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I was recently contacted by a full time college student with five credit card accounts. He doesn’t make enough money to pay all the minimum payments and was wanting to salvage his credit as much as possible. All of the credit card companies, with the exception of Bank of America, accepted him into hardship programs. The hardship program stops the fees and lowers the interest rate so that he can continue to afford payments.
First off, I have a great appreciation for your advice, I have scoured the net for info regarding my debt, and yours is definitely one of (if not the most) helpful compilation of articles I have found. So… THANK YOU! I have five credit cards with totaling balances upwards of $15,000 which are all in my name, but were compiled between my girlfriend and myself (I know, ridiculously stupid to do this). When I was 19 (I am now 22) I received a car loan for $14,000 with no cosigner at a 10% rate. I currently owe about $5,000, have paid almost all of the interest, and will be paid in full in June of 2010, which is also about the same time I will graduate with my bachelors.
In the last year I lost employment, and desperately took a job making significantly less than my monthly obligations. I have been living with my parents and working as much as possible, but I am also a full time student. My debt has ballooned because of use for necessity, late payments and skyrocketing interest rates. I have looked into settling but decided I would negotiate with the companies on my own and do my best to honor my agreements.
All of my creditors have accepted me into hardship programs which stopped all fees and lowered the interest to at or below 10%, except for Bank of America. I owe them the most money at 5k+, with interest currently around 23%. They told me that because my monthly income is less than my obligations they cannot enter me into one of their programs, and I literally cannot afford to pay them at what they are charging me right now.
Given my situation, and that in June of 2010 I should be in a position to make substantially more money because I will graduate and no longer be paying $300 for a monthly car payment, I was hoping to avoid settling or having my account charged off and settling with a collection agency and further damaging my credit. But to me this seems a better option than filing bankruptcy or selling my almost paid car (worth about 8-9k) as I need reliable transportation for a long commute to work and school. I would really appreciate your feedback on this.
All Best, Tyler
Debt Prison response…
Perhaps a two or three year struggle with debt, in your early twenties, can serve as a life long reminder of why using credit should be avoided. Keep your car and complete your bachelor on time if you can. Otherwise, work two jobs and pay most of this debt down.
If you are able to ‘get along’ with four of your credit card accounts for the next year and a half then do so. If you can afford to make payments to them then do so. Bank of America can hit the road. This is not legal advice; this is my opinion on how I would handle your circumstance. I would simply write BOA a letter, explaining that you can no longer make payments, and that later on you will satisfy this debt with them. That’s all I would tell them. Now here’s the bad part.
If they have your home phone number they will auto-dial it for probably six months, most likely, several times a day. Your parents won’t like this. They will also bump your interest to probably 32% and pile on the fees. Collection agencies will do the same, possibly for years.
Within a year they’ll most likely sell the debt to a collection company. 2009 is expected to be a record year for charge offs on credit card accounts – one in ten Americans. That’s a lot of people. When you graduate college you can pay off your debts, and work on settling with the collection agency. They’ll settle for a percentage of the debt they claim you owe.
Yes this will put a negative strike on your credit report, but under your circumstances I fail to see how you can avoid such negative strikes. Besides, you’ll be better off if you avoid using credit. I can’t stress that point enough.
Hope this helps.
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