I was laid off last year and out of work for 5 months. That burned through my savings. I got a one year contract position which has now ended.
I have $45K of unsecured credit and a $6K balance on a secured auto loan. Since I am out of work, I contacted my lender, Wells Fargo Bank, about getting a forebarance for 3 to 6 months. I offered either to total deferal of payments or to make interest only payments. They said no to both. Tried to tell me FDIC regulations would not allow them to do so.
Anyway, I will not be able to continue making the $1,400 monthly payments on my unsecured credit for long. I need to use what savings I do have for food & utilities. Income over the past 10years has been $100K – $140K, credit score is 715, no late payments in past 7 yrs, but lowered some due to high amount of unsecured credit.
What is my best option:
1. Make $1400 monthly payments and hope to land a job within 2 months. The time my $5K savings will last.
2. Call a different dept at Wells Fargo? If so which one?
3. Get a professional debt negotiation person involved.
4. File Ch 7
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Actually the problem of the forbearance does not start with the FDIC, it starts with the Office of the Comptroller of the Currency (OCC) that says that a bank can not keep a non-performing asset on its books for more than six months without showing it as a bad debt. The debt is still collectible but hurts the banks balance sheet. It is a regulation that was put in place after the Savings & Loan crisis many years ago in order to keep the banks books more reliable.
Unfortunately that little regulation does more to drive people towards bankruptcy. As a debt nears that mandatory charge off time the collection pressure really increases and people just can’t take it anymore so the go bankrupt.
So let’s run through your suggested options:
- Make $1400 monthly payments and hope to land a job within 2 months. The time my $5K savings will last. – Not a big fan of this one. I think you are cutting it to close to the wire and besides, you’ll need some money for bankruptcy if you file.
- Call a different dept at Wells Fargo? If so which one? – Probably not a good investment of time. I doubt you’ll get a better answer.
- Get a professional debt negotiation person involved. – You could consider a debt management plan and it would probably bring your unsecured credit payment to about $950 and then you’d have to make your regular car payment. If you have not done so already, click here for debt management information.
- File Ch 7 – Probably the most logical thing to consider in your situation. It will hurt your credit score, but that can be built up again. It will shed your debt you can’t pay and allow you some breathing room to get a fresh start. No other solution will do that. I suggest that you schedule a free bankruptcy consultation with a local bankruptcy attorney and just go and ask all the questions you can think of. Then go home and think about it for a couple of days before you decide to do anything.
Tom, no matter what you decide to do, please come back and give me an update in the comments section and let me know what path you decide to follow.
And by the way, once you can close the door on this past debt that you can no longer service, then you can focus on moving ahead with less stress and pressure. You’ll still need to find some income but you will need less to get by.