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I am trying to help some friends and I would like some options from some of you smart and savvy folks.

Right now, I have some friends who are probably living beyond their means and I have a feeling that they be on the verge of falling behind on their bills. From what I can tell, they have a large amount of credit card debt, medical debt, student loans, a car payment, and a mortgage. They have next to nothing in savings.

Now they have a few kids and I really like this couple. They had just recently moved into their dreamhome.

Unfortnately the mortgage and real estate businesses and a string of medical issues have really beat up their income this year, and they put more money on their credit cards to try and get by waiting for something to turn. I really would not want to see them loose everything and I would hate to see the kids suffer (be uprooted, for their parents' mistakes. I'm not sure how far they are gone but I would like to try to approach them with some good advice to help them before it gets too bad.

I have read a variety of things out there and would like to get some thoughts...

Bankruptcy: This might work for them, but I know I don't like the B-word. Plus I have heard that it actually can stick around on your credit report for more than ten years because of the discharging of debt. Also, I would wonder if they would loose their home (even thought they probably don't have much equity as it is a new construction that they closed on in the beginning of 06.) Plus, I can't stand the thought of a little child loosing his or her toys that they received from generous family and friends.

Credit counseling: This is probably a must, at least for the education so that they learn how to live within a budget. But how do they find a good one? And, are debt mamangement programs worth while, especially if they are making less than their monthly bills?

Stiff the credit card companies: I read somewhere that if you just stop paying your unsecured creditors, that some will write you off, others will try to sue, but if you don't make enough, you could be judgement-proof and eventually the creditors will simply give up and write you off. Where I read this, the person was saying that it actually came off of their credit report faster than a BK because the debt was discharged sooner than if they repaid it in BK.

Negotiate with CC: Has anyone successfully negotiated their debt with a CC company at a fraction of their debt? If either of these folks get a bonus or a big closing, they may have a chunk of cash, or even their tax return. Could they may settle 40K or 50K for 25 or 30 cents on the dollar?

Working with the mortgage company: Right now, I know that a lender does not want to own a home. Especially one that may have depreciated under the loan value. Has anyone worked with a lender to modify payments for a while?

Dealing with Student Loan companies: This debt can't be discharged by BK. What has been anyone experiences with trying to renegotiate a payment plan or stopping payment. I know there is hardship deferrences, but a few years ago I tried to apply for one for myself when my wife lost her job, but because I was still employed I did not qualify. (I told her, next time, I get to go on unemployment and stay home with the kids.)

Again, anyone with useful and constructive feedback, I ask you to please reply. I hope to help my friends and maybe the information you share will help some readers as well.


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