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IS MY IDEA POSSIBLE, WORKABLE?

I am in credit counseling and have been for EIGHT YEARS.
I am still at least FIVE YEARS from being debt free and am seriously thinking about cutting my losses and quitting the debt.
(Much of the debt was pseudo-credit card fraud in that I joined a cult and turned over my credit cards to them for "management" or more accurately "maxxing".)

I am in vocational school trying to get past an hourly job and into a career with earning potential, but cannot afford the monthly payments at the same time. My interest rate on the biggest debts is still 16% and 17.33%.

I cannot renegotiate lower interest rates because supposedly the cccs already did this and calls directly to the credit companies reveal that because the account is closed AND CURRENT, they won't renegotiate.

I HAVE AN IDEA that my best chance of getting out of this hole is to WALK AWAY from the debt, let the accounts become delinquent for a year, and then go back and renegotiate with the lenders that if they want ANY money from me they need to wipe out the interest and late penalties during delinquency and lower my rate.

Anyone ever done this? Any better ideas?

Most folks encourage me to "stick it out" since I've been making payments on the debt for eight years already, but I cannot live as I have for the past four months on a monthly food budget of $70/month with NO money for emergencies/illness/etc. I have already sold my car, gotten a second job (while attending school full time) and done everything else I can think of to cut corners.

I really need advice and haven't found it by searching this thread. If someone remembers a useful thread, please send a link to duranduransfo@yahoo.com
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Okay, first breathe. Several of us hear have had the same feeling; a few people here have been in worse shape than you.

Second, how long do you have left in vocational school? Can you get student loans? I don't normally advocate this, but maybe you could consolidate some of that CC debt into a student loan, that you wouldn't have to start making payments on until 6 months after graduation. You could take that time (the rest of school and the six months after) to pay off as much of the other debt as possible, that way money wouldn't be as tight.

Let's say you are making $500 a month in minimum payments right now through the debt agency. If you consolidate $250 of that into a student loan, you could continue to pay the $500 towards the remaining CC's, and possibly get them paid off before you graduate.

Could you post specifics about your debt, and maybe your budget? List your CCs like this:

Citibank, 1K @ 14.9%, minimum payment $35

And your budget like this:
Rent $450
Food $200

We can take this info and give very specific advice that will help you more.

impolite
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Well...if you are seriously considering walking away from the debt (and I doubt anyone here is going to support that action) then you should probably consider filing for bankruptcy. Just walking away will leave you with a messed up credit report and collection agencies/lawyers/creditors harassing and probably suing you and you STILL oweing them the money.

Bankruptcy will also mess up your credit report, but will leave you debt free. Some people find it easier to rehabilitate their credit from bankruptcy rather than from charge offs and judgements. If you feel morally obligated to pay back the debt, the creditor will still accept your $$, but you just aren't under a legal obligation to pay it back anymore.

But really, you haven't given a lot of information. Eight years is a long time to have paid - and five isn't *that* far to go. What is your monthly income? Monthly payments to credit counseling?

Since you are in school full time, have you looked at the possibility of getting a student loan to cover tuition, books, and living costs? Then you could pay off the credit cards more quickly.
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Don't give up hope. You have worked so hard to get where you are. Why let all your hard work go to waste?. Not only are you paying off your debt, you are rebuilding your credit.

Have you applied for financial aid or looked into scholarships?. From the sound of your post, you are eligible. I also suggest to cut down your schooling to part-time. This will save you money. A great way to save money on books is to purchase them at http://www.half.com.

I am also wondering if you are able to speak to your counselor about possibly lowering your payments to creditors for a set period of time so that you can save for your emergency fund.

There are great tips on saving at the Living Below Your Means board.

JnJfools
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I have already expired my student loan eligibility to pay tuition for school. I am not eligible for additional student loans and I say this after having researched myself and getting assistance from others in doing so.
Here's my budget:

MONTHLY BUDGET
*Outstanding Debts $100.00
Fixed expenses MINUS rent $320.00
$60/month Phone service
$62/month Storage (I now live in a 8 foot square room!)
$198/month Long term debt repayment

Rent $510.00
I have already moved twice from paying $850 to $733 to now $510 to live in a tiny dumpy room. This is San Francisco. NOBODY pays lower rent than I do right now.

School supplies $30.00/month
Utilities allowance $50.00
Jezebel (cat) $25.00
Transport(public pass) $35.00
Food $75.00
Housing Misc--soap, etc $20.00
Clothing $0.00
Fun (sanity maintenance)$20.00
Health & Wellbeing
(I have NO insurance) $50.00

Emergency Fund Devment $300.00
I currently have NO SAVINGS
GOAL IS DEVELOPMENT OVER NEXT 6 MONTHS—BEYOND THAT IS DEBT REPAYMENT FUND ACCUMULATION
Jezebel Emergency Care $500
(My cat is the stability center of my universe right now)
Rent cushion $600
Health and wellbeing $500
Unforeseen Emergency $200
plumbing explosion, theft,
TOTAL $1800

