fee for the negotiations. Will I just continue paying Cap1 but my balance will be lower?

At least in CA's letter, it says it may take several months to reach a negotation. Is there a chance that nothing will come out of it? Because that'd be pretty rough too. Is this timeframe typical or is that just to cover their butts?

Thanks again, this was extremely helpful for some perspective.

-g