Out of work in early 2001, I was unable to pay off my credit card debt that I had accumulated on some wild business ideas. By the time I was employed again, my salary had been reduced by a third leaving me unable to resume paying off my debt.

At the time, I felt my only option was to allow my credit cards to go into default. I didn’t know enough about bankruptcy to safely file without horrible repercussions, and thought that default was the lesser of two evils.

A few years later, I realized I needed to start rebuilding my credit so that I would have some positive history on my credit report that would counter balance all of the negative items. To do this involved acquiring some new credit.

First, I worked out a collection deal with two of my defaulted credit cards. The agreement involved transferring the debt to two new credit cards. This would help me pay off the old debt and build a solid payment history. Looking back, I’m not so sure this was the best option, but it did help to establish my credit, so it wasn’t the worst choice I could have made.

Next, I became a cosigner on my husband’s credit card. His credit card had a higher credit limit than my repayment cards, so my overall available credit increased, and my debt to credit ratio looked healthier. I also started a repayment plan on my student loans to dig them out of default. After nine on-time payments, the loan was in good standing. It was also helpful that I now had an installment account in good shape as well as my revolving accounts. Since 10% of a credit score is based on the types of loans available to the credit holder, this mixture of loans helped boost my overall score.

During this period, I was building a positive payment history, which accounts for 35% of a credit score. I began receiving credit card offers. I was very selective in applying for these as 10% of a credit score is based on new credit. Meaning, the more accounts you acquire in a short period of time, the more points are deducted off your credit score. I opted for a Capital One credit card. This card was my first “real” credit card in a long time. It boosted my overall available credit, had a lower APR than my repayment cards that had been paid in full, and listed me as the primary cardholder.

Finally, as the 7-year mark was approaching on the old debt, I began disputing the negative items. Each time I received an updated credit report, there were fewer accounts hanging around in the negative list and more accounts in the positive items list. My last negative item was removed off my report in late 2009, increasing my credit score by almost 200 points in a year. I started out the year with a pitiful score of 542 and ended the year at a blissful 703. I’m still working towards increasing my score to over 740, but with a solid payment history and no new debt, this goal will be accomplished.

Back in 1997 I was a stay at home mom, getting by on welfare, food stamps and a small amount of child support. I’d been divorced in 1992, and the car I was awarded in the divorce was our 1983 Mercury Gran Marquis. In the next five years, I used my credit cards a good deal to keep it running. Too bad there wasn’t a rewards card for auto repairs, I would have wracked up a lot of points! It was also tempting to buy a few extra groceries, or a little something extra here or there (like replacing clothing at Savers or Goodwill). I was quite frugal and kept to my budget pretty good, but I felt myself sliding into more debt because it was just too easy to justify using the credit card. Even though the non-vehicle repair amounts were small, they were slowly adding up. I felt I needed some help in staying accountable to my goals.

I had $6000 in credit card debt at the time and I was concerned with that amount, considering my low income. I thought about it awhile, and decided debt consolidation was the best option for my circumstances. I went to Consumer Credit Counseling Counseling Southwest (CCCCSW), a non-profit organization. Unfortunately, many debt consolidation companies have cropped up, so it’s important nowadays to make sure the one you work with is legitimately in business to help you get out of debt.

I spoke with a counselor over the phone, and was given a list of things to bring in to my appointment. I was to write down all sources of income, all my bills, and all my expenses, including the amount I typically spent on groceries, gasoline and even how much allowance I gave to my children. It was a pretty bare bones budget. When I got all that written down, I had $150 left over each month.

CCCCSW prefers that clients pay off all credit card debt within 48 months. Since my budget was pretty snug, they worked with me and extended the debt repayment schedule to 52 months. They also usually charge a monthly fee to process the payments, I believe it was usually around $20 a month, but they lowered mine to $6. The remaining $144 went entirely to my creditors each month.

I brought in all my credit cards, and they were destroyed. I also signed an agreement that I would not open any new accounts, and I stayed true to that promise over the next 52 months. In fact, about one year into making the agreement, my car’s timing chain broke and bent a valve, so the engine would have to be replaced. I did not have the means to come up with $2000 for a shop to replace the engine, so we did without a car for the next three years. This led to another problem. I managed to stay within my tight budget by using the generosity of local food banks, and this became nearly impossible without a vehicle. Thankfully my mother was kind enough to drive 23 miles one way to bring us food boxes twice a month during some of the most difficult months.

I had five accounts; two Citibank cards, one Direct Merchants Bank, one Montgomery Ward and the fifth was a line of credit with my credit union. One card was at 16%, and CCCCSW negotiated with the company and lowered it to 8%. They were able to get another down to 0% and the other three stayed at the same amount. Additionally they were able to get the credit card companies to accept lower monthly payments.

Each month I mailed them a payment of $150 by a specified date, and they distributed the amounts that they had determined to each card. If I remember correctly, they started paying the largest amount with the card that had the highest finance charges and as each card was paid off they would apply that amount to the card with the next highest finance charge.

My debt starting out was $6000, but after paying $150 a month for 52 months, the total came to$7384. $416 went directly to CCCCSW for the $6 monthly processing fee, and $1384 went to finance charges. I was credit card debt free in August 2001. It was such a great feeling to be debt-free!

Our lives had changed by that time, and I was employed. We felt we had outgrown the compact mobile home that we’d been living in for six years so I figured it was time to check my FICO credit scores in order to find out if I’d be able to qualify for a mortgage. I had been told by CCCCSW that my credit would be “slow” when I was through with my debt repayment schedule, and I thought I’d have to find some way to increase my credit scores; however, I was very surprised to find that my credit scores were all in the mid-800s for the three reporting agencies.

In closing, I have to say I found the experience to be very positive. I felt I needed the extra nudge of having agreed and signed a contract to stay accountable. If you feel that you are in a rut, and feel you cannot stop yourself from charging one more little thing here or there, you might want to check into debt consolidation for your own peace of mind. It worked for me, and I am happy to have the experience to share with others.

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:

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• Negotiating With Your Creditors When You’re Past Due
• Negotiating With Your Credit Card Company
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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!

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