IVA Debt Settlement

For some individuals who are struggling with debt issues, offering a debt settlement agreement to their unsecured creditors can be a way out of debt, but it is not necessarily available for all.

The concept of debt settlement in the UK is fairly new. The idea of debt settlement in the UK means that a consumer pays less of the debt than they actually owe and (besides bankruptcy), the only way to do so is through an Individual Voluntary Arrangement (IVA).

How Does an IVA Settle my Debt?

An IVA is a debt settlement plan which is designed to ensure that an individual only pays the amount of debt that they can realistically afford over an average period of 60 months. It was introduced as a bankruptcy alternative and many of the negative consequences can be avoided.

For an IVA to begin, it must be improved by the client’s unsecured creditors. 75% (in terms of debt value) must agree to the IVA for it to go ahead. An IVA is generally only suitable for those with high levels of unsecured debt, £15,000 or more, and requires a qualified insolvency practitioner to arrange the IVA.

IVAs means that the outstanding balances of unsecured are joined together into a reduced monthly payment, and the repayments are calculated to be affordable and are based on the individual’s income and expenditure.

An IVA lasts for a typical period of 5 years and is legally binding between the individual and their unsecured creditors. As it is legally binding, it offers the client additional benefits as the creditors cannot change their repayment demands or the terms of the original agreement. It also means that it is legally binding to the debtor, so the set payments must be made or else they could face their creditors declaring them bankrupt.

On completion of the IVA, any remaining debt is written off as part of the IVA agreement.

Debt Settlement Alternatives

The idea of repaying debt less than you owe is not always as simple under UK legislation. Therefore there are a number of debt settlement alternatives which may be more appropriate:

Trust Deeds: IVAs are only suitable for residents of England, Wales and Northern Ireland. Those who live in Scotland have the IVA equivalent of a Trust Deed. This is a long term debt settlement alternative where a proportion of the debt is repaid over a fixed period, often three years.

Debt Management Plan: This is an informal agreement which is designed at consolidating debts together so an individual can make a reduced monthly payment which will cover all of their debt. A Debt Management Plan can flexibly change to suit your circumstances, if needs be. There is no amount of debt relief and the total amount of debt will have to be repaid in full.

IVA, Trust Deeds and Debt Management Plans will ultimately achieve a form of debt settlement, although the ability to repay less than you owe is dependent on the individual debt solution and the percentage of debt write off is dependent on your own unique circumstances.

A reader asked this question:

In desperation last year to keep a business afloat (and thinking that more money was the answer) I had my mom open some credit cards in the corporate name (using her personal guarantee) I REALLY believed that the money would be the answer and it would lead the business to prosperity and the ability to pay things back – but that’s not what happened…

I have since closed the business, but have been paying the credit card bills (about $1000 of monthly payments towards over 45k in credit) out of my personal salary with my new job. We are suffering tremendously to pay these bills and have just recently stopped paying some of our own bills because of not wanting to ruin my mother’s name!

Any options other than continuing to suffer to make these payments?

Dear reader,

It is devastating when a business fails, there is no doubt about it. Particularly if you are left with a large amount of debt. In your case, part of the debt is in a family member’s name, which makes it doubly difficult. The good news is, you have a ton of options. I’ll walk you through them, so that you can decide which ones will meet your needs.

Let’s start with your personal finances. You said that you are falling behind in your own bills so that you can pay your business debt, and protect your mother’s credit rating. That is definitely the right thing to do, but it is going to ruin your credit. Let’s see if we can get control of that first.

Step #1: The planning stage

Before you do anything else, make complete lists of what you owe, and who you owe it to. Do two lists – one list of your personal bills, and one list for your businesses’ bills that your mom guaranteed.
Include the following things for each account:

• The amount you owe
• The contact information for each lender
• Your current interest rates
• Any fees on the account
• Your account number.

Doing this will save you a TON of time in the long run. Also write down the name and operating number of any representative that you speak to when you call, as well as the date and time that you called them.

Step #2: Deal with your finances first

Cut back where you can, and raise your income by taking side jobs if you can. That said, you will need to set aside a block of time to call each of your own creditors. This includes your utility bills, as well as your credit card bills.

