Major CC Debt--Help!

[MileMarkerZero]

What is the name of your state? TX

Please help! Our credit is in shambles after being 700+ for over 10 years. We used our credit cards for a business that went kaput in 2003. We owe roughly $55,000.00 to three credit card companies, two of which are MBNA. The problem is, my husband is a post-doc in a cancer lab and I can't work due to being on bedrest during my current pregnancy. We've had arrangements with MBNA to pay around $600 per month, but we've been doing that for a year and only a very small portion actually goes to our balance--for the most part it has only kept us afloat so we don't get charged off. They have offered us a deal where we would consolidate the cards and reduce the interest. What I am wondering is, would we be better off doing that with our other card as well with a non-profit credit counseling agency like CCCS? Would they be able to eliminate the interest and extend our payment out to ten years' time? We can only afford to pay about $500 for all three cards but right now we are paying almost $900. It is killing us. We don't want to declare bankruptcy. If anyone has any advice for us we'd appreciate it.

One other thing--we have good equity in our condo, but no one will give us a home equity loan because our credit is so shot.

 

[seniorjudge]

You are double posting, but not bad enough for me to give you a nastygram.

Explain to the folks about your escrow problems.

Also, look for some legal financing; you may be able to get out of this yet.

If you have equity in your land, you will be able to get a loan somewhere, surely....

 

[MileMarkerZero]

I apologize. I was not aware I was "double posting"--I posted two seperate topics in two seperate forums. It would not make a lot of sense to post a mortgage question in a credit card forum.

Thanks for your comments. Yes, we can get a home equity loan, at roughly 19%. That is not an option for us.

 

[caliber]

Step back and focus in on the situation

Educational only-individual governance supersedes my post! This is not legal advice. Ask questions and learn!

First. You are in control. MBNA will keep the pressure on as they know your plight and it is highly unlikely they would allow a principal only repayment. They need you to write that check each month. I assume these are unsecured credit card accounts and they are in your personal name(s) and you used them for the past business effort. Has MBNA already consolidated the two cards? If not, I would keep them separate for now. This way the balances remain lower per card. Try to keep the balance below $25k. If either of you are authorized users then remove one another. You are on the wheel and the balance does not seem to go down. I would not recommend a credit counseling company. You can handle what you need to directly with the cc company. Begin to document everything and keep everything you receive from the bank(financial institution). I would NOT borrow against equity thereby turning unsecured debt into secured debt. I would also NOT declare bankruptcy over an unsecured cc balance. You can keep this strategy in reserve, though. You are basically current and this is good. It seems that you cannot make their payment minimums and you are not willing to remain on the wheel much longer. You could present them with a settlement offer based on your terms. Problem is, offers to settle with these guys from a current position does not sit well with them. If you were months behind and in default then they would begin to listen. Ironically, it's best to be where you are now, in a current position. Or, you good formally dispute the account(s) in good faith under Federal Truth in Lending laws.

 

[cyana24]

Or, you good formally dispute the account(s) in good faith under Federal Truth in Lending laws.

Caliber - on what basis would the OP do this? If there are inaccuracies the OP would be able to dispute wih the Credit Reporting Agencies under the FCRA (Fair Credit Reporting Act). I'm going to assume for now the OP and her husband are already making payments under some tier of MBNA's "hardship" progam because of the recent offer to consolidate the two MBNA cards. Futher, TX is a community property state so even if the OP and her husband were AU's on each other's CCs, I doubt that it would very much matter unless the three CC's were in one person's name; I think in that case filing bankruptcy would protect the non-filing spouse.

If you not want to obtain a high interest home equity loan (and I agree with Caliber's statement that it's generally unwise to convert unsecured debt into secured), I'd say your best recourse would be to file bankruptcy. TX has an unlimited "homestead" exemption, that would protect your home assuming you can still afford the payment.

The problem with settling any credit card debts is unless you can can prove to the IRS's satisfaction that you were insolvent, you will receive a 1099-C from each creditor that you settled with. That means any debt "written off" is considered taxable income. Since the OP states that there is good equity in their condo I don't know if that meets the definition of "insovent".

It's not an easy decision to file bankruptcy. But if your (OP) credit (combined, that is) is so "bad" that the only home equity loan that you can qualify for is at 19% then perhaps it should become part of your "business plan". Your credit could recover much faster. I filed bk myself in part due to a failed business in which personal credit cards were used.

If you don't want to declare bankruptcy, obtaining the high interest home equity loan is your best bet. With timely payments on that loan and keeping other financial obligations current, as your credit improves you should be able to refinance your HE loan or you might be able to refinance both mortgages at a more affordable rate. Cease all further credit card use but keep the cards open so you can keep the "age". MBNA will probably lower your credit limit if you persue this route.