Required NET income $1515.00
CURRENT NET INCOME: $755 paid semi-monthly = $1510.00


Implications
Flexibility for unexpected expense-->
Low--little room to adjust to emergency or for “fun”
Budget-tightness related stres-->
High (always worried about money)
Risk of unforeseen expense means financial crisis-->
High ('living paycheck-to-paycheck')

*Outstanding Debts:
$200.00 Phone bill from last housemate situation
$100.00 Personal loan from best friend
$100.00 Utility bill from last housemate situation
Desire is to pay off in 4 months
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I will be in a better financial place to repay the debt once I finish school. Likely to earn as much as twice my current income.
Part time school would indefinitely prolong my current agony until I did finish school.
Furthermore, I am in a vocational program that does not allow for "part time attendance".

I sort of feel that bankruptcy will mar my record for 10 years.
I am hoping that when I go to renegotiate, I can include that they wipe clean late payments, etc. or I won't pay the debt.
Even if they don't, 7 years of credit ugliness is shorter than 10.

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Jezebel Emergency Care $500
(My cat is the stability center of my universe right now)


Sounds like you're worried someone will politely suggest you "get rid of" your cat. Don't listen to them!

-Repo
(who just last night caught herself wondering if she could save a little by switching "the guys" from Science Diet to Cat Chow....nah. Pet ownership is a commitment.)
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Can you reactivate your accounts and then renegotiate interest rates?
Can you get balance transfers to shuffle it to lower-interest situation?
If not, then maybe you can stop paying it off until you are out of school? Or, at least, maybe you can reduce monthly payments? Since you have no possessions, the cc companies probably would not go after you in this case. You can resume payments once you get a job?

2195501y


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Okay, there's not much room to cut, but you might be able to do a few things.

Can you get a cell phone instead of the phone service you have currently? Or maybe do without a phone altogether(yes, people do this)?

Can you sell the stuff you have in storage? I know how it sucks to get rid of stuff you like, but sometimes it has to happen. It might get you a few bucks upfront, but it will also save you the $62 in storage fees a month.

Rent situation: have you ever thought of getting rid of rent altogether, and housesitting? I have a friend that housesits enough that she doesn't pay rent anywhere, plus she earns a little on the side. This might be an option for you, and even if you don't give up the apartment, you might be able to do it for the cash...a week's stay in a mansion with a pool, paid, might do a lot to boost your spirit. Slap an advertisment in a few papers, or make up some flyers (copies made at kinkos) and stuff them in mailboxes and post them in grocery stores.

You have a pet, so you like animals. Could you be a pet sitter? All it requires is some walking and some feeding. You might be able to squeeze that in for a little extra cash. You might even be able to keep other pets in your apartment, while others are on vacation, and earn $50 or so.

How far away is your school/work? Could you spend the $35 on a used bike and ride it there? You could then use the $35 the subsequent months as savings. Not much, but something.

Also, this option would have consequences particular to your situation: what about a family loan? Could you get some $$ to pay off some of those outstanding debts, and make a payment plan with your family to pay it off?

Another option: Could you get a new CC with a lower teaser balance transfer rate, and transfer some of that old debt to it?

How about selling some stuff on half.com or ebay? You could take the $$ you earn and toss it into savings, as a cushion.

If you are able to do a few of these, here would be my advice: Up your "fun money" to $40...I think this is what is making you so stressed. Take the rest, split it in half, and put half in savings and half towards paying off your friend. When your friend is paid off, pay off the utility bill, then the phone bill in turn. AFTER those are paid off, set this extra money towards your highest interest debt. It seems that these bills are the ones bothering you the most, since you want them paid off ASAP.

Hope this helped a little.

impolite
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This is gonna sound harsh, but please forgive my lack of tact.

Picking apart my budget is a path I have already exhausted.
While I appreciate the suggestions (and can say that I have already explored all but one of them), this is not really why I posted.
After THOROUGHLY exploring my options and some truly degrading ones like becoming a dancer at a strip club, I arrived at my idea on temporarily walking away from my debt. I need feedback on THIS idea.


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Picking apart my budget is a path I have already exhausted.
While I appreciate the suggestions (and can say that I have already explored all but one of them), this is not really why I posted.
After THOROUGHLY exploring my options and some truly degrading ones like becoming a dancer at a strip club, I arrived at my idea on temporarily walking away from my debt. I need feedback on THIS idea.


Here are as many repercussions of 'walking away from' your debt as I can think of:

(1) Your credit profile will be shot with more holes than a target at a NRA meeting.
(2) You'll get nasty letters/calls/communication from your debtors.
(3) You'll get nasty letters/calls/communications from the collection agency(ies) your debt will eventually be assigned to.
(4) Your credit profile will be shot.
(5) You *can* be sued for the money. While they can't get blood from a stone, it *is* a possibility.
(6) Judgements (from being sued) don't help your credit profile look any prettier.

