“Dear Michael,
I went into large amounts of credit card debt as a single mom. I divorced when my house was worth $50,000 more than it is now. I insisted with my ex to keep the house so my kids can graduate in the same house. Once the youngest graduated, I lost a lot of equity and couldn’t sell the house. I put money into selling it, fixing it up, etc. only to go further into debt. I then consolidated about 75% of it with Bank America. They promised if I paid 14% interest, I would pay it off in 7 years. Somehow, they say now it wasn’t 7, even though I have made all my payments and it never goes away. I have about $45,000 in “credit card” debt. i have never missed a payment and have good credit. I rent my house to break even on the mortgage and equity (minimum interest) payment with variable interest rates. (Thank goodness it has been low.) I have fairly good credit but it gets me no where as far as refinancing etc since “to o much debt”. I pay down the credit cards and they lower the ceiling. I feel sooo stuck. I have talked to a bankruptcy lawyer and he thinks that I could do a chapter 13 because I make too much. Went to Credit counseling or tried…doors were locked, no one answered the phone and I left…
The lawyer said to quit paying my cards as it is a waste if I am going to do something. My good credit gets me nothing. What should I do? Where to start?
Thank you so much.
Theresa”
Hi Theresa,
What is the estimated value of the home now? What do you still owe on the loans?
If all or the majority of the carrying costs on the home are being covered by the rent you receive, you may want to focus on the unsecured debts first.
Who are the credit card debts with?
What are the balances and interest rates on each card?
A chapter 13 plan last 3 or 5 years. The vast majority are 5 year plans. You may be able to knock out the unsecured debt in that same time frame, or less, without having to file the 13.
If you can answer my credit card debt questions in the comment section, you will get some tips and feedback to assist you in formulating a plan.
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.
I owe on the first mortgage with Bank America around 210,000 on a variable rate now and with Chase, home equity, $75000 and only pay the minimum interest each month, again on a variable rate. The home is probably valued at that total now, maybe a little less. I tried to refinance the first to get a secured rate and have to get “permission” from Chase to refi the first. Didn’t get it before, doubt I will this time. Rent, however, covers my payment, currently so I “break even”.
I took out a “gold option loan” with Bank America a few years back to consolidate cards. It is at 14% which made me leary in the first place but the representative said “you can pay it off in 7 years at this payment.” So I agreed and now it is supposed to be 8 years or longer and I have never added to the balance and have brought it down from $32,000 to about $26,000 in probaby 3.5 years at $600 a month. Seems endless. I have another card that I had to use for “house fixes” of roof etc, at 10% with USAA. Balance is about $13,000.
Again my “great credit rating” gets me nothing since I have so much unsecured debt.
Thanks for any help you can give!
Theresa
I owe on the first mortgage with Bank America around 210,000 on a variable rate now and with Chase, home equity, $75000 and only pay the minimum interest each month, again on a variable rate. The home is probably valued at that total now, maybe a little less. I tried to refinance the first to get a secured rate and have to get “permission” from Chase to refi the first. Didn’t get it before, doubt I will this time. Rent, however, covers my payment, currently so I “break even”.
I took out a “gold option loan” with Bank America a few years back to consolidate cards. It is at 14% which made me leary in the first place but the representative said “you can pay it off in 7 years at this payment.” So I agreed and now it is supposed to be 8 years or longer and I have never added to the balance and have brought it down from $32,000 to about $26,000 in probaby 3.5 years at $600 a month. Seems endless. I have another card that I had to use for “house fixes” of roof etc, at 10% with USAA. Balance is about $13,000.
Again my “great credit rating” gets me nothing since I have so much unsecured debt.
Thanks for any help you can give!
Theresa
Thanks for the additional detail Theresa.
If paying 600.00 monthly is not an option now, a debt management plan (DMP) or reduced interest hardship plan direct from BofA, will not provide much in the way of payment relief. At best the new monthly payment would save you around 50.00.
If you want to avoid chapter 13, and when only considering the credit card debt with BofA, can you accumulate about 7 to 8k over the course of the next 8 to 9 months while not paying bofa? This would involve settling the bofa debt for less than the balance owed and would affect your credit. As you have pointed out, your credit standing is doing nothing for you at this time.
This approach would not provide any benefits that may be available to you with the 2nd mortgage in a chapter 13, but if push came to shove on the home (were you to lose the renter and not find a replacement renter quickly), you could look to filing 13 at that time.
The cost of filing chapter 13 can reach to roughly 3k. The impacts to credit and your personal finances will last 5 years minimum.