How to Get Out of Debt With the Get Out of Debt Guy » capital one

Capital One Sued Me And Got a Judgment After the Case Was Dismissed. – Linda

Steve Rhode — Mon, 07 May 2012 14:45:08 +0000

“Dear Steve,

Capital One wrote off their debt, turned over to a Collection Agency who has now sent to an attorney,,,they got judgment against me and I motioned to have that set aside which was denied,,now at Appeals process. Also the plaintiff’s counsel motioned against my motion. When reviewing court records, I found that the judgment was entered after the case was dismissed and that was main contention in my motion. In their opposition they pointed out to court they filed for judgment on the pleadings and gave a date which was an earlier date than what was filed with the court (in other words..the document was entered after the dismissal date)..I filed an opposition to the plaintiff’s motion stating this..not even sure if this was taken into consideration when my motion to set aside was denied.

Do I have any basis for appeal and are there any cases to cite?

Linda”

The Answer:

Dear Linda,

You don’t need a website, you need a lawyer licensed in your state for specific legal advice about your situation.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Capital One – Scam, Complaint, Review, or Praise?

Research Department — Thu, 02 Feb 2012 05:00:00 +0000

From How to Get Out of Debt

Please share your experience with this debt collection company and provide your review and feedback, in the comments section below.

The goal of this page is to allow people to share information that may be important to help others to make a more informed decision regarding their experience with this debt collection company. Here are some potential questions you might be able to provide feedback about.

Did the debt collector treat you professionally?
Did the debt collector call you at appropriate times of the day or days of the week?
Was the debt collector helpful in assisting you or did they attempt to threaten, harass, or intimidate you?
Did the debt collector threaten you with legal action?
Do you feel you were abused by the debt collector, if so, why?
Was the debt collection company easy to communicate with?
Did the company respond to your communications promptly?
Was the debt collection company able to prove that you actually owed the amount they were attempting to collect from you?
Did you have a really good experience you can share?
Did you have a bad experience you want to share?

It is important to understand when reading comments below that they are the opinions of the individual posters and may not be representative of the overall impression of all consumers that may have or have been contacted by this debt collection company. But everyone does deserve to have an opportunity to express their opinion, even the debt collection company itself, be it good, bad, or indifferent.

West Virginia Settles Charges Against Capital One

Steve Rhode — Tue, 17 Jan 2012 17:14:01 +0000

From How to Get Out of Debt

West Virginia Attorney General Darrell McGraw announces a settlement his office reached with Capital One Bank (USA) N.A.; Capital One Service, LLC, a Delaware corporation; Capital One Services II, LLC; Capital One Services III, LLC; COSI Receivables Management, Inc. (collectively Capital One), to resolve claims involving credit card practices in place prior to January 1, 2006.

In 2005, the Attorney General’s office began an investigation into Capital One’s credit practices, which spawned a legal battle in two circuit courts, the West Virginia Supreme Court and the Southern District of West Virginia.

After the United States Supreme Court paved the way for the State of West Virginia to proceed against Capital One, the West Virginia Attorney General’s office filed an action in 2010 in Mason County, before the Honorable Judge David W. Nibert. The trial was to start on April 24, 2012.

Capital One agrees to provide $3 million in debt forgiveness to West Virginia consumers, $9.5 million to the State of West Virginia to be used for financial relief for West Virginia consumers, and $1 million to the Attorney General’s office for consumer education and restitution.

This case resolves claims related to practices utilized from 2001 through 2005 involving the sale of payment protection and the Credit Recovery Services line of business. Capital One denies liability.

Attorney General McGraw is pleased with the results of the settlement. “This was a hard-fought battle, resulting in a lot of money for the State of West Virginia. Capital One is to be commended for changing the practices that prompted the State’s action.”

“We’re pleased to have worked with Attorney General McGraw to resolve this matter which dates back to a time prior to 2006,” said Tatiana Stead, spokesperson for Capital One. “We’ve since made significant improvements and look forward to continuing to serve our card customers in West Virginia.”

@GetOutOfDebtGuy

Capital One Told Me They Don’t Own My Debt Anymore. – Wendy

Consumer — Thu, 29 Dec 2011 10:31:27 +0000

From How to Get Out of Debt

Even though they can’t collect on a judgement against me, I would like to avoid one, especially since it appears to be a bottom-feeding JDB who is suing me expecting a default judgement. I want to make them squirm. The debt was from a Cap One credit card, but was charged off and either sold or assigned to such and such collection agency (the second one Cap One has tried so far). Capital One told me they no longer own the debt. When I called the more recent collection agency, I was referred to their attorneys. This law firm has a bad reputation for misconduct and has had a class action suit brought against them. The complaint that they served upon me names Cap One as plaintiff, with allegations that seem vague to me. Except for four digits of the acct number and an amt. owed in the body of the compl aint, no other documentation of this debt was attached, not even the address of the supposed plaintiff.

Steve…what I’d really love to know before filing my answer to this lawsuit is this: Can a debt collecting law firm sue me and claim Capital One is the plaintiff when that may be an outright lie? Other than getting it in writing from Cap One that they no longer own this debt, how can I know for sure who is the actual plaintiff? I believe the actual plaintiff is the law firm itself. So far I am denying every allegation they have made but one. If this debt is owned by a JDB, isn’t it FRAUDULENT to list the original creditor as the plaintiff ? I would like to use this info in my response, in the hope that they would dismiss the case rather than be exposed for what they are doing. What do you think?

This is your chance to be a hero and help out this person by providing your feedback and answer to the question in the comments section below.

Sued by Mendelson Law Firm on Behalf of Asset Management for Capital One. – Theresa

Consumer — Wed, 28 Dec 2011 15:34:11 +0000

From How to Get Out of Debt

I’ve been sued by Mendelson Law firm on behalf of Asset Management for a debt of roughly $3500 owed originally to Capital One.

In February of this year I offered a settlement amount of $1300. After about 5 days they countered at $2300, I re-countered at $1500. I’ve made $50 payments on the 15th and 30th of each month while waiting to hear a final amount they would accept ( I asked about the amount each time I called in). In the meantime a court date has been continued 2 times. We are now due to go to court tomorrow. They called today with an amount of $1980, which would not include any of the $600 I’ve paid in over the past 6 months.

Can I explain to the judge that the negotiation has not been in good faith? Mendelson/Asset took 6 months to provide an amount they will accept and now I’ll end up paying more than their original settlement of $2300. Can the judge require the company to accept the $600 as part of the settlement and what are the chances of that happening?

Theresa

This is your chance to be a hero and help out this person by providing your feedback and answer to the question in the comments section below.

Being sued by Capital One – should I sign the agreed judgment? – Charla

Consumer — Thu, 22 Dec 2011 21:02:03 +0000

From How to Get Out of Debt

I lost my job 3 yrs ago. I was unemployed for 8 months with no income at all.

I am now employed – but only part time. Can barely make the house payment and put food on the table for me and my son.

I just completed a course to get an Activity Director Certificate. Should receive it soon. Hopefully then will get a full time job and have more money to work with.

Attorneys for Capital One have sent me an agreed judgment and are asking me to sign it and send it back. Should i? Will they be able to garnish my bank account? I told them I would try to pay $10 a month till I get a better job. Should I file bankruptcy? Please help!!

Thank you,

Charla

Capital One is Suing Me for a Capital One Card I Got After Bankruptcy. – Robert

Steve Rhode — Mon, 12 Sep 2011 20:28:30 +0000

From How to Get Out of Debt

“Dear Lewis,

Hi, I filed chapter 7 back on 2003 or 2004. but got a credit card after my debt was cleared from capital one. I lost my job and couldn’t pay them. after 6 years they are sueing me for $7,600 when they lend me less then 2000 dollars of credit. Can I fight capital one by saying that I was in bankrupt when they gave me the card. they don’t want to settle for less then 4000.

Robert”

The Answer:

Dear Robert,

You didn’t bankrupt this debt. It was after the filing of your case, so you cannot discharge the debt.

I certainly think you should be able to settle for less than $4,000, but do you have it available to give to them if they do settle? Do you have any other debts?

You may be eligible for another chapter 7. You are able to file 8 years after the filing date of the last chapter 7.

Good luck!

My name is Lewis Roberts and I’m an attorney licensed in Florida and Georgia. My practice focus is consumer bankruptcy, real estate issues/closings, and mortgages. I also have Florida real estate broker and mortgage broker licenses. I am a proud member of the National Association of Consumer Bankruptcy Attorneys (NACBA), National Association of Consumer Attorneys (NACA), and a graduate of Max Gardner’s Bankruptcy Boot Camp. I enjoy helping people with decisions that impact their financial well-being.

Legal Disclaimer: This is for educational purposes only. It is not to be relied upon as legal advice. It also does not create an attorney-client relationship. No such relationship is formed with attorney without a written agreement.

If you have a bankruptcy question you’d like to ask just use the online form.

I Settled My Capital One Debts But It Doesn’t Show That On My Credit Report. – Jen

Steve Rhode — Sun, 11 Sep 2011 19:49:58 +0000

From How to Get Out of Debt

“Dear Steve,

I am in CA and I received a call from a collection agency on 9/6/11 about a credit card with Sams Club. They took me completely by surprise and against my better judgment I answered all kinds of questions i.e. Martial status, employment etc. When they told me how much I owed, I told them I didn’t agree with the balance and to send me something in writing. He said he would and asked for my email. Haven’t received anything. I asked what would be their lowest settlement (somehow thinking it would be affordable) and can put this all behind me. He said $900! I told him that I couldn’t afford it and he said can make payment in 3 installs. I told him can’t afford it especially when I don’t agree with balance. When my senses started to come back to me, I asked for his Name and company he was calling from and he said it so fast I could only get his name and Capital something???CDC?? Then I asked for his phone number and he hung up. I pulled my credit report that day and found that my Sams account has been “purchased by another lender” It shows charged off in 2009 $1431. Under the Sams entry is an entry from Paragon Way Inc. with original creditor as Sams and remarked as in collections with an original balance of $1432 and last updated 4/2011. Also there is an inquiry on my credit report from JC Christensen on 4/15/11. But they are not the ones that called me.

I also noticed that there is still a remaining balance due on the two 09 charged off accounts I settled with Capital One in August 2011. I settled for less than what they said I owed. I thought that by settling with them they would show as settled/paid. One of the accounts I had to settle thru Legal Recovery Law Off. which Cap One hired and assigned my acct to. (I did not know I was being sued) I was served a summons on a Sunday and Capital One cashed my check the prior Friday. Thank God they filed a dismissal with the courts.

How can I go about making sure I pay the right company? I am ready to settle the account for a fair amount in exchange for paid in full and if possible and legal a removal from my credit report. After reading all the horror stories online about settling debt with a third party collector/purchaser of debt I want to make sure I pay the right people. The last thing I want is to get sued again or pay just to find out they resold the debt and I then have to pay another company.

How can I go about having Capital one report my accounts as paid/settled?

Do you know of any low cost consumer agencies in CA that can help me with this?

If you need any additional information, please let me know. I would be happy to provide it.

Thanks in advance for any help you can provide.

Jen”

The Answer:

Dear Jen,

Your question brings up a number is issues.

First, I don’t think we have a good idea of who the recent company is that contacted you. Let’s wait for them to contact you again and find out exactly who they are. get the phone number and street address. Also get the full business name and post it in the comments below so i can check on them.

Second, on the old Capital One debt that was settled, there is some question if it actually was. Hopefully you have some documentation stating what the settlement agreement was. I just don’t want to see them later come back and claim “we never agreed to that.”

Of course the credit report is not an exact representation of your account. It might just be that they never updated the report with the new balance. I’d suggest you give Capital one a call and ask them directly.

Even with settling the debt, the amount of debt that was not paid or forgiven will still appear on your credit report as a bad debt. It’s the amount that you paid for the settlement part that should be reflected as paid.

Before you start paying anyone for help with this I think there are some easy steps you can take to resolve this for free.

Call Capital One and ask them for the current status of those accounts you settled. Make sure they show a zero balance and did not sell those debts to anyone else.
Let’s wait for another contact by that collection agency and figure out who they really are. I’m sure they will be contacting you.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Capital One Won’t Accept My Settlement. I’m Disabled. – Wendy

Steve Rhode — Thu, 23 Jun 2011 10:54:54 +0000

From How to Get Out of Debt

“Dear Steve,

I had good credit until I suffered a stroke after my 25 year marriage fell apart. I am on a fixed income now of $1380 from SSDI.