When you go to negotiate on your debt, here is what's likely to happen
(1) You're going to owe even MORE money, with assorted extra fees/charges/increased interest rates. Your debt can be "padded" by a significant amount if you're not paying it. Debt can snowball to tremendous levels of increase over the period of a year.
(2) *If* you successfully manage to negotiate down the amount owed, you'll owe taxes on what you don't pay (ie: if you owe an individual company $3000, if you only pay $2000, you'll be taxed on the other $1000). This might not sound so bad until you consider the previous point -- do you *really* want to pay taxes in the future on "padded" debt being reduced back down to what you originally owed anyway?
(3) The companies are really very hesitant about cleaning up your credit report as part of a settlement. They're not stupid. They've seen people doing this and realize people are letting debt sit for just this reason. Basically, they *know* they can make you suffer whether you pay them back or not, so, they don't have a particular interest in 'working' with you. You may have one or two companies out of a whole group, willing to 'clean up' your credit profile. You will not have *all* of them. And, all it takes is problems with one company to cause your score to tank, and show up as a poor credit risk.
(4) Whatever you don't clean up stays 7 years. Bankruptcy is only 3 more years. If you're going to tank your credit, what's another 3 years?

I hope this is the kind of information you were looking for.

Gwen

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I appreciate your thoughtfully written reply.
Here's my logic in response (please pick apart as you see fit).

1. Any black marks on my credit report fall off after 7 years and 30 days from the date the creditor demands payment. This is shorter than 10 years, so why subject myself to an extra 35 months of black marks if I don't need to?

2. The only reason I am not declaring bankruptcy is an ethical sense of self that I should take responsibility for the principal debt. Arguably I could deny this responsibility because of the debt basis in fraudulent use by an organization--the cult I was in at 18 years old.

What I do NOT ethically feel bound or compelled to abide by is creditor usury. I'm thinking about offering to repay principal only--take it or leave it. I could--and have been advised--to blow off the debt altogether. I intend to offer up paying the principal but not any late payment charges, etc.
Ironically, I wonder if I have the "power" to offer this ultimatum because I have NO assets: no property, no stock, no jewelry, no car, no equity of any sort, no discretionary income? There's nothing to sue.

Thanks again to all who have replied.
Sincerely,
DuranDuranSFO
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I am in credit counseling and have been for EIGHT YEARS.
I am still at least FIVE YEARS from being debt free and am seriously thinking about cutting my losses and quitting the debt.
(Much of the debt was pseudo-credit card fraud in that I joined a cult and turned over my credit cards to them for "management" or more accurately "maxxing".)


Okay. So in 5 years you will be free and clear. And with a decent credit record.

If you walk away: 7 years. Bad credit record.

If you declare bankruptcy: 10 years. Bad credit record.

So, if you walk away or declare bankruptcy, you *extend* your problems by 2 or 5 years respectively.

Maybe this isn't really the solution and normally I would never suggest placing the blame on someone other than yourself, but have you explored the possibility of suing the cult with a pro bono attorney?

pnwwoman
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Some other things I can think of about just walking away:

Companies, insurance companies (Auto, home & life) are starting to check credit

Apartments are starting to check your credit record before renting.

I would assume that walking away and filing bankruptcy would both be considered bad. I don't know if it helps but I would think that repaying would be looked on better.

Stockbuyer2
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If you can get the CC companies to agree on a settlement, you will receive a 1099 at the end of the year. The tax rate on 1099 income is about 27%. Probably a great deal of this $$ is interest/fees that have accumulated over the years.
I know you are frustrated with the 16% you are paying now- but it is less than you will be hit with when tax time comes- and it isn't even as though this is monay you spent or earned - it is considered income - but it is probably only interest.
Just info you may want to consider - I know the bottom of the hole- does it even have a top?- feeling.
Eventually you can climb out - and it's easier said than done. Support helps.
peace and payments
t
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DuranDuranSFO

Walking away from the debt is not the preferred method of settling your debt. If you feel you cannot continue to make the payments for your credit card debt, then filing bankruptcy is your best option.

Reasoning:
You didn't post who your creditors are and how much you owe them still but, as previously stated, you can pretty well estimate that after a year of not making payments it will be double. If you stop paying, their recourse is to file a judgment.

You may get some creditors to settle but the most you could hope for is that you will not have to pay more than you owe right now. Also you have to have the cash at the time of agreement. The chance of them changing the information on your credit report is zero to none. They will not negotiate that under your circumstances. Besides, if they have a judgment against you, you are legally obligated to pay what you owe plus legal fees and court costs. They don't have to negotiate. I assume the terms may vary from state to state, but in my state a judgment can be renewed every seven years, two times. That gives the potential for the judgment to remain on a credit report for 21 years!

The previous posters were trying to give you support and suggestions on how you might be able to continue to make your payments as agreed so you could settle your debt in the easiest (yes it is considering the options) and the most beneficial method for you.

Ester
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DuranDuran (I used to be in love with Roger Taylor...OOooooh la...la...),

Sorry...I got lost for a minute there. I would try and hang in there. Eight years is such a long time for you to have worked so hard only to throw it all away. Could you imagine if you walked away for a year and then came back to all those added late payments and interest....not to mention they will probably jack the interest WAY UP. You could possibly end back up to where you were eight years ago...only to have to start again. This is not even mentioning all the threatening phone calls and letters you will receive in the interum.