Since you are behind on some of your bills, you will need to be able to make some sort of a payment when you call to negotiate. When you are ready to do that, call everyone you owe, and ask them to do the following things:

• Remove any late fees
• Lower your interest rates
• Waive any yearly fees
• Make a payment plan – try to get them to temporarily reduce the amount that you have to pay each month, if you can. You can explain to them that you closed your business, you have a new job, and you are just going to need some time to get everything back up to speed. Be friendly, and polite. Do not close out any accounts – especially your credit cards, because this will lower your credit score. The good news is, since you are behind, your creditors are going to be more willing to negotiate with you.

**If your credit card company refuses to make a payment arrangement unless your account is closed, you will have to decide what is best for you. Closing the account will hurt your credit score, but probably not as much as several months of late payments (or non-payments) will hurt it. For more information on how credit scores work, you can check out this article.

Now if you call and you get absolutely nowhere (which sadly does happen…) call back and try this tactic with your credit card companies:

Tell them that you have found a wonderful balance transfer offer and you intend to balance transfer your debt unless they can match the rate. If the representative still will not help you, ask point blank to be transferred to the retention department.

The retention department exists to help the credit card company keep it’s customers. They are authorized to reduce your interest rates, and pretty much everything else, no questions asked.

I recommend that you not make a payment until they are willing to negotiate with you. Usually a week or more past due is enough. Obviously, don’t tank your credit score and go months past due! Use your own discretion here because this tactic will lower your credit score.

Before you use the balance transfer strategy, check out a few competing offers so that you can back up your claims with something like “Discover has a 0% balance transfer offer going on right now…”

If you make any sort of a payment arrangement, make sure you keep your end of the deal. Otherwise, you will see your interest rates skyrocket, your accounts closed and sent to collections, etc. You really, really want to avoid that if at all possible.

So, at the end of this stage, you will hopefully have lowered your interest rates, removed all of the fees on your accounts, set up reasonable payment plans with your own creditors, and hopefully your credit lines will remain open.

Taking the time to go through these steps for your own accounts will free up more money, and give you a better ability to negotiate the debt that is affecting your mother’s credit rating.

Negotiating the debt that your mother guaranteed:

This is a horse of a different color, and you will want to be careful. In the suggestions above, I have assumed that it is more important for you to get control of your finances than to protect your credit rating (going past due is the easiest way to get a company to work with you on payments, ditto for closing out accounts or balance transfers.) With your mother’s loans however, her credit rating is of the utmost importance. That means that you have far less leeway in your negotiations.

You have one excellent initial option:

Try the balance transfer strategy, and have any fees removed – Simply having your interest rates reduced, or fees removed will not impact her credit score at all. It is important that you do not mention that the business has been closed. That may be all the encouragement that the credit card companies need to close out the account. If they close the account, it could affect your mother’s credit score.

I do not know your entire financial picture, but I am hoping that negotiating your own accounts, and reducing the interest rates on hers will be enough to get you through. If it isn’t, you can try the strategies listed below. You also have the option of taking all of your accounts to a professional debt negotiator. (I will give you the details on that at the end of the article.)

The second best option for guaranteed accounts:

Have your mother check all three of her main credit reports. She can do this for free by visiting AnnualCreditReport.com.

You will need to know whether or not any of the business loans are being reported on her personal credit reports each month. If they are, handle those accounts with kid gloves because anything you do will affect her credit score.

Now, if the account shows up as open, but the payments and debt are not being reported, you might be able to do a little more negotiation and set up payment plans without hurting her credit score. Personally, I would handle those accounts one at a time, starting with the smallest line of credit that she guaranteed. If something goes wrong, a small line of credit being closed out will have less impact than a larger line of credit.

Basically you will want to repeat the same steps that you took with your personal debt with one exception: Do not go past due in order to negotiate the debt at any point. It is very likely that a late mark will show up on her credit report if you do. It will make negotiations more difficult, but it’s not impossible.

When you call those creditors, make sure you ask them what will happen if you negotiate a payment plan with them. A simple, “My mother is the personal guarantor on this account. I do not want to hurt her credit score. If I make a payment plan with you today, will that show up on her personal credit report?” should be enough.

I hate to tell you, but the average customer service representative will probably not know the answer to this question. You may need to speak with a manager, a manager’s manager, or even someone in the collections department to get an honest answer. Once you know the answer, you can proceed accordingly.

As far as your mom’s guaranteed loans go, avoid the following things:

• Closing out the account
• Being late
• Lump-sum settlements
• Payment arrangements that involve the account being reported as anything other than “paid as agreed” on your credit report. If you aren’t sure how the payment arrangements will be reported, make sure that you ask the rep or manager that helps you set everything up.

