questions - need help :)

Jennifer00 · #1 (**permalink**) 08-26-2008, 12:28 PM

Thanks for your help...

I lost my job and have 3 credit cards that were maxed out at 2.5k, 2.5k, &
3k. (I'm sure the balances are now higher) All 3 cards have been charged off. The 3k from capital one was charged of DEC 07 for over 3.5k. The other 2 cards are from HSBC and probably charged off early '08.

I have been getting calls and settlement offers from the collection agencies. I really want to take care of the debt and pay it off.

1. how much time do I have? (I may be able to get a job this fall) How long do the collection agencies keep the debt? What would happen after?

2. will they take any legal action?
3. if so what would it be? judgment or...? (I don't know much about this) What else might happen?

4. should I try to deal with the banks directly instead of the collection agency?

5. If I am able to settle the debts - what will it say on my credit report under each entry? Will it indicate the debt was paid or will it still say "charge-off"

6. As part of paying the settlement, is it possible to negotiate a more favorable entry on the credit report?

Please give me as much information as possible. I really want to take care of this, but I get conflicting information from the collections people. I think if really understood the process, I could get myself out. I want to be able to understand the terminology so I can make the right decissions and send what money I might have according to priority...

I really appreciate your help!!!
Jennifer

Bahamut · #2 (**permalink**) 08-27-2008, 06:47 AM

OK, Jennifer! Welcome to the Forum! You are at the right place.

First of all, do not let yourself fall into the trigger of unsolicited offers / marketing.

We are talking about 8.5 K debt, right? The other cards are going to be charge off and you'll probably get some fees and bad stuff... so to round, let's say you have a $10000 debt.

I would suggest you to get a $11,000 loan, so you pay off your debit and you have an extra $1000 for smaller credit / unpaid bills if any. However, with your scenario I find this more of a dream that a reality.

So you have no job and a lot of debt... well... where does your income come from? What's your financial situation besides debt? You need to find a job ASAP or do something... as you are falling in a bottomless pit, I'm sad to say.

OK... From the income you have? Do you do something else besides eating and paying bills? Those two are the only ones are a must for being in the mortal kingdom. You need to eat... and you need a home, light and water. Let's hope and let's say you have enough for these... I would picture you a scenario... but's it's hard because I need more information... as I do not know how many spare money you have, if any...

However, for a general basis:

- Forget purchasing clothes, shoes and purses... I know you probably like doing it... like any mortal... but this is now your big nononos... your debts and credit is more important.

- So forget to go dining out... pasta and tomato sauce is not expensive, yummy... and means more $ in your pocket.

- Of course going out to the movies, and so forth... NO NO NO.

Basically... stay at home or go to bike to the park. Do activities where you spend no money...

- Stop your cable TV if any... keep internet, but the slowest speed (so more inexpensive)

By this way, you will save money.

All the money saved... use it for those credit cards. Let's call them Credit Card A, B and C.

Pay the minimum of CC A and B...and the remaining for Credit Card C. You will be paying (I hope) more than the minimum for CC C... when you are done with this one, pay CC A the minimum and CC B the remaining amount. Then pay all the amount for CC A. By this way, you will get rid of that credit faster...

Then, after that, close those accounts and get a secured credit card and start over.

If you can't follow this scenario... you are in a big trouble... then, try speaking with a debt company... I do not know this far...

I hope this helps.

Jennifer00 · #3 (**permalink**) 08-29-2008, 10:23 AM

I appreciate your advise. I have all ready cut spending.

I am more concerned with understanding "charge off" and negotiating with the collection agencies.

I hope someone can answer the questions in my post above. As I said I get conflicting information from the people that call.

If someone can help me understand my questions, I would be very thankful...

Jen

Jeanie · #4 (**permalink**) 08-30-2008, 09:29 AM

Jennifer,

Maybe the article from DebtShield would help you better understand charge off and collection agencies. However, I know MANY ppl who file bankruptcy and are moving up the ladder just fine so maybe take that in as an option..?

Good Luck!

~Jeanie

formercap1agent · #5 (**permalink**) 08-30-2008, 10:49 AM

OK, once a bank (meaning the credit card issuer) has "charged off" your account (meaning they've sold the debt to a collection agency) they no longer deal with you, the collection agency does. With the collection agency there are no "minimum payments", they're going to keep sending you notices demanding you pay the whole thing "or else we will take legal action against you" (or words to that effect). If you try calling the bank they will immediately cold-transfer your call to the collections agency. This is exactly what I did when I worked for Capital One. Caller gives the card number, verifies identity, passes security, then the computer tells me "transfer to recoveries" and that was it, automatic transfer.

You *may* be able to negotiate with collection agencies but by design they are tough as nails and don't yield at all. On the other hand, they bought your debt from the bank at a discount so if you pay them in full they made a nice profit off of it. However, they do lose a lot more than they win.

Credit counselling services would be a start, as they may be able to negotiate lower payments and a reduced balance for you. But if that doesn't work (and the counselling service will determine from your situation if this is realistic), then...

If you've already cut spending and still can't afford to pay anybody, bankruptcy may be the way to go. Just make sure you make enough take-home pay to make ends meet (especially for things like rent/mortgage and car payments so that those lenders don't reposess them) since for 7 years you will have to do without credit.

When I was working for Capital One there were people who would call in with a huge overlimit balance and several months past due and would "threaten" me with "If you don't lower my balance and APR I'm declaring bankruptcy". My answer was always "That's your decision not mine. One moment please" and they'd get transferred to our internal collections department who will rough them up a bit before ultimately sending their account to recoveries (charge-off). Take-home message here is, you will never win by threatening a bank. You owe them money, they set the rules.

Bahamut · #6 (**permalink**) 09-01-2008, 11:47 AM

Somehow off topic:

formercap1agent it's amazing... you are in a similar situation than me.
I'm a supervisor of a bank, and it's insane the amount of people who have a negative balance on their checking accounts.

I saw people, owing to us more than $2K

(But not on credit cards... just overdrawn checking accounts)

This people dare to ask me, threaten me and more for a credit card, or for a new checking account, just to get our promotional products... Like they ask you for a lower APR... I'm sure that you had delinquent accounts that their owners asked you for a credit limit increase...

This country has not enough Financial IQ... starting from the White House... we are the major debtor country in the whole world.