I don't know what your second job is, but I can tell you that Home Depots pay REAL GOOD wages for part time help. In Boston they pay $12 to start...I know folks who have been offered $14.

One thought though, which you may have already thought of, did you ever think of suing this "cult" you mentioned. I am certain the time limit is over to do it now but had that ever been considered. A good friend of mine got involved with a cult years ago...a new age one in Sedona....she came back from a two week long workshop telling every one that our friend, Randy, had gone back to the mother ship and that she, can't remember the name of the "new" Randy, had taken over her body. She actually sat us down (all her close friends) and told us that she didn't know us and that she would have to start from ground zero in getting to know us!!! She ended up moving to California and none of us ever heard from her again. We tried to get her parents involved (they had bucks)and take her to a deprogramming facility, but they were products of the sixties and thought it was fine. Idiots...

In any case...look at you.....in school...working your butt off....being responsible and paying down your debt......resisted a cult....you have a lot to be proud of!!! Stick with it and you will will be indestructible.
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<<I appreciate your thoughtfully written reply.
Here's my logic in response (please pick apart as you see fit).

1. Any black marks on my credit report fall off after 7 years and 30 days from the date the creditor demands payment. This is shorter than 10 years, so why subject myself to an extra 35 months of black marks if I don't need to?

2. The only reason I am not declaring bankruptcy is an ethical sense of self that I should take responsibility for the principal debt. Arguably I could deny this responsibility because of the debt basis in fraudulent use by an organization--the cult I was in at 18 years old.

What I do NOT ethically feel bound or compelled to abide by is creditor usury. I'm thinking about offering to repay principal only--take it or leave it. I could--and have been advised--to blow off the debt altogether. I intend to offer up paying the principal but not any late payment charges, etc.
Ironically, I wonder if I have the "power" to offer this ultimatum because I have NO assets: no property, no stock, no jewelry, no car, no equity of any sort, no discretionary income? There's nothing to sue.

>>





I've read through all your comments. Please don't be too upset with efforts to suggest alternative ways of dealing with you income and debt difficulties ---people are trying to think through what is going on and come up with things that might be helpful.


I'm not sure exactly when your debt would drop off your credit report simply due to its age. Perhaps your debt repayment plans delays the time when it will no longer be possible for a credit reporting agency to report on this old debt. If someone can report on that variable, it would be useful information, I think.


You have said that you "can't" continue with your present stringent budget. You are pretty much answering your own question about abandonning your repayment plan with that comment. That is what you intend to do, you are trying to determine what the consequences of such a default might be.


The good news is ---we abandonned debtor's prison some time ago! You have unsecured debts, so the worst that can happen is that your creditors will rather promptly begin harassing you with phone calls, refer your accounts to collection agencies who will also call you repeatedly (getting rid of the phone would be worth considering at that point!). You are obviously very tired of your present threadbare life ---but remember you will be opening yourself to new kinds of harassment. Will you be able to live with that?


Secondly, there is always the chance that you will be sued. The probability of that is small since you have no assets or income to take. I'd make a point of sending creditors and any collection agencies a form letter each month reminding them of your poverty, since this will reduce the probability that they will take legal action against you.


Defaulting on your repayment plan may mean higher interest rates and penalties for failing to make minimum payments that will significantly increase the amount you will be expected to pay. I am expecting that you have decided that you are willing to accept the risk of having to pay these additional costs.


With all this in mind, I will speculate on whether these companies will negotiate to get payment after a year of default. If they see you as a no asset case with no income, no assets and no prospect of either, they might well negotiate a settlement. If they see you as a student graduating from a vocational program with good salary prospects, they probably would not ---they would simply wait with interest and fees adding up each month until you become a target worth having a lawyer sue you.


So the question that occurs to me is whether your creditors know or can find out about the job prospects implicit in your vocational plans and the income that can reasonably be expected to produce in another year or so. They may already know if your credit management outfit told them. Or they may be able to determine that for themselves from your student loan debt or other sources.

The complicating factor is that to negotiate a deal you will need to be able to offer them cash up front. You can't do that if you are broke. If you wait until you complete your schooling and get a good job, you become lawyer bait.


For these reasons, your plan to negotiate a settlement probably won't work, it seems to me. That doesn't mean you shouldn't default. If you really "can't" continue with your stringent budget and CAN live with harassing phone calls from creditors, default is the obvious course of action. You have some prospect for a negotiated settlement out there, but probably small. If it happens you can be pleasently surprised, rather than disappointed.



Good luck!



Seattle Pioneer


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What I do NOT ethically feel bound or compelled to abide by is creditor usury. I'm thinking about offering to repay principal only--take it or leave it. I could--and have been advised--to blow off the debt altogether. I intend to offer up paying the principal but not any late payment charges, etc.