Now, if all of this is sounding like a headache and a half, don’t worry because you can get help.

Professional Debt Negotiation

Professional debt negotiators are experts in reducing debt to a manageable level. They can literally help you reduce your debt by as much as 40% – 70% of the initial total. That sounds wonderful at the outset, but you do need to understand that if you hire a professional debt negotiator, they will do both of the following things:

• Close your credit accounts
• Hold your payments until you are past due in order to gain leverage in the negotiations

Neither of those are really acceptable options where your mom’s debt is concerned. So – if you hire a professional, make sure that they understand this is part of the deal:

They must negotiate both of the following things as well as the total amount of your debt:

If the debt negotiator tells you that is not possible, try a different company. If three companies tell you that isn’t possible, consider using a debt negotiator for your personal debts if you need to, but avoid doing it for any loans that your mother guaranteed.

Other available options:

You can also consider consolidating all of your loans under a Home Equity Line of Credit (HELOC), if you own your home, and you do not already have a loan of this type.

If your credit hasn’t been too badly damaged, you really can consider balance transferring at least part of your debt to a card with better rates. You could especially consider transferring the loans that your mother guaranteed onto new cards that she has not guaranteed so that you can negotiate the debt as you see fit.

When it’s all said and done:

Clean up your credit report, and your mother’s, if needed. Under federal law, you have the right to challenge anything on your credit reports. If the companies that you owed money to do not validate the information within 30 days, it must be removed from your credit report. It’s a bit of a time-consuming process, and I’m sure you will want to help your mother do it if you end up needing to, but it is well worth the effort. Especially if she ends up with something negative on her credit report as a result of your negotiations. You can find complete instructions for challenging items on your credit report here.

I wish you all the best as you work through this situation. With time, effort, and perseverance you can get your debt resolved without damaging your mom’s good credit score. Please feel free to come back if you have additional questions, we’re happy to help.

I have several credit cards with balances on them here in the US. I am about to be transfered back to the UK for work (I am from the UK, not a US citizen), and so will not be using my US issued CC’s again. If I do not pay them off, do you know if the companies (visa and mastercard) will try to retrieve the money once they realise I am not intending to repay it? I know if will ding my credit score here in the US, but I don’t care about that.

John Mathews

Answers – John – let’s go over the procedure of what happens when you stop paying your credit card bills.

Disclaimer : This is not legal advice but just our opinions.

John, since you are leaving the country, I doubt that the creditors will come after you. They certainly cannot call you! They won’t be able to track you down. But if you ever get sued, you would need proper legal advice especially if you are out of the country.

But here’s the issue I have with the email you sent us. You did not say anyway that you are in financial trouble. All you said is that you are from the UK and your company has sent you back. So presumably, you have a job. If you have a job, and are financially capable of paying off your credit card bill, then please pay it off. Society runs based on a certain level of trust. If every foreign worker were to leave and just not pay their credit card bills, then credit card issuers will never issuer to them at all? If you are capable of paying off your debt, then please do so. It is the proper thing to do.

If you have lost your job and are relocated back and have financial difficulty, then that is another issuer altogether.

Oh and one more thing: if there is ever a judgement against you, you may have to disclose that if you ever want to work here again.

Here is another email from a reader with a similar situation:

I am from Pakistan, i was working for an insurance company, the company layoff more then 1000+ emp, i am 1 of them, this was last year dec 2008. i am planning to go back to my country, i actually owe more then $30,000, i cannot pay off every thing coz i only have $2500 in my bank, i am really in a very bad status, i have been trying to find a job for past 6 months. i have 2 daughter & 2 sons back home, i am not able to feed them or my self, so i want to go back to my country & try to find some work there. so what can i do about the credit card debt. what happens if i don’t pay? can they hold me in Pakistan… or if i pay very slow with that affect my status. coz $30000 is a lot. please help me to find a way out of this debt.

kevin khan

Answer: Kevin – for your situation, I would consult an immigration attorney. I doubt you will ever be asked to leave this country or have your status affected if you do not pay your credit card bills or even if you file for bankruptcy.

I also doubt if you can ever be arrested in Pakistan if you do not pay your credit card bills here. You won’t get arrested here though you will certainly be harassed by tons of collection agencies!

