Question Debt Settlement/Payoff & Credit Repair Questions

[jellybean]

all:

I have about $50k in revolving debt and just lost my job. I have been paying on them but now its going to become difficult. I have some cash saved up but paying off everything will use it all, not leaving me anything to survive for a few months until i find something. I was told by someone that I can use a debt consolidation firm to negotiate with each debtor for me and they will be able to reduce my pay offs on each of the cards and i may be able to settle for half of what is owed. first of all, is this true even if i'm current on my payments with them? any other options? is there a way to at least negotiate my interest rate and get credit for the high rates i've been paying on for the last several months? that alone should reduce my payoff.

now that i dont have a job, i'd like to get rid of all this debt and only have to worry about my house and car notes. i did some searching on this forum and can see that debt consolidation is not recommended. what other options do i have?

and as far as credit repair goes...what can be removed from a credit report? i've never filed BK or anything, but are charge offs and late payments easily removed, even if they are all recent (within the last 6-8 months)?

TIA.

[HHM]

Charge off's and late payments CANNOT be removed if they are true statements. Now, late payments typically fall off after 24-36 months, but that assumes at some point you resume payments or otherwise deal with the debt (pay it, or discharge it in BK). Charge-offs are a notation on that particular account, it cannot be removed until status changes about that account, i.e. paid or diacharged in BK.

Bottom line, when it comes to debt, you have 2 choices.
1. Pay it
2. Not Pay it.

Within Pay It, you have 3 choices
a. Pay the full amount,
b. Pay a negotiated settlement
c. Continue to at least make the minimum monthly payments.

Within not pay it, you have 2 choices
a. Do nothing, simply stop paying it and deal with consequences.
b. File bankruptcy.

In your situation, the choice has mostly been made for you, you lost your job and no longer have the ability to service the debt.
So, can you pay it or not. It sounds like you have some cash resources...where is that cash coming from...if from a retirement account of some kind (401K), STOP...do not withdraw and go straight to BK.

As for Debt Settlement...you are correct, they won't even talk to you until you miss payments (thereby trashing your credit). Can you settle...eventually, yes. Is it in your best interests to settle, almost never.
Problem 1: where do you get the money to settle, as you said, you need the cash to live, so why pay down debt.
Problem 2: income tax consequences, if you settle debt, the portion of the balance that is not paid is taxable income. (thus, if you have $50K in debt and settle it for $25K, you will have to declare the other $25K as income for tax purposes).

Without a job (source of income) to service payments, any reduction in interest is a non-starter. The reduction in interest programs are merely conversions. They convert your revolving credit line to a closed-end personal loan at a reduced interest rate, but ha with any loan, you need to be able to qualify, which means having income to service the debt (which you don't).

Your course of action should be this.
1. Schedule a consultation with a BK attorney and find out where you stand.
2. If this "cash" you refer to is in an exempt asset, you should file BK and take advantage of the narrow window of opportunity you have to declare a chapter 7 BK and completely eliminate your debt.

[BillyRip]

Don't even bother with the debt settlement unless you have about $20K to offer as settlement.

Just my .02.

[Never_Again]

If late payments and chargeoffs are accurate, there i no legal way to have them removed. Anyone who tells you that there is is lying!

As for debt settlement, you can work that out on your own. You can settle your own debts if you want to.