So you don't feel ethically bound to pay according to the terms of the agreement you signed? I'm not sure I agree with retroactively picking and choosing which sections of the contract really apply to you.

As far as the cult is concerned, I'm probably not going to score a lot of points by saying that you were 18, an adult, and you knowingly turned over control of your finances to the organization, but that's how I see it.
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Check out www.creditnet.com for extensive discussions of people trying to get their credit reports back in line. Some are very successful at negotiating for removal of black marks, some have not been. OFten it depends on the collection agency that has purchased the original debt. And then you have to deal w/ the original creditor to remove the "charge off" notation. Just one charge-off/collection account that you can't negotiate with, will make it very difficult to achieve decent credit scores.

While its true that you generally have to deal w/ the bankruptcy on your credit report, individuals posting at creditnet.com have credit scores w/in 2 years that are in the mid 600's and up. And you don't have to deal with creditors/lawyers/collection agencies harassing you.If even one of your creditors sues and gets a judgment against you, that will stay on your report as long as a bankruptcy would.

I wonder if you could call your existing credit counseling agency - or another one, and run by them what you think your future situation will be (including those student loan payments!) and see if they can give you any advice. Unbelievably, a friend actually had CCS tell her she pretty much had no other options than to declare banktruptcy because she'd never be able to pay off those debts.

Anyway...just thought you might want to check out some additional info regarding charge offs/collections and bankruptcy before you make your decision.


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When I was still married and in major debt my wife and I went to a credit counselor. He was big on us declaring bankruptcy and had my ex going along with him because he stated it was easier to build your credit back up from bankruptcy since lenders were more liable to lend to you knowing you couldn't declare bankruptcy again for another 10 years than they were if you had outstanding late debt and charge offs. Got my ex all excited since she wanted to get a different house and figured if we went bankrupt we would be able to get a mortgage sooner. I considered bankruptcy a total last option and so didn't really look into it so I don't know how true that statement is but in your situation I would sooner go the bankruptcy option than just walking away.

Wolfshead
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Picking apart my budget is a path I have already exhausted.
While I appreciate the suggestions (and can say that I have already explored all but one of them), this is not really why I posted.
After THOROUGHLY exploring my options and some truly degrading ones like becoming a dancer at a strip club, I arrived at my idea on temporarily walking away
from my debt. I need feedback on THIS idea.


Ok then: I think it's a bad idea. You should honor your financial obligations. "Walking away" is not an option. If you cannot pay your creditors, you should be in bankruptcy court.

I liked the petsitting idea. It's alot better than strippiing, IMHO.

-Repo
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The only reason I am not declaring bankruptcy is an ethical sense of self that I should take responsibility for the principal debt.

ak! how does your "ethical sense of self" feel about "walking away" from the debt "for now"?

Bankruptcy court helps creditors get as much as they can from an insolvent debtor, in fair proportion to other creditors. It is meant in part to protect creditors from people who take it on themselves to just "walk away."

You think they can't sue you? How about if they put you in involuntary bankruptcy and put a lien on your future income?

Now I'm starting to sound judgmental, sorry. But you asked for feed back on the walk away idea, and then claimed moral reasons for not wanting to do the bankruptcy thing.

Who knows, maybe the bankruptcy judge would go easy on you because of the unique circumstances surrounding the debt.

Best of luck to you!
-Repo

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<<As far as the cult is concerned, I'm probably not going to score a lot of points by saying that you were 18, an adult, and you knowingly turned over control of your finances to the organization, but that's how I see it.
>>



Heck, lots of people here turned their lives over to VISA and Mastercard when they turned 18. Don't they qualify as cults?



<<What I do NOT ethically feel bound or compelled to abide by is creditor usury. I'm thinking about offering to repay principal only--take it or leave it. I could--and have been advised--to blow off the debt altogether. I intend to offer up paying the principal but not any late payment charges, etc.

So you don't feel ethically bound to pay according to the terms of the agreement you signed? I'm not sure I agree with retroactively picking and choosing which sections of the contract really apply to you.
>>



This guy has been paying his way out of his mistakes for a number of years. If he has some options in how he manages his credit management decisions, those are a part of the rules of the game, too.




Seattle
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<If you can get the CC companies to agree on a settlement, you will receive a 1099 at the end of the year. The tax rate on 1099 income is about 27%. Probably a great deal of this $$ is interest/fees that have accumulated over the years.
I know you are frustrated with the 16% you are paying now- but it is less than you will be hit with when tax time comes>

I disagree. 27% simple interest, one-time payment vs. 16% compounding interested, front-end (interest first then small percentage to principal) payments. No comparison in my mind. In this case, it seems clear that 27% is LESS than 16%

Anyone disagree with me?
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<If you can get the CC companies to agree on a settlement, you will receive a 1099 at the end of the year. The tax rate on 1099 income is about 27%. Probably a great deal of this $$ is interest/fees that have accumulated over the years.
I know you are frustrated with the 16% you are paying now- but it is less than you will be hit with when tax time comes>


I disagree. 27% simple interest, one-time payment vs. 16% compounding interested, front-end (interest first then small percentage to principal) payments. No comparison in my mind. In this case, it seems clear that 27% is LESS than 16%

Wouldn't you have to agree that it depends on the situation? If someone settles an account with a balance of $15,000 but agrees to pay 1/2 for a total of $7,500 - that 27% due could hit them hard. At that point wouldn't it be easier to make payments at 16%?

