Married 3 kids combined income of about $90,000 gross. Have a home with an interest only mortgage that’s has a year left before it converts. We owe about $25,000 in credit cards. We want to get the debt taken care so we will have enough to refinance to a fixed rate loan to keep our house. Currently with credit card min. payments and other monthly expenses we can not afford to make a full mortgage payment. We are about $500 short each month.
We have been looking into debt management programs like ClearPoint Credit Counseling and debt settlement programs like Care One. Also have considered bankruptcy but do not want to loose the house. I read in Kiplingers about ClearPoint but when looking into it sounds like they probably can not lower my payments enough to make a difference. I contacted Care One they told me in order for us to get the payments lowered we would have to file for bankruptcy to scare them into a settlement and that would take up to 18 months and I would have to deal with debt collectors.
We are cunfused by which direction to go in, Debt Managment, Debt settlement, or bankruptcy?
That is the first time I’ve heard of a debt settlement company telling someone to file bankruptcy to try to scare creditors into accepting debt settlements. It seems utterly pointless. Once you have the protection of bankruptcy there is absolutely no reason to terminate the case and settle the debts. I’m hoping that you misheard the Care One representative, otherwise, that was horrible advice.
For more information on the effectiveness and success rates of credit counseling, debt settlement, and bankruptcy, see The Truth About The Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy.
But I think the answer is clear in your situation. A credit counseling program is not going to work for you. You already don’t have enough money to make at least your minimum payments. And in a credit counseling program your minimum payments to creditors are going to be at least what they were before you entered the program. You don’t need interest relief, you need monthly cash flow relief.
Making that full mortgage payment should be your top priority. make it. Credit card payments come second.
The legal and logical solution here that reduces your payment and allows you to keep the house is a Chapter 13 bankruptcy. I urge you to click here to find a local bankruptcy attorney you like.
My fear is that if you don’t go bankrupt you will enter a debt settlement program which will destroy your credit and cost you a whole lot of money for nothing, or a credit counseling program that is not sustainable for you.