But look, you have $30,000 in debt and only $2500 in savings. You just cannot afford to pay them. Simple as that. Question for you is do you ever intend to come back here and work? If you do, then you’d better consult your immigration attorney on how your financial situation may impact your ability to get a Visa down the road.

Best of luck to you.

Hello Everyone. I currently have about $4400 in credit card debt. It may not seem much, but all the rates on those are at about 25 plus percent. Im dying here. I usually pay just a little more than the minimum due but am getting nowhere. With my budget I set aside only 200 dollars a month towards these credit cards. How do I get out of this? Please help.

Al S

Answer – The obvious answer is to get a new credit card and transfer your balance to a card that preferably has a balance transfer deal. But having said that, you really have not revealed your whole situation like

This is what I would do:

1. Get a new credit card to do a balance transfer – If your credit is good, you should be able to get a 0% balance transfer deal. If your credit is not good, you may not be able to get a 0% deal. In that case, just get another card and then transfer the balance because anything is better than paying 25% interest rate

2. Look at your budget again – Look, your credit card debt is only $4,000. So while it may feel like the end of the world to you, it is not the end of the world. There are many people who have got rid of much more credit card debt in a relatively short time. Revisit your budget again. Set aside more money to pay your credit card debt. You should be paying more than the minimum payments

3. Set your debt reduction plan – Once you figure out how much you are spending a month, figure out where you can cut back on your expenses. Settle on an amount (more than $200 in your case) to pay your credit card bills. Figure out how long it takes to pay off your debt.

4. Do not incur any new credit card debt – I’ll say it again – while you are paying off your credit card debt, do not incur any new ones. If you charge things to your card, pay them off every month.

Before You Get a New Card – Before you get a new card, get a free copy of your credit reports from each of the credit bureaus – TransUnion, Equifax and Experian. You are entitled to a free report every year. Go to their website and get it directly from them. Check for any errors on your report. If there is, dispute it (since the entity that has reported the inaccurate information has 30 days to verify it). If you do have errors, it might explain if you have had your credit scores dinged, which may explain why your rates are at 25%.

Consider Increasing Your Income – Another thing to consider is to try to increase your income. You could perhaps get a second part-time job for extra income. Or rent (sublet) out your room to someone for a monthly fee. These little extra income do make a difference.

Dear Mr Credit Card,

I am in debt to CHASE to the tune of $13,000 and I also owe a total of $4,500 on other smaller VISAS (SAMS Club $2,000, Best Buy $2,000 Kroger $500). I have been unemployed for 5 years. We have exhausted my savings and we are only living on $11,000 a year. We do not have a mortgage and we own our home outright. We have no car payments. I cannot afford to pay $500 a month to the CHASE and I called their hardship dept and they are only willing to negotiate to $300 a month. I am still looking for work. My husband is on Social Security.
Do you think that we should take out a second mortgage out on our home?? IF I contact a debt negotiator firm and they negotiate with the card companies, what effect would that have on my credit score?? Does bankruptcy follow you even when you apply for a job?/ I heard that it does and it could impact your ability to get a job?? Can you please help me chose the “least destructive” path to recovery??? Please sir help me!! Thank you!!! Mrs

Loraine Murphy

Our Thoughts – Loraine – I can’ really answer this fully without knowing more details like how much is your husband drawing on social security. But first, given your situation, I would not take out a second mortgage simply because it does not solve your problem, which appears to be insufficient cash flow. Here’s what I would do.

1. Continue to look for a job – That is the easiest fix for your cash flow problem. Don’t be fussy and try to get anything that will pay the bills, whether it be a position in a fast food chain or a grocery.

2. Workout a budget – You may have already done that but if you have not, then it’s time to take out the pen and paper and go through exactly what you are spending. Make changes to your expenditure if you have to (more like cut your expenditure).

3. Consider renting out a room – It’s great that your house is fully paid. Have you considered renting out a room to maybe a student. That might just be enough for you to cover the credit card bill every month.

4. Can your husband go back to work? – You only mentioned that your husband is on social security but not the reason. Has he reached retirement age. Is he on disability? Can he go back to work? Because if he can, that would make a huge difference.

5. Would you consider selling your house and downsizing? – I do not know where you live or what is the real estate like in your area. But perhaps it may be wise to sell the house and buy a much smaller place and use the difference to pay off your credit card debt. But even so, you will probably still have to get some part-time work to make ends meet if your husband’s social security is not enough to take care of the $11,000 living expenses you have every year.