Kim
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Also that tax money is due all at once. Will you have the bucks to pay that? If not then Uncle Sam starts charging interest and he isn't any slouch on his rates either not to mention any penalties. Not only that, he adds his rates by the month even if you only owe him one day during that month. In other words if you owe Uncle from June 15th to July 15th then even tho it's only 30 days he charges you two months worth of interest and penalties. Have had some experience in that field also.

Wolfshead
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Hi DuranDuran,

Because of a loss in income, I have not paid my creditors since Jan-Feb. One of my eight or so accounts has charged off, the others are either in-house or in collections. I'm in the process of re-paying my obligations.

At the risk of going against the crowd, I would say, stop paying for 6 months-1 year. Before doing this write each creditor a letter via certified mail, stating that you've hit a financial low and unless they have a hardship program to put you on, you will be unable to pay them. Give them 30 days to reply. If no reply, stop paying. That way, 6 months-1 year down the line, you'll have your letter showing your appeal for help.

For collection calls from collection agencies, send a cease and desist letter (I have a sample letter, if needed). For calls from the original creditor, grin and bear it. They have a legal right to call.

If you have no assets, no large stocks, etc. you're pretty much “judgment proof”. You don't mention your balances owed for each creditor, but IMO for balances under $1000.00, the chances of being sued are VERY SLIM, unless you have some strict creditors. (If your creditors or CCCS know about your future increase in income, you may choose to go the bankruptcy route or continue on your current plan. With greater income, your changes of being sued increases).

Also, while some here may say, it's best not to settle an account, I agree and disagree. Personally, I wouldn't settle the account for a lesser amount because there are tax implications. However, I would settle by offering, say, the full amount in exchange for a deletion or "Paid as Agreed" marking on your credit report. Many creditors will not settle for lesser money AND a good mark. But if you offer all of the money owed, they may be more flexible. Send your settlement offer certified mail (I have a sample letter, if needed) addressed to the Vice President of Customer Service/Consumer Affairs (get the name). Give them 30 days to respond. If no response, dispute the item on your credit report. If they don't respond to the CRA's, you could possibly get the mark deleted (the mark can be re-added later if the creditor gives the CRA's the verifying info). If your dispute comes back verified, contact the creditor, bring up the offer you sent them and try to negotiate a settlement by phone. FOLLOW-UP WITH AN AGREEMENT LETTER VIA CERTIFIED MAIL REQUIRING AN AUTHORIZED SIGNATURE (I have a sample letter if needed). NEVER SETTLE AN ACCOUNT THROUGH A VERBAL AGREEMENT WITH THE CREDITOR. NEVER MAKE A SETTLEMENT AGREEMENT WITH A COLLECTION AGENCY; THE CREDITOR WILL STILL REPORT YOU AS DELINQUENT.

Bankruptcy impacts your credit profile for 10 years (although with time your credit will improve), and your creditors don't get any money. At least this way, they'll get something…just not right now. Although, your score will be greatly impacted by not paying for 6 months-1 year, the older the mark the less new creditors may weight it.

I would also suggest you go to www.creditnet.com. GREAT information about repairing your credit and working with creditors.

JMO

lekia2
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The entire tax issue may be mute. If you can prove you were insolvent on the date the a settlement was reached, you would have no tax liability.
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I agree with Seattle Pioneer. Wise advice in his two posts. I also second the www.credit.com straight talk board.

One issue is if these debts were opened after 1997, the "sol" for 7 year credit reporting starts with the first day of delinquency (not the last date of activity on the account). If before 1997, then the "sol" for 7 year credit reporting begins with the last date of activity. If your debts are before 1997 every time you pay CCCS you are lengthening the time it will be reported. And if you take some time off,and then start paying again - then you have "re-aged" the debt on your reports for another 7 years.

If there is no way at ALL to cut back on living expenses anymore - then I suggest a BK-7 option b/c:

1. You've done CCCS and it is too stringent for both your living necessities (I don't think abject poverty is an answer to paying back CC debt - especially the "interest on the interest") and, arguably, your emotional health. If CCCS can't help, they often will *recommend* BK-7.
2. it protects you from judgements and tax penalties that you would get if you "walked away" (if you ever anticipate having any assets).

3. it allows you to reaffirm a debt to pay it for moral reasons of responsibility you mentioned without legal jeopardy.

4. it actually makes you a much safer credit risk for creditors b/c you have a lot of real cash in your hands, no financial obligations, no threats of impending lawsuits, and you can't do it again for 10 years.