Like Genie was, I am also being sued by Capital one for credit card debt of $3600, + unspecified add’l fees and interest, w/only about 25 days to respond.

My credit is unlikely to ever recover, since I can never earn income again, and my medical bills just keep coming! I have already settled with 2 cc cos, but Cap One wouldn’t budge on amending the amount owed.

I have only exempt income (and told them so) and a 10 year old beater car, some used furniture and some personal effects as assets in my name, and I told them so. I used to own the home I live in with my daughter, but after she dropped out of college in 2007 to provide in-home care for me, I deeded the property to her in March 2010.

I was concerned that the end was near for me because I kept having mini-strokes, any one of which could’ve ended my life, or caused more severe disability. The home is worth about $180,000. It is the only way for me to compensate her for her giving up her career goals to help me in this situation.

I feel bad enough as it is and don’t want to leave behind any debt that she may have to pay later. I still want to settle the Capital One debt. This would leave me with only a few small medical bills that ended up in collections to do what I c to clean up my credit some.

I don’t want to file bankruptcy, because of possible “fraudulent conveyance” issues coming up, and don’t want to lose the roof over our heads. I would like to settle this debt because I fear what may happen in court.

I NEVER want another credit card again. I have a relative that has offered to help me out, but they cannot pay any more than the $3600 of the original debt, not all the extra charges Cap One may be awarded in court. After the Cap One is handled, barring more catastrophic medical expenses, I should be okay financially. Can you help me figure out what do next Steve? I read your great profile, and love watching those WWII dogfights also.

Steve, I am desperately trying to settle my last remaining credit card debt to Capital One (amt: $3600). I was already served with a summons to respond to 4 days ago.

As a stroke survivor, my doctor advised me to “avoid stress at all costs”, but how exactly do I accomplish that? I thought that trying to call Cap One directly with an offer instead of calling their attorney might be better, but they patched me into a department that has had me on hold for FOUR AND ONE HALF HOURS, while having to listen to an endless 30 second long recording!

As I am writing this, I’m STILL on hold. They are probably snickering watching that “line on hold” button flash, knowing that it’s from a person they’ve already filed suit upon. I cannot sleep or eat from the stress this is causing me. I’m going to hang up on them now (I should’ve done it long ago, but it took me sooo long to type this, I figured I might as well leave the speakerphone on while typing!) Steve…can you, would you, please help me?

Wendy”

The Answer:

Dear Wendy,

First off, let’s bring your stress level way down. I know how personal this feels, creditors do that to people. But at the end of the day this is personal for you but just business for Capital One. Nobody there is stressing over it.

Capital One should have eagerly accepted your settlement offer to cover the original balance. But this is just another sad example of how creditors and logic do not always go together.

So if Capital one does not want to me logical maybe the place to start here is with the obvious. From what you’ve shared you are living on benefits and have no other assets to your name at this time. If you don’t expect that situation to change then you could always just let Capital One sue you and get a judgment. You’ve got nothing to garnish or levy unless you have loads of money sitting in a bank account that is in your name and from money not related to your SSDI.

After they get the judgment, if you decide later that you want to try and settle, that’s always possible. But at this moment, let’s not get the stress level so high this kills you. maybe it’s just time to take a deep breath, let the situation flow and then deal with it on your own terms.

Does that sound like a reasonable approach at this time?

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

How Can I Lower My Capital One Credit Card Interest Rate? – Kelly

Michael Bovee — Tue, 07 Jun 2011 20:31:10 +0000

From How to Get Out of Debt

“Dear Michael,

I’m 49 and married.

Credit card is with Capitol One and I’ve had it for at least 6 years.

No late payments.

I don’t remember what my interest rate used to be, I think around 18%, but they raised it a couple of years ago to 24%!

A few months ago my limit was raised from $3000 to $6000, and I stupidly used it for stupid things and the balance it now $5119.00.

Every month I try to pay $400 to $500 split up one mid-month and one at the end of the month.

I have called to ask them to lower my interest rate and was told by an annoyingly condesending young man that my account didn’t “qualify” for a lower interest rate. I asked why my account didn’t qualify, after being a good customer for so many years? He couldn’t tell me. He just said that I should make 2 separate payments each month.

My husband thinks my balance is still around $3000.

I did call and ask them to lower it but the answer was no, with an attitude.

So my questions to you are:

Do they ever do that with just a phone call, or did I just happen to get to a world class jerk when I called?
Is customer loyalty ever acknowledged by these companies with, say, a lower APR?

Also, do you think I can do this on my own without the help of some sort of credit debt service?

Thank you, any advice you can give me is truly appreciated.

Kelly”

The Answer:

Hi Kelly,

Your experience in requesting your interest rate be lowered is not uncommon. If you are paying on time there is generally no incentive for a bank to limit their profits voluntarily. It is not until you show some sign of financial distress that payment reduction plans are revealed to you as an option. This would generally mean falling behind with payments. This of course can damage your credit if 30 and 60 day pays are reported.

You may have reached a jerk. That happens. His ability to offer you some form of payment reduction through an interest rate reduction is more bank policy than his refusal. He could not offer anything to you if he wanted.

Do not expect loyalty to come into play with credit card issuers. The goal of the lender is to secure returns for its investors. You may reduce things to a personal level, but they generally do not.

A credit counseling company could possibly assist you in reducing the interest rate on the card and establish a payback period over 4 or more years. If you would like to discuss your situation with a counselor I would recommend you connect with an AACC member who offers debt management plans. There are currently 3 AACC members who do so.

Click here for credit counseling information.

Have you reviewed your budget in order to identify if you can make accelerated payments towards your debt(s) and pay them off aggressively while not making credit purchases? If not, this would help identify what you can do and will also prepare you for any consult you may pursue with a debt relief service provider.

If you do look at your budget, or speak with a credit counselor, please update me with what you learn in the comment section below.

Michael Bovee has worked with financially challenged consumers for the past 17 years and is a recognized expert in his field. Michael founded Consumer Recovery Network (CRN) in 2006. CRN offers debt settlement services and educational resources nationwide. He has served as its president since 2006.

If you have a debt related question you’d like to ask, just use the online form.

Capital One Sued Me and Won. Now I Want to Setup Payments But They Want Me to Pay More Than I Can Afford. – Bill

Jeremy Golden — Tue, 24 May 2011 19:02:07 +0000

From How to Get Out of Debt

“Dear Jeremy,

I received a Money Judgement from the district Justice Court to the Common Pleas Court for 7,071.00. from being sued by Capital One.

I tried to set up payments that I could afford, however they said it was not enough.

I am recently unemployed and want to know how best to handle this situation

Bill”

The Answer:

Dear Bill,

I think what you wanted to say was that Capital One received the judgment against you (not the other way around). Assuming that is the case you still have a few options. First, even though they have a judgment they still might be able to negotiate a settlement. At the least it doesn’t hurt to contact the creditor and see what they might be willing to settle. You can tell them about your employment situation if you like and that might make them more interested in settling. You may even be “judgment proof” which means that a creditor doesn’t have much hope of collecting on the judgment as you don’t have assets. Whether or not you are judgment proof depends on your financial situation and to a certain degree the state you live in.

Second, you don’t indicate whether or not you actually had notice of the lawsuit before they obtained the judgment. In most situations a Plaintiff has to provide notice to you (or make reasonable attempts) before they obtain a judgment. If you did not have notice you might be able to set aside the judgment and defend yourself in the lawsuit which might give you more leverage in settling.

Finally, if neither of these options seem feasible you could always explore your options with a bankruptcy attorney. If you are a candidate for bankruptcy the creditor might want to settle for a very low amount rather than lose their entire claim in bankruptcy.

Jeremy Golden, Esq. is one of the resident debt experts here at GetOutOfDebt.org that helps people for free. Jeremy is a consumer rights attorney licensed to practice in California. He represents individuals in cases against debt collectors for violations of the FDCPA. He also focuses on defending people in collection cases who have been sued by their creditors or debt- buyers. In the last five years he has won at trial or obtained a dismissal in over 200 collection cases. Recently he was voted one of San Diego’s Top Attorneys in the field of Consumer Law by SDMetro Magazine. His website is goldencardona.com

If you have a debt collector question you’d like to ask just use the online form.

We’ve Worked Hard to Repay Our Debt But Now In a Tough Spot With Capital One. – Kerri

Steve Rhode — Tue, 15 Mar 2011 22:03:05 +0000

From How to Get Out of Debt

“Dear Steve,

We had some life changing circumstances in 2004… it led us to stop paying on 11 credit cards. We went through a debt consolidation company and they basically took our $3800 and did nothing… In the past 2 years we have settled on 7 of these accounts. We got into an amazing church a few years ago and it’s changed our lives and how we look at our finances. We are slowly trying to rebuild and do what is righteous- but settling 7 accounts in 2 years has taken every bit of disposable income we have…

The 4 accounts left are with Capital One. Two back in the day were $5000 each- now are over $10,000. We received a notice that a civil suit has been filed against us on 1 of the remaining smaller balances ($2500 now $5000)… and I’m sure the other is in the works. I called Capital One about the 2 large accounts and they were charged off in 2008 and our SOL is up in September so I’m sure they will be suing us shortly… With this multitude of urgent debt facing us… should we file bankruptcy? We unfortunately filed bankruptcy in 2000… so not what we want to do… We are in such a different place in our lives as far as credit goes and we don’t ever use it and are paying off the few we have left agressively… What should we do??

Kerri”

The Answer:

Dear Kerri,

I think the best answer to this problem is not found by looking backwards, but by looking forward. What is the goal you want to accomplish on this in the next 3 to 6 months?

Do you feel you have a greater responsibility to fix the past or to fix the future?

Before we come up with a direction to head it’s important to work through the issues. No matter what you have accomplished in eliminating your debt up to today, it does not matter if that path will leave you in harms way because of the remaining debt.

If you have not done so yet I would ask you to read The Honest and Unvarnished Truth About How to Get Out of Debt and then come back and post the answers to my questions in the comments section below.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

How Can Capital One Charge Off My Debt And Keep Charging Me Excessive Fees? – Angelo

Steve Rhode — Tue, 01 Mar 2011 23:26:12 +0000

From How to Get Out of Debt

“Dear Steve,

I was always under the impression that banks are required to charge off debt at 180 days. Just about every issuer does this and account balances dont seem to increase much more from that point with the exception of Capital One, I have found that Capital One balances increase almost 50% within a year of default. I am curious how Capital One is legally able to not charge off bad debt and continue to charge excessive fees, penalties and interest?

Can you shed any light on this Steve?

Best,

Angelo”

The Answer:

Dear Angelo,

The charge-off function confuses many people. They believe that a charge-off alters the underlying terms of the debt. It does not. The best way to think of a charge-off is as an accounting requirement. After 180 days delinquent the bank can no longer report that account as a good performing account on their books. This reporting function is actually an outgrowth of the S&L crisis of the 1980s when S&Ls held horrible debt on their books and masked the true condition of the institution.

As a matter of practice credit card companies in the past would bundle all their charged off debt in big lots and sell it soon after charge-off. Some money for that junk was better than trying to collect it and get little. However there is no requirement I am aware of that requires Capital one or any bank to have to sell the debt. And if the bank held onto the debt, the multiplier of fees, penalties and maximum interest can make the balance rocket.

I just so happen to have a Capital one application in my hand so let’s use that as an example. And let’s also assume that once the card went delinquent that the bank ratcheted the limit down to the balance, which generates over limit fees.

So if the balance began at $1,000 at the end of 12 months with fees and interest the balance would be just about $2,200. If the initial balance was $4,000, at the end of 12 months it would be about $6,200.

Little calculator I made to figure this out.

If the bank has already taken the reporting hit and is willing to hold-on to the debt and feels that approach will be more profitable for them, as far as I am aware, they certainly can.

The charge-off conundrum is very similar to the statute of limitations brain twister. Many people think that debt past the statute of limitations can’t be collected. In fact it can be attempted. The statute of limitations only limits the creditors options to sue you, not their ability to collect.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Capital One – DIY Credit Counseling Repayment Plan Terms

Steve Rhode — Sun, 13 Feb 2011 02:35:27 +0000

From How to Get Out of Debt

The following information is designed to assist you to put together a self-directed debt repayment plan with the creditor listed.

This information has been obtained from a number of sources and while believed accurate at the time it was posted, it may have changed.

However, it is good information to use to get an understanding of the types of things the creditor may do to assist you when working directly with them to create a repayment plan you can afford.

If you would like some personal advice and assistance from a credit counselor to put together your own repayment plan, visit the DIY credit counseling section of the forum and a counselor will help you there for free.