Debt Settlement – If you decide to go the debt settlement route, there are a couple of ways to do it. Most firms will help you settle it such that you pay off your debt over a period of 4 years. Your credit score will definitely take a hit because it will take months to settle with your creditors.

But if you have an emergency fund and can settle for a one-time lump sum payment, that will be easier and takes a shorter time to negotiate. But it looks as though you have used up your savings and this is not feasible.

You should not worry about credit score because since your house and car are all paid for, there appears to be no need to apply for credit anytime soon.

At the end of the day, you might end up getting a job and still settling your debt for less than the principle.

Mr. Credit Card

I am so confused on what if anything that I can do about my situation. When I first turned 18 I applied for a credit card, and got approved. I did not know about this credit card until one day my mom came crying to me that she thought I called to tell them it was stolen… but really it was her that was using it. After giving me this long sob story I – stupidly – agreed to make her able to use the card. She promised to make the payments, turns out you can’t even trust your mother! Now I am in debt $8,000! I have no idea what if anything I can do. Please if you have any advice!!

Crystal Smith

Answer: Crystal, looks like Mom has broken your trust. I have to ask you a couple of questions first.

I would assume that you approved Mom to be an authorized user of your credit card and she is not a joint account holder. If this is indeed the case, then all you have to do is to remove your Mom as an authorized user and she will not be able to use the card in future. I would suggest having a word with her first and confront her. You will have to tell her that what she did was unacceptable and that you would have to remove her as an authorized user. Here is an action plan.

1. Set a Budget and a Payment Plan

I would assume that you are not able to pay off the $8,000 at once. You said you were 18 years old when you got the card, but I do not know how old are you now or whether you are in college now or are you working and earning some income. What you should now do is to set up a budget, look at your income and expenses and figure out a payment plan that will eliminate this $8,000 in credit card debt. You may have to cut back on some spending. But what you want to avoid is having to just pay the minimum.

You can use this calculator from CNN to help you figure out a realistic time frame to pay off the debt

to figure out how long it takes to repay your credit card debt.

You may have to make some sacrifices and work part-time if you are at school. Or work more if you are already working part-time.

2. Explore Balance Transfer Opportunities – You did not mention what rate you are paying on your card. I also do not know your credit scores. But definitely explore 0% balance transfer credit card deals. They will help you save on interest payments and your cash flow in your quest to eliminate this credit card debt.

3. Confront Your Mom

Once you figure out a plan, I would then confront your mom and at the end, ask her if she would bear some burden in your payment plan. Ask, but be realistic and do not expect anything.

I would be firm with your Mom and tell her how disappointed you are, but also be nice (in the sense that this should not turn into a shouting match). Bear in mind that what she did was wrong. She should never have been using your credit card (she should have got her own). She has broken her promise not to pay. You also have not told us about her situation : what does she do? how much does she make? Can she afford to pay?

4. Try to Get Refunds

There are other things you can do. For example, find out what has your mom been buying. Has she made any impulse purchases within the last month (like BowFlex on QVC). If you has bought some high ticket items within the last 30 days, you may be able to return and get a refund (especially for late night infomercial products).

5. Remove her as an authorized user

I’ll leave it to you whether to do this before you speak to her or after, but either way, this has to be done (IMO).

To summarize, here are your actions steps :

Sometimes life sucks and things happen. Stay focused. You need a plan to reduce this debt, stop the problem and move on. And also learn your lesson. If you are still in college, you may have to work part-time and if you are already, you may have to put in more hours. Remember, at the end of the day, it is your credit. Your credit score will affect whether you can rent, get an auto loan when you decided to buy a car and even affect your employment prospects. Pay off the debt ASAP and move on.

Oh – one more thing. You did not mention this in your mail (and I do not know your entire situation), but would speaking to your father about this help?

Anyway, hope this helps. Good Luck.

I have missed four months of credit card payments on a high interest, high debt
($10,000) credit card. If I can payoff the entire debt next month (10,000
dollars), will the credit card company reverse any negative credit reporting on
me? What will my credit show?

Brandy

Brandy, you are in an excellent position to negotiate with your credit card company. Because you are so past due, your credit card company is beginning to lose hope that you will pay. Because you can afford to pay the balance in full next month, all the negotiating power is yours. Your credit card company will definitely negotiate with you to pay down a large balance immediately – especially when the account is so past due.