Another solution even before BK-7 or walking away: It seems your living necessities are at a near bare minimum. CCCS really should not have you at that level of discomfort. Can you go back to CCCS and "re-negotiate" the CCCS repayment plan based on what your living needs are? I once interviewed with a CCCS agent and he would not let me submit on my application living expenses that were unrealistic. Maybe they can re-negotiate with your creditors and give you more room for personal needs. After all, 8 years is a long time of good, steady repayment history...


Good luck,

shulamite


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"I also second the www.credit.com straight talk board."


Whoops.... Wrong board.


It's www.creditnet.com "Straight Talk" message board.


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<DuranDuranSFO rants back>
Bstroh,
While you may not agree with retroactively picking and choosing which sections of the contract really apply, I always have the option to renege on a contract either in part or in full. I accept the consequences that follow.

Yes, I joined a cult. I didn't do so because I was in the healthiest mind frame at that point in my life and at SOME POINT we should be able to stop paying for mistakes we made. My mistake was trusting others. It made my life a living hell and eight years later, I am still picking up the pieces.
Unlike you, I do not believe an unhappy childhood leading to zero self-esteem at 18 should equate to a life sentence of poverty or indentured servitude to First USA.
Did I sign the contract with the creditors? Yes, it's true. It's also true that they have ALREADY made hand over fist profits from my purchases 8 years back. Impressive return on investment has been achieved by the creditors and in address to your moral righteousness, my lessons are learned. I don't need to be beaten with a financial baseball bat an additional 5 years when getting my butt soundly paddled by debt was punishment enough. In my mind, now it's a matter of getting out of debt on balanced terms--not exclusively on the terribly one-sided and arguably usury terms of my creditors.
The world is not black and white and every decision is NOT made in a vacuum free of context. If I read your last statement about being 18 and an adult in proper context, I can righteously retort that you'll relate to people a whole lot better if you can get past the "I'm right, you are wrong" mentality and show some consideration for context.
You might argue that 18 year olds that steal belong in jail as long as hardened criminals. Look at what Missouri is doing to rehabilitate rather than punish youths. Not only is it more humane, but it's cheaper per day for taxpayers AND the reccidivism rate is far below the 70% return to jail rate of traditional jails--it's 11%! (Yes, that eleven percent, not a typo.)
If I got a little more help rehabilitating instead of being punished by those with your mindset, maybe I wouldn't be earning $10/hour and paying income tax on $20K a year. I'd be earning $50K a year, paying thousands more into the coffers that will sustain your social security far before i ever see a cent back and contributing to the community (and the economy) in more significant ways than I can dream of currently.
<end of rant>
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DURAN,

First of all dont walk away. Second of all welcome aboard and let's start attacking that debt. Post your info here and we can all help you. I applaud the efforts you have made and with our help you wint need CCCS.

Slovell
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True- I am thinking on a one year basis - not a five year- pardon my replying without thoroughly thinking
peace & interest
t
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While I appreciate the suggestions (and can say that I have already explored all but one of them), this is not really why I posted.
After THOROUGHLY exploring my options and some truly degrading ones like becoming a dancer at a strip club, I arrived at my idea on temporarily walking away from my debt. I need feedback on THIS idea.


I had some debt that I didn't pay for three years. I was lucky, the highest single debt was $800, and no one actually sued me. I'm now over a year into repayment and can see the light at the end of the tunnel (6-10 months depending on how aggressive I can be after this move.)

It can be done. It's very uncomfortable. You have to ignore phone calls from collections agents, tell them to contact you only in writing or send cease and desist letters. They will harrass you, but eventually give up and pass it on to another agent, who will then harrass you.

It's not fun, but if it's a choice between rent-food-sanity and paying the bills, go for rent-food-sanity.

you will get a lot of moral judgements from people here; most of them haven't been that close to the edge.

Ishtar

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ak! how does your "ethical sense of self" feel about "walking away" from the debt "for now"?

Bankruptcy court helps creditors get as much as they can from an insolvent debtor, in fair proportion to other creditors. It is meant in part to protect creditors from people who take it on themselves to just "walk away."

You think they can't sue you? How about if they put you in involuntary bankruptcy and put a lien on your future income?

Now I'm starting to sound judgmental, sorry. But you asked for feed back on the walk away idea, and then claimed moral reasons for not wanting to do the bankruptcy thing.


Repo,

Hey, there! We usually mostly get along, but I'm bristling a bit here. I know you're not talking to me, but I feel like this is aimed at me.

I did this. I didn't pay for three years. My debt was under $5000, which did not seem enough for me to declare BK, but after rent, daycare, food, basic transportation costs I had NOTHING left to send to the debt.

I choose to not declare BK and wait until I was on my feet. Now, about 18 months after starting a repayment plan, things are getting better. I've aquired (sub-prime) new credit - which is all reported as "pays as agreed" - I've paid off two collection/charge-off accounts, and I have the others on my repayment plan. So far, I haven't settled anything, but I'm considering settling on one debt. My FICO is improving every month.

If I had declared BK, I'd be looking at another 5 years of struggling. I'm not PROUD of what I did, but I'm glad I did it this way.