If you would like some free guidance on how to put together a self-directed debt repayment plan then download my free ebook, Eliminate Your Debt Like a Pro.

Below you will find terms that are specific to this creditor.

@GetOutOfDebtGuy

Capital One
DIY Credit Counseling Terms

Payment % of Balance:		Regular Payment
Minimum Payment Required:		$15
Interest Rate Reductions Available:		No Change
May Bring Account Current After Some Payments:		Yes
May Stop Late and Overlimit Fees:		Yes
Requires a Full Budget to Grant Terms:		No

Terms subject to change without notice.

Definitions:

Payment % of Balance: – The minimum payment the creditor is looking for. For example, if the formula is 3% of the balance then multiply your balance by the percentage. Let’s say your balance is $1,000. To calculate your minimum payment you would multiply 1000 x .03. The minimum payment would be $30.
Minimum Payment Required: – This is the minimum payment the creditor is looking for. If your calculated minimum payment is less than this amount you will need to increase it to at least this amount.
Interest Rate Reductions Available: – The creditor has been know or currently does reduce interest rates when consumers are on special repayment programs.
May Bring Account Current After Some Payments: – If you are delinquent on your account the creditor does or has been known to bring accounts current when making special payments.
May Stop Late and Overlimit Fees: – Some creditors may stop late and overlimit fees when special payment plans are agreed to.
Requires a Full Budget to Grant Terms: – Creditor may require a complete budget before agreeing to special terms. A budget guide may be found my free ebook you can download, Eliminate Your Debt Like a Pro.
Secret Phone Number to Reach Representative: This is the telephone number to reach a special payment representative.

More DIY Help is Available

There is so much free help and advice available on GetOutOfDebt.org that it can be overwhelming. But let me steer you to some important sections.

DIY Main Page – You can find the top of the DIY part of the site, here.
DIY Credit Counseling and Creditor Index – Want to find a specific creditor and their DIY credit counseling terms, click here.
DIY Debt Settlement – Want to see if settling your debt might make more sense for you in your situation. Visit the DIY debt settlement section of the forum and speak with an expert for free.
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Capital One Wants Me to Pay After Seven Years Or They Will Sue. – Heather

Steve Rhode — Tue, 09 Nov 2010 02:15:23 +0000

From How to Get Out of Debt

Got a Capitol One credit card almost 8 years ago. I was young and irresponsible, went through some hard times in my life and stopped paying. I have not made a payment for more than 7 years, and now they are calling and saying that I will be served court papers.

I have a debt with Capital One from 8 years ago and now they are calling and saying that I will be served papers and have to go to court. Will I be given like a 30 day period once they serve those papers to still try and work something out with them? I live in Wyoming and the statute of limitations is 8 years. Are they threatening me as a last effort to try and get some money from me? I make barely over $1000 a month, am going to college, and have two kids that are depending on my income. I can not afford another bill, but do not want to be sued. Is it too late? Do you think it was just an empty threat as a scare tactic by a bill collector?

Heather

Click here to help people to get out of debt.

This reader question was submitted for site members to answer.

This is your chance to be a hero and help out this person by providing your feedback and answer to the question. Post your response in the comments section below.

If you have a credit or debt question you’d like to ask just use the online form.

@GetOutOfDebtGuy

How Can I Stop Creditors From Tacking On Extra in Court? – Laurie

Steve Rhode — Sun, 31 Oct 2010 23:07:41 +0000

From How to Get Out of Debt

I owe about 5,000 in total – i am living in court these days but my real issue is not paying the card in payment is the extra almost 1,000 they tack on – how can I combat this.

Need to go to court with capitol one on a 1,000 credit limit and now it is up too almost 2,000 what can I do???

Laurie

Click here to help people to get out of debt.

This reader question was submitted for site members to answer.

This is your chance to be a hero and help out this person by providing your feedback and answer to the question. Post your response in the comments section below.

If you have a credit or debt question you’d like to ask just use the online form.

@GetOutOfDebtGuy

Thanks for This Website! – Rocio

Steve Rhode — Wed, 22 Sep 2010 12:40:21 +0000

From How to Get Out of Debt

“Dear Steve,

I had a baby in 2008 and i couldnt work for a year, so i got behind on all my bill ive been trying to pay one by one but capital one now is taking me to court

Hi thanks for this website!! i’ve been sue by capital one the original amount was 500 and now is 1200 plus court fees, should I try to contact capital one or wait for court day im really confuse please advise me on this, thanks a lot

Rocio”

The Answer:

Dear Rocio,

If you’ve been sued by Capital One you can’t ignore that suit. You probably received a notice of the court date and you may have been asked to supply some information in advance. The document you received will tell you if you have.

When you go to court take with you a listing of your income and expenses in case you are asked for financial information. But just be mentally prepared to not win. The issue at hand is one of contractual law. You had an agreement with Capital One and for whatever reason you were unable to repay the debt. Capital One then added on late fees, penalties and additional interest to the debt and the balance grew to what it is today.

Your best shot at avoiding a wage garnishment to repay this debt is going to be to come to an agreement with the attorney handling the case for a payment plan that is mutually acceptable. If you need specific advice about your case and your local law you’ll have to find an attorney licensed in your state.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Steven is Disabled, in Foreclosure, and Being Sued by Capital One

Steve Rhode — Fri, 27 Aug 2010 18:07:01 +0000

From How to Get Out of Debt

“Dear Steve,

A hard working blue color man, worked for 30 years before getting injured on the job May of 08. I am now considered disabled. Besides trying to save my home from foreclosure, Capital One is suing me for nonpayment; I received papers from the sheriff saying I have 20 days to respond.

Seeing how I am disabled and was injured on the job and not able to work , am I still libel for these payments or is there some kind of insurance on credit cards?

Steven”

The Answer:

Dear Steven,

It sounds like you are in a really difficult and tough position but there are some options. Generally I’m never a fan of credit card insurance since I don’t think I’ve ever seen one of those policies pay off. But if Capital One has been charging you insurance then you may be eligible for some type of coverage. The best way to check would be to call Capital One customer Service and ask them if you are eligible for payment protection. They’ll let you know. Additionally you can look at some of your old statements to see if there was a line item charge on there for payment protection insurance.

Since you were injured on the job and disabled there are a number of avenues you can follow. I think your best bet would be to immediately contact a personal injury lawyer and let them know what happened. A good lawyer will also be able to tell you what else you are eligible for because of your injury. Not only may you have a claim against the employer but possibly Work Comp. But in order to protect your rights you should contact a lawyer right now.

When you contact the personal injury lawyer let them know about the Capital one lawsuit and ask them for specific legal advice on how to handle it in conjunction with your injury claim.

If you don’t contact a lawyer right away then regarding the lawsuit by Capital One I would suggest that you call Capital One first as I mentioned to to see if you were eligible for payment protection coverage. Then I would make sure that you respond to the papers you were served with, stating your case and situation. You will get a court date for the suit, be sure to go to it. You can explain your situation to the judge at that time also. You may still lose the case but if you don’t respond and don’t show you will be guaranteed to lose.

Big Hug!

@GetOutOfDebtGuy

Can I Be Sued and My Wages Garnished if I Make $70 a Week? – Karylan

Steve Rhode — Thu, 26 Aug 2010 21:04:28 +0000

From How to Get Out of Debt

Karylan

“Dear Steve,

I am 24 yrs old living at home with my mom and might be getting sued by capital one. I work at a grocery store about 8 hrs a week sometimes not even that. I have had no luck finding a stable job, i might have to quit the one i have becuase i don’t have a car. I make about $70 a wk if i work all 8 hrs.

If i am sued can they garnish my wages where i make so little money?

Karylan”

The Answer:

Dear Karylan,

There are two different view on this. First, while it is highly unlikely that you would be sued, I have seen it happen before. And when I asked the creditor why? Their response was that while the person might not have anything of value or income right now, they probably will in the future. I have seen people sued by creditors for just a few hundred dollars.

I asked my lawyer friend to respond to you as well. Here is what she had to say:

“Don’t panic! The debt collectors’ threats to sue you are very likely to be just that: Threats on which they have no intention of acting. Threatening to sue and garnish wages or place liens are how collectors scare folks into paying when they can’t afford to pay. Debt collectors are often paid based on their collections so they tend to say whatever they think will motivate you to pay. Here are some facts:

It is not worth a creditor’s time to sue on small debts. They would have to spend more in legal fees than it’s worth to them. And just suing on a debt and winning doesn’t mean they can collect. Your situation right now makes you “judgment proof” meaning that you have no real assets and collection of a judgment against you would be something most creditors wouldn’t want to pursue.
No one can garnish your wages or place a lien on your property without first getting a judgment against you for the debt. A judgment is only obtained after you have 30 days to respond to the written civil (not criminal!) complaint. This complaint will be mailed to you and will have the court’s name at the top, along with the caption showing the name of the creditor “vs” or “v.” you. It won’t look like normal correspondence from the creditor. Even after your 30 days to respond (or any extension you receive) passes, the creditor still has to file more court documents and you will get a copy of all of them.
If you live in one of the 46 states that allows wage garnishment, then after all of the proper legal papers have been filed, it is possible for you to be garnished. But in your case, I do not think this will happen, I think they are trying to scare you into borrowing money from your family or friends to pay the debt. While we all want to pay our just debts, your financial situation at the moment doesn’t allow for that.

The bottom line is that the vast majority of these threats to sue are empty threats and nothing will happen without your knowledge so long as you get your mail. Therefore, I’d advise you to simply wait and see. After all, you need to save for a vehicle in order to get a better paying job.

In the meantime, visit the FTC’s website and read your rights under Federal Fair Debt Collection law so you can protect yourself. When this collector goes away, be prepared for another one to take it’s place– bad debts are sold and resold, another reason to learn all of your legal rights. Good luck and hang in there!”

So there you go, two slightly different points of view.

I think in the end all you can do is keep living your life and not worry so much about what MIGHT happen.

Big Hug!

@GetOutOfDebtGuy

Capital One is Suing Me. Do I Have a Case Against Capital One? – Jody

Steve Rhode — Tue, 17 Aug 2010 22:02:15 +0000

From How to Get Out of Debt

“Dear Steve,

okay here we go I have just recieved a summonds in the amout of $9700.00 from a lawyer claiming to represent Capitol One.

Now i’m not claiming that i don’t owe capitol one money but of course they have tacked on nearly 4,000 dollars to the initial 7,000 i was in default for.

Now here is what happened back in 2009 due to loss of income and seperation at the time i was in a huge amount of debt and no way to pay it all i began missing credit card payments as my mortgage was so high i had to choose home or pay credit cards.

after about 3 mths of Capitol one brutally harrasing me at home, my family, and my former job that i no longer worked at , Not to mention them telling my family and ex co workers exactly who they were and how could they get in contact with me which i thought that was against the law for them to disclose that information.

I became so frustrated i contacted my mortgage company to go on a hardship modification program that way i could lower my payment and try to make payments to the credit card company’s.

I was put on a modification program, So i called Capitol One started making payments in march of 2009 didn’t think much about it till about a year later and looked up my credit report to see how things were looking well i just wanted to die when i seen what popped up Capitol one put it as charged Off 3 mnths into me making payments I called them straight away and demanded why they would do that when i have been making payments and was told that when i arrainged to make payments the charge off was already being processed after only 3 mths of missed payments mind you.

Now the worse part my mortgage company has me listed as not making any payments even though i pay the modification payment every month and have tacked on 22,000 that they say i owe them. so currently i am in debt 26,000 to credit cards and 22,000 to citimortgage god knows when i will even get an answer from them if i’m getting refinanced or hit with the full amount. But my bigger concern is how can capitol one report a charge off when i was making monthly payments which i have made copies of every payment i sent.

I have read that its illegal for a company to report missed payments when u have proof that you have made payments. what are my options.

Do I have a case against capitol one and should bankruptcy be an option for me.

Jody”

The Answer:

Dear Jody,

Once an account become 180 days delinquent the creditor must charge off the debt. The credit card companies will then sell the debt to a debt buyer.

Was it Capital One that sued you or the new owner of the debt? It would be unlikely that Capital one charged off your debt and would latter sue you.

Were you making just hardship payments to Capital one or your full monthly payment due?

The issue of the mortgage company reporting your modification payments as partial payments are quite common. The issue here is if you have a permanent modification or only a temporary modification. Which do you have?

Was Capital One not sending you statements and had you checked on the status of your account after you resumed making payments?

