I Want to Pay Less Than I Owe Without Hurting My Credit. – Diana


“Dear Steve,

I make a good salary but we got caught in an investment home situation with a construction loan, and have been making ends meet by using credit cards.

I have been pretty successful at paying the minimums, but have missed many due dates and of course interest rates have raised and minimum payments have raised. I am done with this credit card debt life and I want to find a better way to pay these off.

I have about $70,000.00 in credit card debt and across the many cards I am paying upwards of $1,500 per month but seeing small decreases in the overall remaining amount. We just inquired about a program that helps reduce what is owed, but it involves not paying your cards for 6 months and then having a lawyer negotiate a lower payoff amount.

I don’t like this because it destroys whatever credit rating you have and then I assume will take years to get it back up. My first child will be going off to college in 4 years and I am sure we will need a loan to help her.

I can’t afford to have any worse of a rating then I have now. What type of program do you suggest? I can afford to pay about $1,000 per month, but I want a consolidated way with a lower interest rate.

We currently will not be able to get an equity loan because of our second home situation. I was also thinking of going to my parents and asking them to get an equity loan off of their house at a much lower rate and then making the payment that way. What this won’t do for me is get any negotiated lower payoff amount.


Dear Diana,

Any time you pay less than you owe it will result in a negative mark on your credit for the forgiven debt and a potential tax liability.

If you want to keep or improve your credit then pay the debt as you agreed to or pay it off in full.

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The debt settlement route you mentioned has been identified by the Attorney General’s of a number of states as a scheme to watch out for. In the past year several lawyers have been put out of business for operating such debt settlement enterprises.

There is no “get out of jail free” card for debt that will let you pay less than you owe and protect or improve your credit. If anyone convinces you that there is, they are either stupid or lying.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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