Ishtar
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<<You think they can't sue you? How about if they put you in involuntary bankruptcy and put a lien on your future income?

Now I'm starting to sound judgmental, sorry. But you asked for feed back on the walk away idea, and then claimed moral reasons for not wanting to do the bankruptcy thing.

Repo,

Hey, there! We usually mostly get along, but I'm bristling a bit here. I know you're not talking to me, but I feel like this is aimed at me.

I did this. I didn't pay for three years. My debt was under $5000, which did not seem enough for me to declare BK, but after rent, daycare, food, basic transportation costs I had NOTHING left to send to the debt.

I choose to not declare BK and wait until I was on my feet. Now, about 18 months after starting a repayment plan, things are getting better. I've aquired (sub-prime) new credit - which is all reported as "pays as agreed" - I've paid off two collection/charge-off accounts, and I have the others on my repayment plan. So far, I haven't settled anything, but I'm considering settling on one debt. My FICO is improving every month.

If I had declared BK, I'd be looking at another 5 years of struggling. I'm not PROUD of what I did, but I'm glad I did it this way.

Ishtar
>>



I agree. You aren't doing anything illegal or immoral if you don't pay because you can't afford it. The companies retain their options ---they can sue you if they wish. Their interest and minimum payment options continue to accrue. If you don't file for bankruptcy and eventually get back on your feet, you know they are going to be there with their hand out. The fact that their options are limited is the nature of unsecured debt. If you are willing to live with the risks and penalties, you are entitled to do so if you wish.



Seattle Pioneer
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Repo,

Involuntary bk? Not gonna happen. That way, you make sure you get nothing plus, you've paid the filing fees!
Involuntary bk is very rare. You use it if you believe a debtor has assets and is disposing of them in a way that they can't be recovered. An involuntary bk seeksto freeze everything in place and demands an accounting much quicker than a lawsuit.
The only real danger I see for Duran is a lawsuit and a possible wage garnishmnet but, he can always bk something of that nature.
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After reading the entire thread, here are my thoughts. Walk away if you need to, as long as you are aware of the consequences and are willing to live with them. And it sounds as if you are. I would recommend disconnecting your current phone number and getting a new number before you walk away. That way, your phone will not ring off the hook every day. I'd have my number listed, yet in another name. And if they call your current number, it should not tell them what your new number is.

Also, keep all paperwork for every account you have, so that when repayment time comes, you can keep it all straight.


Do you plan to tell the creditors that you intend to stop paying? Or will you just walk away without notifying them?

Good Luck with it...

Louise
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If I had declared BK, I'd be looking at another 5 years of struggling. I'm not PROUD of what I did, but I'm glad I did it this way.

Ishtar, you know I love you, and I'm sorry I made you bristle! I should clarify/backpedal a little. I actually have no ethical problem with what you did, nor with what "thinking about walking away" is proposing. What I had the problem with was the claim that s/he was prevented from filing BK because of ethics. IMO, filing BK is perfectly ethical (when used appropriately), and our legal/economic system is built with the BK option in mind. BK protects both debtors and creditors.

If a debtor feels that BK will hurt him/her more than just ignoring the debt temporarily, then I agree it's probably wise for him or her to devise an individual plan rather than resorting to BK. I admire what you've done. You've fixed your debt situation (or are in the process of doing that, and making good progress) without the help of the BK courts, and that's commendable. The reason I got a little obnoxious was that I don't think it's fair to claim moral high ground for not filing BK, if what you're doing is economically similar to BK. I meant to point out that BK is not just an escape hatch for debtors; it also protects creditors. So IMO it is not really ethically "better" to do a homemade debt reorganization plan than to file BK.

I realize my post was harsh, and maybe even harsher than intended. I merely meant to take issue with claim of "ethical sense of self" as justification for doing the walk away thing. As for my other post about it being a bad option, I still think it's a bad option to walk away without super-aggressive budget review, which I'm still not convinced the poster has done, given his/her poo-pooing some of the suggestions made here. (But maybe s/he has; I don't know b/c I don't have the whole picture.)

I'm a little more educated than I was before your post, and I hope you've unbristled a little...
-Repo
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I realize my post was harsh, and maybe even harsher than intended. I merely meant to take issue with claim of "ethical sense of self" as justification for doing the walk away thing

{{{{{{hugs, Repo}}}}}}}}

I understand what you mean now, I think.

Ishtar
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{{{{{hugs, Repo}}}}}}}}

I understand what you mean now, I think.

Ishtar


So we're cool?
;-)

-Repo
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So we're cool?
;-)

-Repo


You bet!

Ishtar
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You aren't doing anything illegal or immoral if you don't pay because you can't afford it.

Seattle,
I don't disagree with this. I think I clarified my position in my reply to Ish.
-Repo
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Repo,

Involuntary bk? Not gonna happen.


I don't know much about it, but I was thinking after he starts earning money, and maybe some of the creditors who aren't first on his paydown plan start getting antsy. Wage garnishment is more likely, which can be a major pain in the butt.
-Repo
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