When you call to pay the balance in full, you can negotiate with your credit card company for some (or all) of the following things:

• To remove the late marks from your credit report - More on this in a minute, since it was your original question.
• To remove every single one of the late, or over limit fees on your account.
• You could possibly have the account re-opened, if it’s been closed. That is not a guarantee, just a possibility, and it will depend on the bank’s policy.
• If your interest rate was raised because you did not make payments (this is standard procedure) then you can negotiate to have your interest rate reduced, and the balance re-calculated from the point that your interest rate went up. Again, this depends on the bank’s policy, but it is worth asking for because it could save you quite a bit of money.
• You could also offer your credit card company a settlement for a reduced amount – Instead of negotiating away all of the fees and extra interest on the card, you could simply call and offer them $7,000 to pay off the card instead of $10,000. They will negotiate with you because you are so past due, and because you can make a large lump payment.

Now, there is a difference between having the fees and interest removed, and just doing a settlement as far as your credit report is concerned. Namely that having the fees and interest removed from your account will not show up on your credit report as a debt settlement.

If you actually offer a lesser amount on your debt and do a settlement with your credit card company, then your credit account will be noted that way and it could lower your credit score a little – even if you removed the previous late notices.

Getting the late notices removed from your credit report:

You will need to attack this problem in two ways.

#1: When you call to pay your balance in full, tell the representative that you can pay the balance in full, but that they must be willing to remove the prior four months worth of late notices before you do. You must have proof in writing that they are going to do this, or it will most likely never happen!

Get them to fax you an agreement, or send you a letter in the mail that states what’s going on: That you agree to pay X amount, and they agree to remove all of the late notices on your credit report. If it’s not in writing, it’s not real, so don’t make a payment before you do have something in writing from your bank.

Additionally, ask the representative you speak to to note your account for you. Make sure that somewhere on your account it is noted that those late reports are to be removed. That way, no matter who you call and speak to, the next representative will know what’s going on.

#2: Check your credit reports, and challenge as needed

Unfortunately, there is still a possibility that the late notices will not be removed. If that happens, all you need to do is challenge the late reports through all three credit bureaus. That will be as simple as sending in the letter you got from your bank stating that they would remove the late notes, and proof of your payment to the bank to show you kept your end of the bargain.

That’s it! The late notice will be gone if you take those steps.

You can get instructions for challenging items on your credit report here:

Have a question for us? Leave a comment below!

Keep Reading and Grab Our Free RSS Feed:

• Negotiating With Your Creditors When You’re Past Due
• Negotiating With Your Credit Card Company
• Should You Pay Your Credit Card Bill Late? The Answer May Surprise You

Maybe you can help. I have a question/problem. I have a Chase card, maxed out, sadly, to $20k. I get these promo checks from time to time. With my interest rate, I’m paying about $260/mo in interest. I always, always make my payments on time, but I’m just barely staying afloat.

However, I have enough money in a newly liquidated account to pay off the entire balance. That money is to be used as a down payment on a house, sometime in the next several months. My “idea” is to pay off my balance, and then a day or two later, use one of the promo checks (namely the 5% APR unitl Feb 2011), to give me back that money to use for my house down payment. Thereby saving me about $200/mo in interest payments. That could help me lower my balance if the money is going towards my principle and not interest.

My worry is that, in the fine print they say that they reserve the right to decline: “Under certain circumstances (for example, if your account is past due or over limit, or if we reasonable believe that you will be unable or unwilling to repay the balance or as described in your Cardmember Agreement), we may decline to process your transaction, in which case, you will be notified.

Basically, if they decide to cut my limit, or not allow this check, or whatever, I would have my balance paid off, but I’d be unable to buy the house I’m trying to buy.

Any thoughts? Does your inside guy have any thoughts about this? I know it’s a bit un-orthodox. Thanks.

If you are serious about purchasing a home, I would avoid paying of the account and then using the promo checks. It’s a good idea, but with the current economic conditions, Chase could very well decide not to honor their previous offers.

Every day we get comments from folks whose credit limits have been drastically reduced for no reason. The credit industry is in a bit of a panic right now, because many banks are overextended. So, they are cutting credit limits, increasing interest rates, and going back on their previous offers of credit. Many times this is happening to good customers too – the ones who don’t ever make late payments and such.