I wish I could answer your question but I’m left with more questions after reading your question. Please post your answers in the comments section below for me.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Capital One Just Raised My Interest Rate by 5%. Should I Close My Account? – Lori

Susan Nilon — Sat, 14 Aug 2010 18:58:22 +0000

From How to Get Out of Debt

“Dear Steve,

Capital one just raised my interest rate by 5%. I have never even been late with a payment.

Should I close the account and pay off at old interest rate, or just accept the new terms?

Lori”

I asked my friend Susan Nilon to answer your question for you. I wanted to make sure you got an answer as quickly as possible as I’m a bit backed up at the moment. I’ll be watching the comments on this question and be around to help if you need me.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Hi Lori,

Without knowing all of your circumstances, I can only give you my initial reaction. 5% interest rate is not too bad of a rate hike. It is not unusual for a credit card company to raise their rates these days. I have seen people with a 7% interest rate end up having it adjusted to at 25% and 37% interest rate…with no option other than to accept it or close it.

That being said, my best advice to you is to put the numbers in front of you to see what it all will mean. Ask yourself these questions:

How does the new interest rate compare to the old one in regard to making the monthly payments?
Do you have the ability to pay down the debt at a faster pace?
If you opted out of the new interest rate and closed the account, you will have a debt to pay. How will that impact your budget when you no longer have that credit card to use?
Do you have another credit card to use?
Can you transfer the balance to a card with a lower interest rate and keep this one open?

If you close the account, it will affect your credit score. But how much it will affect it is depending on what your score is. If you have a really good score, then it might not make much of a difference. But if you have a mediocre to poor score, it could have quite an affect on your rating and future plans.

In the meantime, call the credit card company and see if they are willing to keep the interest rate at the original rate. If your account is in good standing, then they might be willing to work with you.

If you would like to send me more information in the comments section about your credit and monthly bills, I can give you more detailed advice on what to do. In the meantime, being an advocate for your self is your best plan of action.

Sincerely,

Susan

If you have a credit or debt question you’d like to ask just use the online form. We are happy to help you totally for free.

I’m Being Sued By Capital One. Should I Go Bankrupt? – Laura

Steve Rhode — Thu, 22 Jul 2010 09:16:30 +0000

From How to Get Out of Debt

“Dear Steve,

My husband and I have been struggling for over a while now. I lost my job in the middle of July 2005 which cause us to default on our credit cards in September. I took any kind of job I could, until I finally found stable work in October of 2008. Just when we thought we would be able to get back on track, my husband lost his job in March. We are again struggling to make ends meet and hoping not to lose our home.

In June of this year, I was sued by an attorney representing Capital One for a credit card that I stopped paying in September 2005. It was charged off by Capital One in March 2006 for the amount of $979. I have asked for proof of debt and was sent a copy of the March 2006 statement showing the balance. My court date is October 21st and they are suing for $1989 plus court fees and attorney fees. I want to know if it’s too late to settle. If not, what would be a reasonable amount? I have spoken with an attorney who said that we would qualify for a Chapter 7 bankruptcy but I would really like to avoid that since the Statute of limitations will be up by the end of this month. Should I tell their attorney that I will file bankruptcy if they don’t work with us? What advise can you give me? I don’t want to file bankruptcy but will before I get a judgment against me.

Thank you for your help,

Laura”

The Answer:

Dear Laura,

It is never too late to settle but in order to settle it will require both you and the attorneys to agree on a figure. And they may demand that payment in one lump-sum.

It doesn’t hurt to ask them but be prepared for them not to agree. At this point, their stronger play is to sue you. And as far as threatening them with bankruptcy, not a big deal. You either will or you won’t. They’ve heard the threat a thousand times and it does not matter to them.

Do you have other debts as well or is this the only outstanding debt you have? I can’t imagine that you’d go bankrupt over just this one debt.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Mohamad Wants to Pay His Creditors If Only They’d Let Him

Steve Rhode — Sun, 18 Jul 2010 19:27:34 +0000

From How to Get Out of Debt

Mohamad

“Dear Steve,

Our company closed by end of January and I’m behind with my bills. I’m struggling to pay my mortgage. I call other credit cards and some of them made payment plan and lower the interest but Capital One is giving me a hard time. I owe them $16,000 and the collection agency call me and the only deal they want to make I pay $5,000 now and when my company close they want me to take money from 401k to pay by April. I try to contact debt consolidation company but some of them are no good and last experience I had for my wife they did not represent New York. I’m confused and need help I told Capital One I want monthly payment plan but they refuse.

Mohamad”

The Answer:

Dear Mohamad,

People find it hard to believe me when I say that often the hardest obstacle that people have to face is to get their creditors to take a monthly payment.

If the collection agency may just be collecting the debt and is limited in what they can accept by instructions that Capital One has given them.

In your situation a debt management plan may be a logical step to take and while you have had a hard time finding someone to work with, click here for debt management information and help. The advantage of working with a debt management company is that they have a better chance of slipping this debt back inside Capital one and out of the hand of the debt collector that won’t listen to you.

This time, let’s get your Capital One debt into a debt management solution and see where we go from there.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Capital One is Suing Me and I Have 30 Days to Respond. – Sue

Steve Rhode — Tue, 15 Jun 2010 15:46:07 +0000

From How to Get Out of Debt

Sue

“Dear Steve,

I have two issues really.

First, Capital One is suing me and I have thirty days to respond and I am gathering my information for that response. What sort of documentation do I need there?

Second, I was co-signer on auto loan for a friend. However, the paperwork and loan docs say I am primary borrower and my friend is co-borrower and his wife is not on the paperwork. I brought this to the attention of the salesperson and when he went to handle it for me and said to call him back the next day, he was gone, no longer with the company.

I called the lender to point out the error and they only had the set of doc with me as primary and I only have the original sales slip with only my friend and his wife on the paperwork. That wasn’t the only difference in the sales slips either.

The only difference is my credit report was pulled between the first set of docs and the second set. Well long story short, we never received statements, payment coupons and when the my friend was making payment arrangements for missed payments, the lender gave him the run around and tried to make them make a second payment for one that had been cashed but not posted due to error on the lenders side. It was repossessed last year and now I am being sued. I have all the documentation on this bad deal. What do I need to include on this response?

Sue”

The Answer:

Dear Sue,

You really need to contact a local attorney for advice and assistance with this before you respond.

As far as the lender is concerned they have an apparently signed agreement with you as the primary borrower for a vehicle that was repossessed. They will come after you for the balance due. Which your friend should pay for you.

Big Hug!

@GetOutOfDebtGuy

I’ve Struggled to Pay On Two of My Cards But Capital One Just Sued Me. – Stacia

Steve Rhode — Mon, 07 Jun 2010 20:08:29 +0000

From How to Get Out of Debt

“Dear Steve,

I am 26, engaged, and have one child. I graduated with a BA in 2008 and the only job I found was as a secretary at the university I went to school at. While in college I racked up $20,000 in federal loans and $15,000 in a private loan.

I also managed get myself in trouble with credit cards trying to cover other various college expenses. I got behind on 3 of my credit cards my last semester of school. I was able to get on good terms with bank of america and am making monthly payments on about $5,000 with a very low interest rate. I will have it paid for in 3 years if I continue to make the same payments on it. I had a Chase card too it defaulted and was written off, then I settled with a debt collector and it’s now paid for.

The last credit card, a Capital One card, I have yet to catch up with. I just have not had the extra money to pay anything on it. I have been waiting on a tax return to pay it off. I got a few more tax credits this year because I had a baby. Well I have yet to receive my return and now Capital one is suing me.

I was served papers Sunday to appear in court on June 14th. This gives me two weeks to figure out what to do. I just don’t know if I should seek out a lawyer or try to call the attorney for capital one and set up payments. I really don’t want to go to court but I will if I have to because I don’t want a judgment against me.

Do I try to contact Capital One’s attorney/collectors and make a payment plan or wait until I go to court and see what happens? Do I need an attorney (which I can’t afford and don’t qualify for free assistance)?

Stacia”

The Answer:

Dear Stacia,

First, if you are expecting a big tax refund that typically means you are withholding too much each payday when you need it most. Adjust your withholdings to break even at the end of the year, not get a big refund.

This is a classic example of why embarking on a solution that does not address the entire situation, but attacks it in pieces is problematic.

I can’t think of anything that would prevent Capital One from suing you and winning, probably going for a wage garnishment following that. There is no doubt you incurred the debt and Capital One is enforcing the contract you both agreed to when you took out the card.

It seems the better approach would have been to have considered bankruptcy when you first realized you were having problems. The bankruptcy would have addressed all of the debt at the same time and prevented you from being sued and garnished.

Your number one priority on limited funds is to make sure you are first repaying those student loans. Deferring or postponing payments on those can lead to massive debts. For the government backed loans you may want to look at the Income Based Repayment (IBR) program. The private loans have no options.

As far as the suit goes you can seek the advice of a licensed attorney in your state or you can go to court and answer the questions of the court. Not showing up means you automatically lose.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I’m Living in China and Having Problems With Capital One. What Should I Do? – Christina

Steve Rhode — Thu, 20 May 2010 16:15:20 +0000

From How to Get Out of Debt

“Dear Steve,

I opened a Capital One card in September 2005 in order to have an emergency card while I was on a trip to China. The card never arrived in time and from December 2005 onward (before I even used any charges on the card!) I repeatedly asked to close the account. After much a struggle to try to close the account and getting fees racked up from it still being open (annual fee, etc) I resigned myself to having this card. I used it and I was making payments but always there was some other fee that they would charge and even when I tried to pay it off it would have another ‘charge’ that prevented me from closing it.

I did a balance transfer in order to try to close the account again. Now I have about 1,900 USD in debt from this card, even when I make payments they say it is past due and I’m living out of the country so its difficult for me to call them and they do not respond to my requests to call my China phone number.

I wanted to do a debt consolidation loan but I don’t owe enough money. When I was in the States for February, I reached an agreement with them that I could make a lump sum payment of 441 dollars in March and they would take 100 USD off the total balance owed. I made this payment, the money was debited from my checking account and then now, in May they say the payment was returned and my ‘minimum payment’ which was 55 USD (I was paying 76 USD for last two months) is now over 500 USD! I don’t even get paid that much in one month!

They sent a letter saying that I was over six months past due (which is not true, although I had been past due before, I have paid for the last three months, payments that were to bring my account (according to them) back in good standing and that were above the min. payment amount.

What should my next move be? Keep the payments being sent to them of 76 USD per month? Or just stop paying all together and ask for debt forgiveness?

Christina”

The Answer:

Dear Christina,

Since there is no such thing as debt forgiveness if you want the balance to go away we’ll have to think about a different approach.

To aid in communications with Capital One you might want to consider using the email option once you login to your Capital One account online.

In your situation, good communication is critical.

If you plan to return to the United States to live in the future you are better off reaching an agreement that keeps you current and repaying the debt. This will improve your credit report rather than leaving it with a bad debt, defaulted account and years of collection calls.

If you would like to try to get the interest rate reduced and bring the account current then think about enrolling the debt with a credit counseling agency. You can click here for credit counseling information.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I’m on a Fixed Income and Can’t Afford My Minimum Credit Card Payment. – Theresa

Steve Rhode — Fri, 14 May 2010 16:39:40 +0000

From How to Get Out of Debt

Theresa

“Dear Steve,

I’m on a fixed income and finding it more and more difficult to pay my credit card’s monthly minimum payment. My credit is already pretty well shot as I had to let my car go (voluntarily repossessed) last summer and I’m currently in negotiation to settle a small business loan (SBA).

That leaves my Capital One card, which is a minimum of $100.00 per month. My fixed income is a pension of $387.00 a month plus $250.00 from at-home contract employment with the local university. I also have an online business which is barely creaking by although I do anticipate the business to pick up because the product I sell is a good one and I have gotten a few orders since starting; however, that will take time.

I’m continuing to look for more work but it is slim pickings and difficult without a vehicle (I take public transit which is expensive). I would like to pay this card off but it’s down to either the card or food on the table. ( I’m current on my credit card right now.) I’m 57 and still in reasonably good health; however, I experienced a work injury two years ago which left me with a cervical spine injury and doctor’s recommendation to retire early.

Should I write to Capital One and explain my situation or should I let the card just go to default?

Teresa”

The Answer:

Dear Teresa,

The politically correct answer is that it never hurts to contact your creditors and explain your situation.

That being said, it won’t help much. While Capital One may offer you a slightly reduced payment, once you fall behind, that really does nothing to address the underlying problem of too little income. Based on what you are currently making I don’t see how you could promise to make any payment.

