Because we were on the verge of bankruptcy this year and had even seen several lawyers.  I wish I had this article to help me through it. 

Our story... we had $70,000 in Credit Card Debt, $90,000 Second (HELOC) on our house that we owed $366,000 on but only had a value of $298,000.

So what did we do?  We were lucky…we settled with the credit card companies for 30%, got a home modification in which our payments were lowered $900 per month and now life is returning back to normal.  Others aren’t that lucky…that’s where this article will come in.

This article is to give you information at your finger tips that it took me MONTHS of research to find on my own. I hope this helps you…it would have helped us.

There are several things you can do if you are buried by credit card payments and interest. The three things you should NEVER do?

1. Don’t hire an outside company to negotiate your credit card balances down. Do it yourself!

2. Don’t worry about creditors phone calls. You need to answer those calls because when you do...they'll slow down!

3. Don't tell credit card companies ANY personal information they don't already know. Never give up phone numbers, income or anything. Just tell them that there is no reason to answer that and say I am trying to earn extra money to a pay you but right now you don't have anything to give them.

If you are willing to put up with the phone calls and bad credit report (everyone has bad credit these days) then you can negotiate and settle your credit cards. We were fortunate and had extra income to make settlements. I understand others are not that lucky.

Typically you need to wait 90 days to start negotiating. Till then just answer the calls and say you are trying to get the money to make the payments. That is good enough. You see you are dealing with the credit card companies at that point. They will actually be nice and understanding. They just want to make sure you are not hiding from them. Like I said...we answered our calls and they went from several a day to a few a week.

Don't be afraid they are going to come take your house or call your work. You can figure you have like 180 days before ANYTHING gets remotely serious. Even then...after a year (which is the basic timing) they come after your house to foreclose...you still have time to file for BK. But lets not get ahead of ourselves.

Back to your credit cards. Keep in mind if you file for bankruptcy…they will look back 90 days to see if you took advantage of your credit cards in particular if you took cash out. Don't ever try to cheat the cards because it will come back to hurt you.

After 90 days you can consider filing for BK. If you don’t want to file for BK, you can settle.

HOW TO SETTLE

After 90 days ask them..."is there anything I can do? I might be able to get some money from my relatives?". Keep in mind...only do this if you can settle...course at this point you can do it to buy time as well. Don't be upset when they tell you that they will settle for 85% of the total. Don’t laugh at them either. Just say you can’t do it, but you will keep trying to earn some money to make the payments.

That total that they are willing to settle for will continue to come down…but it will not get serious till about 160-180 days. The cards will go to charge off at that point (181 days) and the collectors (outside agency’s) will make the calls…they are the mean ones.

All credit cards company collectors that we had (5) were all nice, again they were from the credit card company. At day 160 they were lowering the % on the same call! They went from 45% to 30% in about 5 minutes.

We settle for 30%…but to be honest I feel we could have waited until 20% and even less if you have the time and will power. We wanted to be done.

But don’t sweat the collection calls. You are not bad people…you are doing what this president and every major company is getting away with. You are getting your life back in order, and the only people you have to worry about is YOUR family.

Our credit cards btw…Bank of America (they were the easiest/best to work with) $17,000 (settled for $4,250), Chase $55,000 (settled for $16,500) and Capital One $5,000 ($1,500).

First and foremost...after you read this go to the BK Forum. They will be able to deal with your specific needs.

Next decide if filing for BK is your way out? If you don't have money to settle...and you owe a reasonable amount. File. We should have filed and let our house go...but we loved our house and because of the modification was able to keep it.

CHAPTER 7

1. This is the best one to file. BUT...you cannot have more than a couple hundred dollars a month of disposable income. (money left over after expenses) And you can only make x-amount of money per year. (varies from state to state) But they do take the last six months and amortize it out over a 12 month period.

2. There is a means test to see if you are eligable. Most lawyers will not do the means test for you, so check the internet for a sample one or even one of the ads on this page will have one.

3. Most chapter 7's will run you about $1,500 to $2,000 and yes...they want the money up front before they do anything.

CHAPTER 13

If you make too much money (means test) this is where you end up going. It sucks. It really penalizes you for making money. They will take a percentage of your money and pay it towards the debt...but really...we are talking a few hundred dollars a month. So would you rather pay all your debt per month, or a few hundred? Yes you still have to make your house payment if you are keeping it.

In addition...if you make more money each year...that extra money goes towards your debt. That's the part that I said sucks. So it really is a system that forces you...not to work any harder.

Chapter 13 is more expensive probably in the $2,000 to $4,000 range.

Now it's time to go check out the BK Forum. I will be adding to this article soon. Good luck and stand proud...you will feel embarrassed now, but there is no need too...you are not alone.