So, proceed with caution there.

My advice is to call CHASE. They are known to be difficult to negotiate with – I’ll warn you of that in advance. But call them just the same. Tell them you are planning to balance transfer your debt if they do not lower your interest rate.

Do not threaten to close the account – It’s won’t do any good. Speak with a manager and threaten to balance transfer. Ask specifically to be transferred to someone in the retention department. (Those are the people that will have the most power to negotiate your interest rate.)

You should also ask them to waive any of their fees that might be on the card – membership fees, late fees, or over limit fees. I know from personal experience that they will remove at least one such fee as a “courtesy” but if you are willing to pressure them (politely) you can probably get everything removed.

So, to sum up, you probably shouldn’t use the checks. Just call and haggle with CHASE to see if you can get your rates reduced. It’s too big a risk right now that CHASE wouldn’t honor the promo checks.

Thanks for your question!

Have a question for us? Leave a comment below!

Thanks also to these carnivals for featuring our articles this week:

I am a small self employed person. My credit score has dropped due to a couple Dr. bills.

I have a 20,000 balance I want to transfer.I am paying 18.99%. My FICO score went from in the 800’s to the 600’s due to Dr. bills which I am paying on. Other than that there is only one other account -simply wireless which was a mistake on their part.

I never activated or used the phone 18 years ago. Do you think it would be worth trying to transfer? If so who do you recommend?

Thanks Sheri

Thanks for your question Sheri! There are a few steps you will want to take before trying to balance transfer, because your score is a little low to be able to transfer the total amount. You might be able to get a partial balance transfer at this time, but the rate probably wouldn’t be a whole lot better than what you have right now.

So, instead, I suggest taking a few steps prior to transferring your balance.

Step 1: Pull your credit reports. All three of them. Start by visiting Annual Credit Report.com. Make sure you view your reports at Exuifax, TransUnion, and Experian.

Which types of negative accounts do you have? Are all of the negatives medical bills aside from the simply wireless?

Step 2: Challenge anything that you reasonably can. If the Simply Wireless account was a mistake, then challenge it and get it removed from your credit reports.

If you have multiple past due medical bills, but you are currently paying on those accounts, go back and challenge them too. As long as they are being paid, you should be able to have the negative accounts removed.

If the company validates it when you challenge it, call the medical company and explain what they are doing. Tell them that since you are current on your accounts you want to remove the old negative information. They should work with you, as long as you are friendly.

You can learn more about how to challenge items on your credit report here:

Now, if you are having trouble making your medical or credit card payments, you should know that you are a good candidate for debt reduction / debt negotiation.

What is Debt Reduction / Debt Negotiation?

When you work with a debt negotiator, they will help you to immediately reduce the total amount of your debt.

How do they do this?

Debt negotiators begin by closing out your current credit accounts. Then they call the credit card company, and they negotiate a new interest rate for you, as well as drastically reduced monthly payments. It is possible they can also handle your medical bills for you too, and even reduce the amount you owe there.

Now, debt negotiation will hurt your credit score (because they have to close your accounts) BUT they can reduce your debt by as much as half of what you owe.

That would make it a lot easier to get everything paid off, and you would be debt free sooner, with less stress. Especially if you are dealing with medical issues.

We work with an excellent Debt Negotiator named Sam Sky. Sam has worked as a debt negotiator for years, and is also the author of a credit repair book.

If you’re interested in seeing how much he can reduce your debt, you can fill out a quick form to contact him. He’ll be able to explain he process to you much better than I can, but it’s very simple. You will take your accounts to him, he will negotiate on your behalf, and reduce your debt. You will make monthly payments to his company, and in turn that company will send the money to your creditors each month.

The real benefit of this is how much your payments will be reduced monthly, as well as lowered interest rates and more favorable terms on your loans. Definitely something to look into!

Here’s the contact form for Sam.

If you do decide to use a debt negotiator, then you will have some cleaning up to do once your debt is paid off. Particularly where your credit score is concerned.

Once your debt is paid down, you can look into getting a small limit secured card. If you don’t charge much on the new card, and you make regular payments, then your credit score will completely recover within a couple of years.

If you’re worried about your debt, it’s really a small price to pay. Just understand that if you negotiate your debts this way, you won’t be able to get a loan for a couple of years afterward while you rebuild your credit.