If you don’t pay Cap One they will put your card into collections, charge it off after 6 months, sell the debt to an outside company and the new debt owner will go back after you again. If at any time they decided to sue you then you could go bankrupt and eliminate the debt and suit.

One approach would be to stop paying and do nothing. Don’t let the collectors wind you up and certainly don’t make any promises to pay money you can’t afford to pay each and every month until the debt is cleared.

It sounds like you might be eligible for SSDI and some public benefits, including SNAP. You should check out these programs and see what you can get. After all, you paid into these programs with your tax dollars all those years you worked. Now that you need it, get it.

Big Hug!

@GetOutOfDebtGuy

Capital One is Only Suing Me On One of My Cards. – Angela

Steve Rhode — Mon, 10 May 2010 21:16:58 +0000

From How to Get Out of Debt

“Dear Steve,

I live in Illinois and have been summons to court for debt to capital one.My question is why is capital one suing me only for one card I have defaulted on when there are two? I’m being sued for 1800 on a card that had a 500 limit I stopped paying june of 2009 and I also have another card 500 limit I stopped paying on in august 2009 one is visa the other mastercard. Will they just sue me again?

Should I contact the attorneys office who is taking me to court? I offered capital one 1100.00 and they refused they wanted payment arrangements to be made on the remainder. I could not bind myself to another agreement this time that I knew I couldnt afford. So they said theyll sue and they have but why one card at a time? More money for them I guess.

These are the only two credit cards left to be paid I was in debt to several companies all who settled over the phone for a fraction of what they were asking problem is I have no funds for payment to capital one I am unemployed I have lived with my significate other who is the father of our 3 school age children for 16 years but we are not married he owns a home but my name is not on it same as the vehicles they are all his. I tried to work with these people but they wanted it all or nothing and theyll sue me and now they have.

Our household has an income but barely enough to hang on to our home.I’m trying to find employment but ive been stay at home mom for years any experience I have is a decade old. Our household suffered from reduced hours and wages due to the economy thankfully hours are again pretty steady and hourly wage has increased but not sure after being sued is there even a chance for payments? Or pay it or go to jail?

Never been in this situation before.

Angela”

The Answer:

Dear Angela,

I’m not surprised they are only suing you on one card at a time. It’s also not clear if the card you are currently being sued on was sold to an outside debt buyer or not. Based on the age of the debt I would bet it was sold by Capital One and now the new owner is going to aggressively pursue the debt with a lawsuit. It is a more common practice these days.

If the debt was sold then the person that owns this one account may not own the other account. That would explain the suit for one debt at a time.

It seems you have a couple of options. You can attempt to negotiate with the holder of your debt again to offer a lump-sum settlement. Offering $1,100 on a $500 limit card seems like a reasonable but nobody said creditors were reasonable.

How much do you owe on the other card?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I Had a Baby, Lost My Job, and Can’t Pay My Credit Cards. – Amanda

Steve Rhode — Wed, 21 Apr 2010 19:44:10 +0000

From How to Get Out of Debt

“Dear Steve,

In October 2008 I lost my job. I have 2 credit cards through Capital One and could not afford to make any type of payments on them bacause I had to pay for food and housing and a baby. I am single so no support from a spouse either to at least pay a little towards card.

I have received my phone calls and I have informed them I was unable to make any type of payment as I do not have any type of income. I have now receieved a letter from a Lawyers office and they are telling me I must pay account in full which both together is only 3,000 dollars which isn’t near as much as some peoples debt I canunderstand. I however have no way to pay at all.

They informed me if I do not pay that legal action will be taken and I will be sued.

I called the office and told them what are my options that I have no income at this time and the man I spoke with told me it didn’t matter if I did not pay, Capital One will sue me for the monies owed and that was it.

What can I do? I own nothing, no home, car, no pensions, 401k, I have nothing to my name at all.
What can I do should I just file bankruptcy and be ruined which my credit already is, so what is the difference, I know there is money to pay for bankruptcy also, do you have any suggestions.
I am actively searching for a job , currently my parents have been helping me, but they are barely helping thierselves so I can’t ask them to pay my bad debt and they are my only famly.

Thank you,

Amanda”

The Answer:

Dear Amanda,

There is a huge difference between owing a debt and logic.

Logically you have no way to pay this debt at this time. But Capital One had dumped you in their massive collection hopper of people that owe them money. They are not going to treat you as an individual, but grind you along with everyone else in the hopper.

For them, that process will involve suing you. While you don’t have anything now, they are betting that you will in the future so they are going to stake their claim in you now for a future payoff.

No matter why or how you got in this situation, the facts now are that you are barely making it, you are actively looking for a job and you have no family financial support network. It is what it is.

At this point the only way to legally end this debt and claim against you would be to file bankruptcy. It is not a judgment about if it is right or wrong, but like the debt, it just is what it is. Going bankrupt and ending this debt might just be the most responsible thing you can do right now.

I would suggest that you contact a local bankruptcy attorney and call to schedule a free bankruptcy consultation appointment to go in and discuss the situation.

Big Hug!

@GetOutOfDebtGuy

I’m in College and Getting Sued by CapitalOne. What Do I Do? – John

Steve Rhode — Sat, 13 Feb 2010 16:51:01 +0000

From How to Get Out of Debt

“Dear Steve,

Full time college student with debt from credit cards and past balance for a college in California.

I’m a 21 year old college student (about a year left of school) My student loans are all deferred until I graduate, but I have two credit cards and a balance from a college I used to attend in California. The total that I owe is about $3500 and all three of the creditors have collection agencies and attorneys harrassing me. I was served by capitolone and told that they are filing a judgement against me.

I attend the Culinary Inst. of America full time, so I am unable to work enough to pay these debts. I pretty much just make enough money to live on and my mom pays most of the misc. college expenses to help me. I would like to try and settle these debts but don’t know where to start. Might you be able to offer advice?

John”

The Answer:

Dear John,

Where do you start; with income. Until you get out of school it does not sound like you can make much, if any, money to begin to resolve these debts.

I’d just wait till you graduate, get a job, and start earning some money before you do anything. Otherwise, what’s the conversation going to be?

“Hi Capital One, it’s me John. I just wanted to call you and tell you I don’t have any money.”

Save the time and bake me a batch of snickerdoodles.

If they are going to sue you, they win. Like I said, it can all be dealt with latter.

Big Hug!

@GetOutOfDebtGuy

Capital One Sued by West Virginia Attorney General

Steve Rhode — Mon, 01 Feb 2010 21:23:35 +0000

From How to Get Out of Debt

Attorney General Darrell McGraw has sued Capital One Bank (USA), N.A. and four other companies in the Circuit Court of Mason County for unfair and deceptive acts and practices, unlawful debt collection practices, and unconscionable conduct in connection with their credit card lending and collection practices.

Capital One Bank (USA) is a national bank headquartered in Glen Allen, Virginia. It has about 500,000 credit card accounts with West Virginia consumers. Capital One Services, LLC, Capital One Services II, LLC, Capital One Services III, LLC, and COSI Receivables Management, LLC are Delaware corporations that service and collect on the credit cards issued by Capital One Bank.

The complaint filed in Mason County is based on numerous violations of West Virginia’s consumer protection laws. The complaint alleges that Capital One solicited consumers to enter into debt repayment plans by sending them solicitations that were disguised as offers of new credit. The offer was sent to consumers who had charged-off accounts with Capital One or other creditors.

Under the terms of the offer, Capital One agreed to provide the consumer $1.00 of new credit in exchange for the consumer’s agreeing to transfer the entire account balance of a charged-off account to the new credit card account. The consumer was required to make payments on the old debt in order to receive any further increases in the credit limit on their new credit card. By transferring the old debt onto a new credit card, Capital One was able to charge interest, late fees, and over-the-limit fees on debt that otherwise would not have been subject to those fees. It also allowed Capital One to re-age the debts so that the applicable statute of limitations period started new.

The complaint also alleges that Capital One: issued multiple low-limit credit cards, each charging exorbitant fees, rather than raising credit limits on consumers’ existing accounts; unconscionably imposed over-the-limit fees on consumers’ accounts; sold services to consumers who could not benefit from the services; and, billed and attempted to collect for credit card accounts that were never activated.

Attorney General McGraw stated, “Capital One’s practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking.” Until recently, the Attorney General was under a federal court injunction that prohibited him from suing the bank for its credit card practices; however, on January 4, 2010 United States District Court Judge Robert Goodwin granted the Attorney General’s motion to modify the injunction. Under the new order, the Attorney General is not prohibited from suing the bank to enforce non-preempted substantive state laws.

@GetOutOfDebtGuy

Capital One Payment Protection Isn’t Covering Me. – Danielle

Steve Rhode — Sat, 16 Jan 2010 16:00:06 +0000

From How to Get Out of Debt

“Dear Steve,

I lost my job in November of 2008, the day after it happened I called Capital One ( which I had 2 credit cards with) to activate my payment protection on both cards. I had both cards for at least four years & paid for protection on both. I was told I had to wait until it had been 30 days & call back to activate the protection. So I waited and unfortunately got more behind but I called back & was told they would send out the claim information & they would let me know when it wen into affect.

I never recieved any claim documents, I called back again about a month later & went through the entire conversation again & was told I would need to be caught up on payments before they could help me but they would send out the info again. Never recieved anything & couldn’t afford to get “caught up”.

A year later I was contacted by a law firm here in Oklahoma, who was calling to collect the debts & I let them know in November of 2009 that I was unemployed and actively looking for a job and had every intention of payig the debt back.

It’s now January and I was served a summons on both debts to respond within 35 days. I don’t know what to do. The total for both cards is under &4500 with the court fees for each one they have already added on.

Doesn’t it count for anything that I paid for payment protection for years, tried to activate it & no one would help me – aren’t I at least due that?

Please tell me what I should do – I am still unemployed, not recoeving unemployment & my husband it working 2 jobs to support myself and our 2 daughters under 7years old. We’re not even getting by right now. Please help!
Thank you.

Danielle”

The Answer:

Dear Danielle,

You do have a valid argument but this issue is going to come down to the lack of response by Capital One and they will say you never activated the payment protection coverage.

The good news is that Capital one should have a record of your repeated calls in their system and that would be the foundation for making the claim.

The bad news is that I don’t think you are going to make any progress without the help of a lawyer. The best course of action at this point is going to be for you to find a local attorney to help you with this matter. They can also advise you what to do with the looming and time sensitive lawsuit you are facing.

I know funds are limited at this point for you but if you don’t get some legal representation in this situation it is just going to roll over you. You will lose the lawsuit and they will get a judgment against you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I’m a Hard Working Blue Collar Worker And I Can’t Pay My Bills. – Steven

Steve Rhode — Tue, 05 Jan 2010 20:15:21 +0000

From How to Get Out of Debt

“Dear Steve,

A hard working blue color man, worked for 30 years before getting injured on the job May of 08. I am now considered disabled. Besides trying to save my home from foreclosure, Capital One is suing me for nonpayment; I received papers from the sheriff saying I have 20 days to respond.

Seeing how I am disabled and was injured on the job and not able to work , am I still libel for these payments or is there some kind of insurance on credit cards?

Steven”

The Answer:

Dear Steven,

Credit protection insurance is available on credit cards but I don’t suggest it. I don’t like it for two reasons, it rarely pays off and it is expensive.

An offer I saw yesterday was $0.89 per $100 of debt, monthly. So if you are carrying a $10,000 of debt you are paying that it will cost you $89. You are much better off putting $89 a month in a savings account and letting that grow.

Insurance is priced so that the company receives more in premiums than it costs to pay out claims. That’s how they make a profit. Also, the insurance company knows that not every person will make a claim or be eligible for a payout. So let’s say 1% of claims are ever paid out over a five year period. That is reasonable. For every 100 similar people are paying for this type of insurance the company will have collected $534,000 over five years and maybe paid out one $10,000 claim.

Credit protection insurance is a huge money maker for the banks and that’s why they push it.

If you were hurt on the job you should get yourself a lawyer to protect any claims you might have for wok comp and possibly SSDI, depending on your disability.

Steve

My Wife and I Are Retired With $28,000 in Credit Card Debt. – Dale

Steve Rhode — Mon, 04 Jan 2010 03:08:13 +0000

From How to Get Out of Debt

Dale

“Dear Steve,

My wife and I are both retired. Our ages are 68. We find ourselves $28,000 in credit card debt. with a car payment and a motgage. Six of the credit cards are from Capital One. They are changing the rates to 19.99% on all of the accounts. We have some as low as 7.99% and 11 and 12%.

