Credit settle, DIY or service?

[Cantgetout]

Maybe this isnt the best subforum to ask this, sorry and please advise if thats the case.

I'm a single male in my mid 20's who fell into the credit card trap. I was fine until about 2 years ago when I was hit with 8k in hospital dept and about 5k credit card debt from not working. I worked my way up a little and was able to keep everything paid untill 2009 when I was forced to take a 10% pay cut at work. I changed my taxes to claim 5 and have been paying just the minimum on my debt for 14+ months. I still had to cash in my 401k (8K$) to keep my head above water. I now have my 10% back at work but cant see a light at the end of this tunnel .

So recap, single, male, mid 20's, make around 50k a year.
30K- carloan
5k -city
4k - boa amex
4k - discover
1500 - local credit union
1500 - capitol one
2k - chevron (not sure bank)

As it is I make enough money to pay for all my bills and living expenses but MOST of my debt is at 25-30% interest rates with the car being the exception, so I'm getting nowhere!

I'am considering 2 options, the DIY way listed here:

http://hubpages.com/hub/Credit-Card-Settlement-and-Negotiation

Or I have a distant family member who has been "doing this for 8 years" with a company who charges 10-15% of what you start with but say they settle within 2 years at around 50% and set up some sort of a account you pay into every month?

Getting the money to settle on my cards is possible if it gets as low as 50% from a family loan but not easy. Searching around here it looks like city and discover are hard to get to settle and they just send you to collections? Am I in way over my head here, is this "10-15%" thing a scam or worth it?

Thanks for any thoughts you might have

[Depressed]

You hardly owe anything compared to many on this forum. Sell the car, and get something cheaper. Use the extra money to pay down the debts. Try to find a low interest loan to consolidate the cards. Save your credit rating so you can get a good interest rate on a mortgage in the future.


None of your creditors will be interested in a settlement until you have paid them for more than 3-4 months.

You only have 18K in debt outside the car, you could have that paid off in a year or so, if you were willing to make some sacrifices.

[DebtHater]

I second Depressed recommendations.

Dump the car. You can't afford it. This is what's killing your budget. Not the credit cards.
Get on a written budget.
Cut back your lifestyle (NO eating out, fancy dates, etc).
Try calling to high interest cards to lower the APR.

With out the car you only have $18K of debt making $50K. You should be able to clean that up in no time with out settling.

[StartingOver08]

You can make your own hardship arrangements with the cc's. They all have hardship depts ...you just have to be persistent to get through to the dept.

1) Do NOT use a service - they hurt you more than help you. This is a DIY thing.
2) Get rid of the car. Buy a beater.
3) Get on the hardship plan for each of the cards. They will do zero percent or 2% interest rates (sometimes 4%). They will want to debit out of your account directly. Don't let them debit from your main account. Either set up a pre-paid card for them to debit from or set up a different account that you fund separately at a different bank just for this purpose. Set your fund up before you call to make arrangements. There are usually two programs: short term and long term. Short term is a year. Long term is up to 5 yrs.
4) Be carefull with the CU. If that is where you have your main checking/savings accounts then either don't mess with that card or move your accounts first. They have cross collateralization and the minute you get behind they will take the funds from your account to apply to the outstanding balance.
5) Banks have a similar thing called the right of setoff. So when you set up your new bank accounts (where you will keep most of your funds) make sure it is in a bank that does not have any of your debt. Protect yourself.
6) The other option you can check out is the debt snowball by Dave Ramsey. JMO. It sounds like something that could work for you.

[forgotten]

I changed my taxes to claim 5 and have been paying just the minimum on my debt for 14+ months. I still had to cash in my 401k (8K$) to keep my head above water. I now have my 10% back at work but cant see a light at the end of this tunnel .

You are setting yourself up for a HUGE tax liability.
You are way underwithholding on your taxes and you will owe additional taxes on that 401k cashout come the end of the year. If you think the credit cards are bad wait until the tax man comes looking for his check.

[StartingOver08]

Forgotten is right....make your arrangements with the IRS FIRST. They come first anyway. File your 2009 taxes right away so you know how much you owe. You can make installment arrangements with them...pay them before you pay any unsecured debt.