If you do not want to use debt negotiation, and still want to balance transfer:

As far as balance transferring goes, make sure you clean up your credit reports, and then give it a couple of months before you apply. This will give your credit scores a chance to go up before you try to take on a new loan.

Thanks for your question!

Have a question for us? Leave a comment below!

Keep Reading:

• Credit Restoration Brokers – An Interview With Sam Sky
• Review of The Credit Book By Sam Sky
• Business And Personal Debt

A reader, Mary, had this question:

Hi Mr. Credit Card,

I have a question about a phone bill that is at least fifteen to twenty years old and I can’t even remember it. I am getting phone calls almost everyday and Ignore them mostly, but today I did say yes my name is Mary and then was told that it was Portfolio Recovery trying to collect a debt for Southwestern Bell.

I am so tired of them calling me every day. I usually don’t pick up the phone. Today a customer service rep. told me that they could put it back on my credit.

I denied being the person they are looking for and told them that I would start collecting all the letters they send me and keep track of all the calls and report them to the proper agency as this is harassment….

Well, I guess my question is, Can they, after all these years, put that back on my credit report? My credit is in very good standing but I know nothing about this Southwestern Bill , it’s been so long, and if I try to ask them anything then they will just know it’s really me and then I’ll never get them to quit calling.

I did also tell them that I would report them and after I said this they informed me they would remove my number. Can you give me some advice, because I have a feeling that they will still keep calling as my caller ID shows my name , or my previous name, and they could have seen that when I called them back. Just to let you know, I only confirmed my first name. They tried to get me to tell them the last two digits of my social and I wouldn’t.

I denied that I was the Mary they are looking for. Now since I’ve spoken with them I’m afraid they may be able to put this back on my record. Sorry this was so long, I will appreciate any answers you can give me.

Thanks Mary

Thanks for your question Mary.

You have a couple of options here, but first you need to check your credit report.

You can check all three of your credit reports for free by using Annual Credit Report.com. You will be looking to see whether or not this account is being reported to the credit bureaus. Make sure you check all three of your credit reports too, or you can’t be sure.

If the account is being reported to the credit bureaus:

If the account is being reported then you will want to do a debt settlement with the collection company to get it off of there. Since the account is so old, you could probably offer them 50% of the total and have them accept. Just make sure that you have them mail you, or fax you something that says they will accept a 50% settlement from you. Then, you can pay that amount, and the headache will go away.

If the account is not being reported to the credit bureaus:

If you check all three of your credit reports, and do not see the account listed, then you’re probably in the clear since the debt is so old.

You are correct in thinking that if you acknowledge the debt in any way, they can begin collecting again. As long as you keep telling them that you have no idea what they are talking about, and that you are not the right person, it is going to be very hard for them to pursue collection.

However, I have to tell you honestly that they might continue collecting anyway. It’s just the way these types of companies work. It could even get to the point that the company will try to get a judgment to make you pay the past due amount.

If I were in this position, these are the steps that I would follow:

• Continue to ignore the calls for now (just for now!) and take the time to pull your credit reports.Don’t admit to owning the debt until you have decided what you want to do about it.
• Check all three of your credit reports (Equifax, TransUnion and Experian) to see if this is showing up and lowering your credit score.
• If it isn’t showing up, you can settle the debt, or not, as you choose.This is mainly because the account is so very old. Newer debts don’t work this way! If it is showing up, you will want to pay the debt as soon as possible.
• Make a settlement offer with the collection company – old debts have a way of biting you in the rear when you least expect them to. The only way to know that it is handled once and for all is to be proactive – call the company back and arrange a settlement.
• Clean up your credit report – If this account has been reporting as past due, you will want to make sure that it shows up as settled once you pay it off. You could also consider challenging the account itself to have it removed. You can find out more about how to do that by reading this article.

That’s pretty much it. If you don’t acknowledge the debt, they will have a hard time collecting it from you since it is so old. In the event that they do threaten to take you to court, you can offer a settlement at that point. Or you can be pro-active, and negotiate with them now, pay a percentage of the debt, and have the problem go away immediately.

Thanks for your question!

Have a question for us? Leave a comment below!

Keep Reading and Grab our Free RSS Feed:

• Is Your Spouse Liable For Your Debt When You Die?
• Credit Card Debt Negotiation – Not All Opportunities Are Created Equal
• Business And Personal Debt