We have a choice to either keep the accounts open and pay the higher APR or “close” the accounts and pay off at their current APR.

When they say close the accounts, does that go to the credit bureaus then, or when we actually get them paid off. My FICO score is @720 and my wifes is @660. I don’t want to mess my score up, but at our age, do I care? Our other creditors are not doing that “yet”.

Dale”

The Answer:

Dear Dale,

It certainly is a Catch-22 problem. On one hand, if these cards are your oldest, you still use them, and pay them on time, then the closing of these cards could hurt your credit score a bit. But that being said, closing the cards and actually paying off the balance would be better for your financial life overall.

Far too often people make decisions about what they will or won’t do based on how it impacts their credit score. We can’t lose site of the fact that a high credit score is not an indication that you are making really smart financial moves. The credit score is designed to allow creditors to spot customers who will make them the most money at the lowest risk.

What you might want to do is get a copy of your consolidated credit report and figure out which of your bushel of Capital One cards you’ve had open the longest. If you keep that one open and pay it off as soon as possible, you could close the rest of them with less impact to your credit score.

While your wife does not have a horrible score, it will be interesting for you to order the credit score option with your credit report so we can figure out why her score is low.

After you get a copy of your consolidated credit report, use the link, it is the same consolidated credit report that I use and love, I’d be most appreciative if you would come back and give us an update in the comments section to this question at My Wife and I Are Retired With $28,000 in Credit Card Debt. – Dale and tell us what you found.

Big Hug!

@GetOutOfDebtGuy

How Can I Get a Credit Card Company to Accept a Repayment Plan I Can Afford? – Scott

Steve Rhode — Fri, 01 Jan 2010 17:12:53 +0000

From How to Get Out of Debt

Scott

“Dear Steve,

How can I get a credit card company to agree to a repayment plan that we can afford?

My stepdad passed away last fall, and as family stepped in to help my aging Mom, we discovered that they had accumulated about $35K of credit card debt. They were supplementing their fixed Social Security incomes by using credit cards and so-called “convenience checks”. When my stepdad was alive, they were just able to keep up with monthly payments by combining their incomes.

Now, my mom has two accounts each with two different companies. One company, Chase, agreed to a debt liquidation plan with a 0% interest rate and equal payments spread over 5 years, for both of the cards my Mom had with Chase.

I have repeatedly called the other company, Capital One, but they have refused to make any kind of allowance or propose any other repayment plan, aside from waiving a late fee due to “hardship”. The interest rate on one card is 24.9% (!), and the other card is 14.9%, so it’s hard to make a dent in the balance when so much of the minimum monthly payment is going toward interest charges. In fact, my Mom’s fixed income does not allow her to make even the monthly minimums on these two accounts.

How can I convince Capital One that we’d like to repay the balances, but on more favorable and realistic terms? I have called repeatedly, and they just don’t seem to care.

Scott”

The Answer:

Dear Scott,

I’m not shocked or surprised. People are always surprised when I say that the hardest thing you have to deal with when in trouble is getting a creditor to accept a reasonable payment arrangement. It is actually hard to get creditors to accept payments you can afford.

The only legal way you can force a creditor to accept a repayment plan is by going into a Chapter 13 bankruptcy. It is a legally enforced repayment agreement dictated by a bankruptcy judge.

But based on your mother’s age and situation I think she should really consider a Chapter 7 bankruptcy and discharge the debt. If she feels compelled to makes payments for her own reasons after bankruptcy, she can.

I seriously doubt that any minimum payment approach in her situation will ever result in the debt being eliminated in her lifetime and if she has to use Social Security money to make payments then she definitely needs to go and talk to a bankruptcy attorney. I would suggest that you schedule a free bankruptcy consultation and go with her.

Big Hug!

@GetOutOfDebtGuy

Frederick J. Hanna & Associates is Trying to Collect an Old Capital One Debt From Me. – Ann

Steve Rhode — Tue, 29 Dec 2009 23:11:46 +0000

From How to Get Out of Debt

“Dear Steve,

I am in debt with Capital One credit card company. I’ve been unable to pay them for the past year. I just recived a letter from FREDERICK J. HANNA & ASSOCIATES, P.C. ATTORNEYS AT LAW.

It states I need to contact them to make arrangements to pay the unpaid balance. If I don’t notify the office within 30 days they will send me a Judgment. It also states at this time, no attorney with this firm has personally reviewed the particular circumstances of your account. However, if you fail to contact this office, our client may consider additional remedies to recover the balance due. The blance due is $857.02

Is Capital One Credit going to sue me of 857.02

Should I notify this law firm?

What should I do?

Ann”

The Answer:

Dear Ann,

If you believe the debt is correct, then yes, you should contact the law firm and come to some agreement on how to pay the old debt.

If you don’t feel you owe this debt then send a letter to the law firm within 30 days of the letter and ask for a copy of the written agreement you signed and statements to show you owe the debt. Send this handwritten letter to them by some type of traceable method like certified mail return receipt requested, UPS, or FedEx.

Can you be sued over an $857 debt, why yes you can.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I Filed Bankruptcy and Debt Collectors Are Violating My FDCPA Rights – Maria

Steve Rhode — Sat, 12 Dec 2009 09:02:43 +0000

From How to Get Out of Debt

“Dear Steve,

I have many messages left on my answering machine from debt collectors. Some of which I believe are violations of the FDCPA. Creditors Interchange has left messages about expediting judgment against us-no mini-miranda ever. Fred Hanna Associates mention they are debt collectors. And they do say that if this is not so and so hang up now. NCO wouls alway say the this was an attempt to collect a debt. Nationwide did so also. National Action Financial Services stated this is from a debt collector.

We filed BK March 30, 2009, and for several weeks I received calls from NCO about 49, Nationwide-4, National City-our home equity-they kept sending statements all the way into May asking for payment and last called May 14.

June 5th we recevied a could not make the name out but the telephone number was clear. And then on June7th we recevied another call this time I answered. She was very hesitant in giving me any info. Finally she said she was collection for Capital One and they just sent the file to them. Asked her why they would do that when we filed BK. She got rattled. So I asked her if she knew what the FDCPA was and her reply was “What did I do something wrong? What is that?” I did give her attorney’ name and number and no calls today.

My question is actually I have 2. Have the collection agencies I mentioned violate the FDCPA but leaving the messages they left on the answering machine? Also what recourse if any can be taken against the many phone calls I received after filing BK.

Attorney just told me to ignore them and then later said I should have answered and gave him his number. Shouldn’t they be reported to the Bankruptcy court for violating BK code. We also had a vehicle repo after the filing. Shouldn’ that be reported also.?

Maria”

The Answer:

Dear Maria,

I know this is very stressful and disconcerting. Quite frankly the fastest way to make them stop is to pick up the phone and call them. Be sure to have your bankruptcy case filing number, the date filed and your attorney information on hand when you call.

I’m not surprised they are still calling, it can take a period of time for the information to filter down to the collector, especially outside collections. Once you give the collector the information above the calls should stop very quickly.

When you talk to them, even though you are stressed and they might not be very nice, just have a smile on your face. Armed with the bankruptcy details the collector will tick a box in the computer that will begin to remove you from active collections.

Trust me, it will end well if you follow my suggestion.

Regarding the repo, I’m not sure what chapter bankruptcy you filed but if it was a Chapter 7 and there was no agreement to get caught up on back payments or continue the regular monthly payment the lender probably just snatched up their collateral. Just ask your attorney for clarification on this situation.

Big Hug!

@GetOutOfDebtGuy

I Owe Capital One $55,000 And Have Not Paid in 8 Months. – Dawn

Steve Rhode — Thu, 10 Dec 2009 21:11:59 +0000

From How to Get Out of Debt

“Dear Steve,

I owe $5,500 to Capital one. I have not paid in 8 months and it went to collection. They said they are going to sue me. I dont have the money to pay on this for another few months. What do I do?

Hi, I am 24 and I have a credit card with Capital one which I have not paid on for 8 months now. I just dont have the extra money to pay on the card. I have been barely keeping my head above water with the bills I already have.

Today I received a call from a Collection agency. They were yelling at me and telling me I was young and don’t know what I am doing. They told me that Cap one is going to sue me for the $5500 I owe. They also started calling my family members and leaving messages on their home phones. They even went as far as to ask for my Father.

I dont even live with my parents. I told the collection agency that they can not call my family and they told me that they are going to keep calling in order to get in touch with me. She kept yelling at me and saying what are you going to do about this. I couldn’t even get a word in so I hung up. I read that you should never admit to a debt to a collector so I just told them that I would call capital one. They continued to tell me that I cant call cap one because they dont want to talk to me and they wont take my calls. Which i know cant be true.

I am actually really scared right now because I dont want to get sued and I dont know what to do. I am going into a debt management program and it starts in January. Now i am afraid that cap one wont accept the program. What should I do and what are my next steps. I can use all the advice I can get.

Thanks so much!

Dawn”

The Answer:

Dawn,

My bet is Capital One charged off your debt and sold it to the collection agency. The tactics you describe would not be authorized by Capital One but would be the type of pressure tactic used by a bad debt buyer.

Since you are barely keeping your head above water with the bills you currently have, I really don’t think a debt management program is going to be enough to solve this problem for you. It sure sounds like the last thing you need is another payment for this Cap One debt on top of debts you can barely make.

I honestly don’t see a logical exit from this without bankruptcy. You should click here to find a local bankruptcy attorney you like. Make an appointment to go in and see the attorney and discuss your situation.

Bankruptcy will give you protection from the collection company, terminate your debts, and give you a fresh start.

Big Hug!

@GetOutOfDebtGuy

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Capital One Doesn’t Care I’ve Been a Good Customer for Seven Years and They Are Coming After Me. – Jake

Steve Rhode — Thu, 19 Nov 2009 15:36:29 +0000

From How to Get Out of Debt

“Dear Steve,

Have capitol one credit card for about 7 years now never late. In Dec 2008 the business where I am working cut my hours and now I am with reduced pay. Wife wasn’t working but now she is only a little more than minimum wage. Was able before to pay bills but now more difficult. Behind on credit cards but making payments on time but not enough. Behind on mortgage too and asked company HFC to refi before I was late they said no. So now in pre foreclosure in new jersey.

I have to go to court next month for capitol one they are sueing me for $6400.00. I called there lawyer and he said pay up 2500.00 or see you in court. I tried to explain but he said see you. I wanted to make $100.00 a month with no fees he said no.

Should I get lawyer or go in with explanation and tell judge I have payed only $55.00 to 75.00 a month since Dec 2008 and they took my money but would not work out plan with me. I cannot afford more. I’m stuck. Is there anyone to call that can help talk to lawyer before I go I can’t get pay garnished or more bad credit.

Please help.

Jake”

The Answer:

Dear Jake,

With a $6,400 balance the minimum payments would have been around $130. You said you have been making payments of $50 to $75 a month. Yeah, that’s not going to cut it. If you send any payment less than the minimum amount due your account will become more and more delinquent as the months pass. Eventually your account may land on a lawyers desk and you will be sued. Jake, it’s just a flowchart process, not individual consideration.

Of course you always deserve to be heard in court but I’m confused on what your argument would be. It sounds like you hope to rest your position on the fact you sent some but less than the minimum payment required. All the judge has to do is be presented with your contractual agreement from Capital One and it will be evident you have not been able to meet your contractual promise.

The lawyer you need to speak to is a bankruptcy lawyer. Bankruptcy is the ONLY option you have that will provide you with legal protection and relief from this situation. Bankruptcy will end this court case and prevent any judgment or garnishment. And it will also address the rest of your debt at the same time.

So find a local bankruptcy attorney you like and make an appointment to go talk to them about your situation.

Lastly, an attorney summed up these default lawsuits for me very well once when I made the argument the person was doing the best they could under the circumstances. He said, “Steve the judge will decide this as a matter of law. If the person failed to honor the contractual agreement, they will lose. It is out of the hands of the judge.”

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

New UK Debt Relief Trickery Now Labeled a Scam

Steve Rhode — Mon, 17 Aug 2009 21:53:29 +0000

From How to Get Out of Debt

Basil and Amanda Rankie in the UK took matters into their own hands when it came to dealing with MBNA, Capital One, HSBC, and other credit card debts. Using contract law in the UK they were able to get the court to nullify their credit agreements and wipe off their debt.

This isn’t a new trick. There has been a question about the enforceability of credit agreements in the UK for some time now. And this created an explosive industry in the UK to challenge similar agreements and claim that they could be terminated.

As you would expect, the UK government didn’t take very kindly to this and have been working to crack down on these debt elimination companies with accusations that they are unfairly taking advantage of consumers.

Well the Rankine’s decided their approach had legs so they started up a website to sell their credit agreement cancellation services to others. And here is where I think they ran into trouble.

Their business model was curious and it perplexed me that that they would “buy” credit card agreements off of individual consumers and fight them. Unless there is a huge legal loophole involved here I can’t see how they could purchase the debt without the acceptance of the original creditor.

Apparently the Office of Fair Trading in the UK (equivalent of the FTC in the U.S.) was very skeptical of the claims themselves. The OFT came out and said that companies offering to help people become debt free through buying or selling on debts is a ‘debt sale scam’ and warned consumers to steer clear of them. It argues the law does not permit the sale of debt without the original lender’s permission.

Daniella Lipszyc, a specialist in contact law with Ultimate Law in Altrincham, Cheshire, said the central issue here is a loophole Basil has identified: lenders terminate a contract after a borrower falls behind in repayments, before they ask for the whole amount to be repaid.

This loophole is the window created – after the contract has been terminated – that the Rankines are using to sidestep contract law to buy debt.

Daniella said: ‘They are right, technically. The problem is they want to assign the liability for the debt to themselves, which is the bit I can’t see working. The liability for the debt is a personal one, much like a personal injury claim; you can’t assign a personal injury claim to someone else – it’s yours alone, it’s personal. There’s also an implied obligation to repay the debt.

‘Whether this holds up in a court of law remains to be seen.’ Source

The Rankine’s company, Credit Card Killer, charges clients a flat fee of £450 plus 10% of the outstanding debt for a loan agreement, in return for ‘buying’ it off them for a nominal payment of £1. There is a further charge of £350 plus 10% for additional agreements.

I’m sure this isn’t the last we’ve heard about this but don’t get your hopes up that this has become an easy way out of debt in the UK or the U.S.

@GetOutOfDebtGuy

Capital One is Suing Me and I’m Really Depressed. – Genie

Steve Rhode — Thu, 09 Jul 2009 15:09:49 +0000

From How to Get Out of Debt

Genie

“Dear Steve,

Hi, I’m so glad I found this site. I’m 26, just graduated from school…and I have a ton of debt which is driving me crazy.

Right now, I have a few collections agencies after me. Last week, I go home on Friday and find 3 letters- 2 of them being summons and one from the lawyer who is about to sue me for $1250 on a credit card bill from Cap. 1 which was originally $650 which I could not make minimum payments for.

I’ve been trying to keep up with payments for other loans and bills. It’s getting really hard for me now to keep up. I really want to settle at least this one with a lump sum amount- which is a bit less than what their suing me for.

I want to call to make the offer,but at the same time, I’m afraid if i say the wrong thing, it’ll backfire and I’ll end up paying more or having the debt unsettled. Please….I need your help. I now have 20-25 days to respond to the summons. I’m also afraid that if I pay this one, Cap. will come after me again for the other cc bill, which I may not be able to pay.

What should I do? I’m really depressed and going crazy over this. As I mentioned, I also have other debts in collections aside from this one. The other biggest one that I’m worried about is a student loan- which I think is a federal loan…I’ve been getting letters saying they’ll garnish my wages…but I have no full time job. I can’t afford to be sued by them either. I really really really want to settle these debts, but I dont have any money. Thanks for your help

Can You help me? How do I go about with settling these debts- starting with at least the one i’m being sued for….Please help.

Genie”

The Answer:

Dear Genie,

I’m really glad you found my site as well so I could help you with some practical advice.

This is obviously a situation that did not begin last week. For all of these debts to be in this stage it has been brewing for a while. The most serious of the debts is the student loan. Student loans have the most unfettered powers to inflict real pain on your financial life.

If you could update me on the total amount of debt that you owe, not including the student loans I could give you a more detailed answer. Just update me in the comments section of this question.

The first step is to get a plan in place to get your student loans out of default. Since these are government backed loans I suggest you look into the IBR option available. Loads of information is available here on the Income Based Repayment (IBR) program.

Now, how we deal with the other debt is unknown till you give me more information but one thing is for certain, do not settle any debt until we have a master plan.

I understand the emotional drivers of wanting to make this CapOne debt go away but using available funds to settle one debt in a bigger problem is not a solution. It’s like fixing one crack of many in the face of a dam.

Right now this all feels immensely scary and leaves you naturally depressed and in a panic. All of those emotions are perfectly normal. I’ve lived through it myself. But, those feelings are not a true reflection of the technical aspects of your financial situation, but reflect your emotional state of mind.

When you suffer from money troubles the emotions are much more powerful than the facts of the realities and that leads us to feel very odd in many ways.

Update me in the comments section with the total debt you owe and let’s take this to the next step. Once we come up with a plan for you to implement you will begin to feel better.

Big Hug!

@GetOutOfDebtGuy

I Panicked and Called a Debt Reduction Company. I’m Afraid I’ve Walked Into a Scam. – Megan

Steve Rhode — Mon, 20 Apr 2009 19:22:12 +0000

From How to Get Out of Debt

Megan

“Dear Steve,

My husband and I currently have around 10-12,000 in credit card debt and medical bills. About 2 years ago, after our 2nd child was born we became unable to make the minimum payments on the credit cards (about 10 different credit cards) and we have also been unable to pay the medical bills from our son’s birth and from a few pediatricians and a couple of trips to the ER.

We were doing fine making all of our payments until my husband’s company stopped paying his medical insurance premium and we became responsible for it. That was the beginning of the end and the birth of our son was the proverbial straw that broke the camel’s back. SO…. nearly 2 years later and I have not made payments on any of the credit cards, Capital One is suing each of us (we had 2 credit cards with them, each of them for $500).

My husband lost his job 2 months ago and now our income is about $1600 a month, we have a $500 car payment and pay $800 in rent and utilities. When we originally were served the papers from the court (Capital One suing us). I panicked and called a “debt reduction company” I have been paying them $250 a month for the last 6 months, at this point I am pretty sure that I walked right into a scam as they have yet to settle any of my debt and with my husband losing his job we can not even make that $250 payment.

What is the worst that can happen in our current situation? Should we file bankrputcy?? We were advised that we would probably have to do it ourselves based on our extremely low income. We have no assets to speak of, we rent our living space, all we really own is our furniture and most of it is from thrift stores, nothing fancy! We are relatively young (26 and 30) and I am so afraid this is going to affect the rest of our lives. Our daughter is 5 and I know she can see how stressed out I am about this. I am so worried all of the time, I just don’t know what to do next! help!

Megan”

The Answer:

Dear Megan,

I’ve written about my concerns of debt settlement companies and also the success of the lump-sum debt settlement approach. In your particular situation, just based on what you’ve shared, I can’t really see where the monthly payment debt settlement approach is right for you.

It will take you a long time to save up enough money to save, and based on 15% fees for many of the debt settlement companies, all you are probably doing right now is just paying their fee out of your monthly $250 payments.

What concerns me most about bankruptcy is not that people file bankruptcy, but that people don’t consider bankruptcy for fear of how they might feel, if they did.

I think your situation is providing you with the answer. I’m a debt whisperer. LOL.

You situation is telling you that even $250 directed towards your debts is more than you can handle. So even if you had enrolled in a debt management or credit counseling program, instead of just a debt settlement program, I think all those options would have failed or be failing for you right now. Bankruptcy will eliminate your credit card debt, medical bills and stop the lawsuits.

While thinking of going bankrupt scares you for fear of how you will feel. It certainly seems like an appropriate solution based on your situation.

What you need at this time is not a solution that will patch your situation for a few months. You need a solution that alter the current path and allow you a fair and reasonable chance of getting out of debt. I think, for you, that’s bankruptcy.

I think you should still schedule a free appointment with a local bankruptcy attorney and go and talk about bankruptcy. You could still file for bankruptcy yourself but I would prefer to see you work with a bankruptcy professional, even if you have to pay and even if you think it’s easy.

You are both young. You can rebuild your lives bigger and stronger. You owe it to your daughter to create an environment that fosters a better future rather than to perpetuate a situation without a resolution.

What you will learn from this experience will serve you the rest of your lives and help to make you stronger, as individuals, and as a family.

You little girl is picking up your vibes and the stress is impacting her. Please provide her with some comfort by doing what is best for you and your family, even if it is hard.

Big Hug!

@GetOutOfDebtGuy

Capital One is Calling Me Every Day Even Though I Am Disabled. – Debra

Steve Rhode — Sat, 14 Mar 2009 19:38:59 +0000

From How to Get Out of Debt

Debra

“Dear Steve,

I haven’t wored in about 5 years due to a car accident, I’m not getting SS disability because they don’t believe I’m injured enough, I’m living with a relative, I have no assets or even a bank account. I am being sued by Capital One for a long ago credit card bill. I have already responded and filled out 2 interrogatories stating my situation, but I am still getting daily calls from the ‘attorney’s’ office.

Is there any way to stop this or will it go on forever?

Debra”

The Answer:

Dear Debra,

In my experience, just because you were turned down for disability, does not mean you are not eligible for it. You might need to get an attorney that is experienced in these issues to fight for it for you.

The only way to close the door on this debt is going to be through bankruptcy. You have no other legal tool or right to prevent the current and future pursuit of this debt by one party or another. Sending a cease and desist letter might slow down the communications from outside collectors but it does not change the underlying situation.

Big Hug!

@GetOutOfDebtGuy

I Need to Put My Debt Behind Me. I Have No More Money to Make Payments. – Chris

Steve Rhode — Fri, 06 Feb 2009 20:19:12 +0000

From How to Get Out of Debt

“Dear Steve,

I turned my car in about a year ago. I have perodically made small payments to a collection agency. This loan was through Capital One Auto Finance. The reason for turning the car in was it was costing me more to keep it running than I could afford. This was a nice car with very few miles and extended warranty. Unfortunately things that went wrong were always somehow not covered.

Within a year I literally had the thing towed in 12 times. I couldnt even tell you how much it cost me, one little mishap left me stranded on vacation in another state for two extra weeks because they could get the parts for the car. I tried to get the dealer to do something but no help could be found so I just turned it in.

Recently I was contacted again by the collection company and offered a settlement. I was to pay $100 in Nov and & Dec then the remaining settlement of $2100 in Jan. Today when I was called it was a new person telling me the guy I spoke with no longer woked there and they could not verify nor standby this offer but was willing to let me pay nearly $4000 to close this out to keep from taking me to court and garnishing my wages.

I BEGGED the manager I spoke with to pull the tape of the guy that worked there and myself talking to verify what I was saying, and they talked all the way around it. Even saying that that was two months ago and chances are it had been erased etc. Dont get me wrong I owe this debt, but the car sold for $13000, I paid nearly $8000 on it before letting it go, they sold it at auction for $7000. They have already got there money and then some. I have no family to help my moms dead and my dad lives 3 states away and doesnt have a pot to pea in cause he is just a drunk. I am a college educated person, who works hard but this is too much. I also have had two surgeries in the past year and am behind on most of my credit cards. I just got my house payment caught back up.

I just want this behind me, I planned to pay the remaining $2100 dollars this month with tax money but that is all I can pay. Of course they will take that but I am still going to owe the full balance of $8000. I do not have money to continue making payments. Is there a cheaper way for me to get out of this. Please help

Chris”

The Answer:

Dear Chris,

Sadly, they are playing you. Here is a great lesson to learn from this. If a debt collector comes to an agreement with you, you MUST get it in writing and NEVER make a payment till you do. Collectors lie all the time to sucker consumers in settlements.

When trying to do debt settlements yourself this is just a classic mistake people make. This is why I always recommend using a professional third-party debt settlement company to properly handle a settlement agreement.

The usual scam runs like this, the collector will offer you a sweet deal and you’ll make a couple of payments. All of a sudden you find out the guy isn’t there anymore, did not have the authority to make that offer, there is no record of the offer, etc. And now you’ve made some good faith payments towards a del that no longer exists.

If there are tapes of the calls I find it hard to believe that they are erased after two months. The tapes exist for regulatory compliance and as a CYA. Nobody tapes calls strictly for “training purposes”.

The way I see it you’ve got three options.

Hire a lawyer to represent you and fight this with the collectors.
Pay the collectors what they are now demanding from you.
Go bankrupt and eliminate the debt.

Steve

Credit Card Companies Are Coming For You. Protect the Wife and Children.

Steve Rhode — Thu, 20 Nov 2008 14:50:35 +0000

From How to Get Out of Debt

I see a new advertising campaign in our future.

When Banks Panic
You Lose

Even though the Federal Reserve has lowered its rate to 1%, banks are raising your interest rates in hopes of making a bigger profit. Oh yes, they are raising your fees or charging news ones as well.

At a time when the government is pleading for consumers to return to consuming, the banks are instead dissuading people from doing this by punishing consumers with higher fees and charges. And at the same time the banks are getting billions of dollars in bailout money to help get this economy moving again. It almost sounds damn near unpatriotic.

And let’s be clear about why the banks and credit card companies are scrambling to make these new revenue streams and profits. It is because the brightest and most financial savvy banking minds of our time swindled themselves by buying and insuring crap loans that inflated housing values and now result in record numbers of foreclosures. That’s some damn smart banking.

So the banks losses are the direct result of their own ineptitude and you are going to pay for it with higher credit card fees and charges.

What Credit Card Companies Are Doing

American Express

Raising standard purchase interest rates and boosting APRs for cash advances, late payments and defaults.

Boosting the foreign exchange transaction rate for consumers and small business by 35% from 2% to 2.7%.

Bank of America

Is offering lower initial credit lines and closing some accounts with zero balances that have been inactive.

Reviewing all accounts and will adjust interest rates, fees and terms as they see fit based on risk.

Removed the balance transfer fee cap.

Look at the details of a recent BofA credit card offer here.

CrunchBase Information

Bank of America

Information provided by CrunchBase

Capital One

Changing its minimum payment formula which may increase monthly payments for some customers.

Raising interest rates.

Chase

Raising overlimit, cash-advance and default interest rates.

Will charge some customers a $10 monthly service charges and raise monthly minimum payments way up to 5% of the outstanding balance, from 2% where they are now.

Citibank

Raising interest rates on some customers.

Discover

Removed the balance transfer fee cap.

I would not be surprised at all to see monthly payments for cardholders to increase significantly as more creditors take the Chase lead to increase monthly minimum payments from where they are now. It is a quick win to increase their cash flow and will likely result in higher losses, but more cash now, when they need it.

Here is an example of what it can mean to you:

$10,000 Card Balance
Old Minimum Payment: $200/mo
New Minimum Payment: $500/mo

Imagine if all your cards did that to you, which they legally can. Many monthly budgets would be torpedoed leading to missed or late payments, but wait, that generates more fees to the credit card companies. Me sees a plan.

The banks will claim that by raising the monthly minimum payments that it is in the interest of the debtor since it will help the consumer to pay their bills off faster and get out of debt sooner. Truly this is nothing more than raising the hurdles higher and then saying it is better for runners who now have to jump higher.

Credit Cards Still Available

You should not get the impression that credit card accounts are not still plentiful and available. Just look here to see what is being offered.

While credit card companies are going to punish and raise revenue on its current crop of hostages, ah, customers, they are not going to stop extending credit. It’s what they do.

That is a good news, bad news situation. If you are stuck with a bad card with horrible rates and terms, it is still possible to switch. Granted, with credit standards toughening it is harder to switch of you have bad credit.

CrunchBase Information

Bank of America

Information provided by CrunchBase

James Wants to Know If Capital One Will Take His Car If He Stops Paying His Credit Card

Steve Rhode — Tue, 18 Nov 2008 22:14:23 +0000

From How to Get Out of Debt

“Dear Steve,

I can not pay my credit cards,because of sickness.

I have a auto loan with Capital One and a credit card with them as well.

If I just pay only my auto loan on time each month and stop paying on the credit card, can they touch my car because I pay one and not the other.

James”

The Answer:

Dear James,

You are in luck. I can’t think of any past case when Capital One would repo a car with a Cap One auto loan because of a failure to pay the Cap One credit card.

This is primarily because it is two different loans that are not tied to each other. Now, I have seen this happen with credit union debt when someone has a credit card, bank account and savings account all with one credit union. What some credit unions have said in the past is if a member defaulted on a credit card account that they would not release the lien on the car loan once it was paid off until the credit card account was paid off.

Even though Capital One is now providing banking services, I’ve still only heard about this car and credit card problem with the credit unions.

Thanks for the question.

Steve

The Answer:

Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out.

Steve Rhode — Fri, 31 Oct 2008 14:51:17 +0000

From How to Get Out of Debt

Credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings have finally come together with the help of the National Foundation for Credit Counseling, Consumer Federation of America and the Financial Service Roundtable to start the process of creating a debt solution, other than bankruptcy or credit counseling.

That could be potentially really good news for consumers as it starts to make some major movement towards the perfect debt assistance program I outlined before.

At the heart of this new initiative is the Office of the Comptroller of the Currency giving banks permission to write off up to 40 percent of the balance owed on credit cards on a case by case basis. If banks did this it would give consumers a possible solution to pay what they can afford without bankruptcy. That is good news.

But with every good news story there is a catch, and pretty significant ones at that. Banks don’t want to book the loss on the loan until the consumer pays off the reduced balance through a payment plan. That will mask the true losses by the banks under this plan for years. But the primary reason for this is probably because the banks want to and will come back in full force and vengeance to collect the total amount due and then some, if consumers fail to complete the entire plan as scheduled. That could be very dangerous for consumers that have a slip or two during the long and difficult 60 months of repayment.

Worse yet is that rather than in bankruptcy where consumers do not have to pay any income tax on the amount of debt forgiven, in this plan, they will. The group is asking that borrowers be able to defer payment of income taxes they will owe the IRS on the forgiven part of the debt until after the remainder was paid off. You have to pay income tax on forgiven debt, just as if you earned the money. That just puts the banks squarely ahead of the government and leaves the consumer with potentially years of additional debts payments to make after five years of paying back creditors.

No Lingering Tax Liability- Unlike now, where any forgiven debt is taxed by the IRS as if it was earned as income, except for debt discharged in bankruptcy, the IRS needs to not bill consumers for the that amount owed that creditors may write off under this plan. Getting a tax bill for debt you already can’t pay is a strong disincentive for consumers to even bother with repayment. – The Perfect Debt Assistance Program

And the forgiven debt tax issue is a big one. If banks write off a total of $60,000 worth of debt to help you avoid bankruptcy, depending on your tax rate you can wind up with an IRS obligation of $12,000, more or less. Finishing a long and hard repayment schedule over five years only to wind up owing the IRS and paying for another couple of years seems cruel and a huge disincentive.

Scott Talbott, senior vice president at the Financial Services Roundtable is quoted as saying that under this plan “Both parties win”. I’m afraid that is an optimistic statements at this point and while we are potentially headed towards a good plan, we are not there. Right now I’d have to say the current plan heavily favors creditors.

Currently, the only thing the plan does is potentially leads consumers into a five year payment plan that is not binding on the creditors under law, leaves the debtor owing the IRS at a latter date, masks the banks write offs until the reduced debt is paid.

Since the plan is not binding, it will only take the actions of one creditor with excessive collection pressure, or arbitrarily changing their mind to conform with then current bank policy to continue participating to tank the whole repayment plan, maybe years into it. And creditor flip flops are not a worry of something that might happen, they happen now in a normal debt management plan, especially as creditors buy and sell portfolios of debts.

If the plan fails years into the repayment plan, consumers will have wasted years of struggle and payments and potentially be in worse shape than if they just went bankrupt to begin with. In order for this plan to be effective it must be contractually binding, just like an Individual Voluntary Arrangement (IVA) in the UK is.

Even though I once served on the board of directors of a consumer credit counseling office that was a member of the National Foundation for Credit Counseling (NFCC), I have been hypercritical of the NFCC in the past, feeling as if they are not doing enough to defend consumers against bad creditor behavior and actions since they are primarily paid by the creditors. But for this effort of trying to create a new solution for debtors I’ll give Susan Keating, the president of NFCC, a provisional thumbs up for finally seeing the light that better solutions for problem debt need to be made available to consumers, other than the traditional debt management plan (DMP).

I also see my old contact at Consumer Federation of America, Travis Plunkett, is quoted as saying that “In this case we have a clear common interest”, we do Travis but we’ve got further to go before this is a good plan for consumers other than bankruptcy, where no lingering tax liability exists and the plan is binding on the creditors. Keep up the good work Travis.

Having spent the past few years in the UK and working with similar plans there, this new debt write off plan being put forward here could be something great but unless we tighten up some major issues, as I laid out in the perfect debt assistance program I’m afraid that it will not be as beneficial for both parties as it could be.

A final sticking point is that this plan only address part of the consumers financial struggles and does not provide a single solution to address all debts, as bankruptcy does. Not mentioned in this plan is how consumers in trouble would be able to incorporate a failing mortgage into one single and coordinated solution handled by a third part in the time of monetary crisis. If a plan can be created that address all the issues and wraps things up into one package, then we’ve got a world class solution.

Keep working on this guys, we are halfway towards a decent debt repayment solution for good people with bad debt.

Steve

Christine Writes And Asks Me “Should We Liquidate The IRA to Pay Off Debt?”

Steve Rhode — Thu, 25 Sep 2008 19:29:01 +0000

From How to Get Out of Debt

“Dear Steve,

We have about $35,000 in current debt not including a home that is not finished. We have about $120,000 in IRA money. We own $75,000 in real estate free and clear that is for sale but not sold yet. Should we liquidate some of the IRA money to help out our debt?

Christine”

Dear Christine,

The interesting thing about helping people with debt problems and to get out of debt is that no two situations are ever the same. Recently Steve wrote in and asked me a similar question about borrowing from his retirement account. You might want to review that Q&A to see what I also told him. The advice I give you is probably going to be different.

It is hard for me to consider borrowing retirement funds as a good thing to do. I am a firm believer of putting money into IRA and 401(k) accounts and leaving it in there to grow. While it is in there it might require some readjustment of the mutual funds it is invested in but taking it out is almost always a mistake.

I say almost always because I have advised some people to do it in certain situations and I could see myself doing that if I was in a really bad situation as well.

The times that I have suggested borrowing from the IRA are usually when there is a critical situation that would be fully resolved by borrowing the money. One example was when this couple came to me for help and their newborn son had just died and she was now out of work. The husband had been diagnosed with cancer and was having to drive 200 miles each way for special treatment. The cost of the treatment, his time off work and the gas, plus funeral expenses had deflated their bank accounts.

With everything going on they fell behind on their bills. They owned a house and had about half of it paid off. Capital One was coming after this guy really hard for about $65,000 and he didn’t have it. He looked into refinancing their house to take cash out but he could not find a lender.

He had about $50,000 in his IRA and after fees and penalties he would wind up with about $37,500 if he cashed it out. I told him that if he could get Capital One to agree to settle the debt for that amount he would avoid bankruptcy, putting his home at risk and he could retire this debt once and for all.

Capital One refused to accept less than $43,000 and we talked about it on the phone. He was bummed, I was depressed and even the story and documentation would not persuade Capital One to accept his entire IRA as a settlement.

He called me the next day. Seems that when he got home he opened the mailbox and in it was a letter from a different department at Capital One agreeing to accept $25,000 as a full and final settlement. Just goes to show you that big creditors don’t have a clue what other departments are doing or saying.

He took the offer, cashed out most of his IRA and paid off Capital One which saved his house and it gave them tremendous peace of mind.

But Christine, that does not sound like your situation and in your case, based on what you’ve told me I’d say that you should not tap your IRA to pay off your debt.

It sounds like our primary issue here is that we are waiting for the home to sell and when it does you’ll have enough cash to pay the cards off completely.

If you rush to cash out or borrow from your IRA it will be very difficult to return yourself to the same position you are in today. With the stock market in the sewer as I write this the value of your IRA is probably off by a large amount. If you sell now you will get less for your shares than if you hold on to them and let the market come back.

If you take out $35,000 and before you can repay that money the market starts to climb again the same amount of shares will cost you more and maybe a whole lot more. And if you can borrow from your IRA and pay it back at a low interest, say 5%, it actually costs you a whole lot more than that. You’ll have to pay the 5% plus lose the increase in value of those stocks you would have got if you left those shares alone.

If the market rebounds and your IRA goes up 15% in the next year or so then it doesn’t cost you 5% to borrow, it costs you 5% + 15% = 20%. That’s expensive.

Generally you are always better leaving the IRA money as ‘off limits’ except in rare circumstances.

Let’s do this, let’s revisit the situation in a couple of months and take a second look at your situation then if things have not changed with the house.

Big Hug!

@GetOutOfDebtGuy

How to Get Out of Debt With the Get Out of Debt Guy » capital one

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Definitions:

More DIY Help is Available

Have New Information?

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