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OT: settling credit card debt

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RuLaw2004

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Feb 10, 2004
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My uncle was in a car accident a couple of weeks ago and he's been in a coma since. His kids are starting to evaluate their parents' financial situation and have come to discover some signifant credit card debt, in addition to the medical bills that are accumulating.

Has anyone ever settled credit card debt or know of the best way to proceed?

They're going to reach out to the card companies to request forbearance while they evaluate their options and see how things play out with my uncle. I've told them to consider looking for attorneys familiar with credit settlement, but was curious if anyone had any insights to offer.
 
REDRICH65 said:
Never have credit cards in joint account with anyone.
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maybe not with people growing up in todays world.... I have been married 40 years and have
had a joint checking account, joint savings and mutual fund accounts, and no separate
accounts at all..... it works for me and the misses..... but not for everyone...

my newly married daughter and her spouse have separate accounts.
 
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It sounds like the discussion with his auto insurance company should come before anything. Good luck. $$$$
 
First my thoughts and prayers for your uncle. Next they should speak to an attorney about their debts before doing anything. Send me an email bwrlaw@yahoo.com. It's what I do!
 
I used to fix credit. With that said, the last person you want to speak to is an attorney. They have no clue on settling the debt and always advice bankruptcy. Wait to see how it turns out before jumping the gun.
 
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jvgrad02 said:
I used to fix credit. With that said, the last person you want to speak to is an attorney. They have no clue on settling the debt and always advice bankruptcy. Wait to see how it turns out before jumping the gun.
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Well get more than one opinion then.
 
A common misconception is that credit card debt is owed to the "card companies" (Visa, MC, et al). Any balances are actually owed to the bank that issued the credit card. Visa and MC just own the network infrastructure. The 800 on the card will eventually route you to the bank. Hope that helps.
 
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The debt is not always forgiven when there is a surviving spouse but they will negotiate aggressively.
 
CvilleLion said:
A common misconception is that credit card debt is owed to the "card companies" (Visa, MC, et al). Any balances are actually owed to the bank that issued the credit card. Visa and MC just own the network infrastructure. The 800 on the card will eventually route you to the bank. Hope that helps.
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Actually 90% of credit card debt is put in master trusts, banks do not hold it on their balance sheets, its not capital effecient for the banks to hold credit card debt.
 
CvilleLion said:
A common misconception is that credit card debt is owed to the "card companies" (Visa, MC, et al). Any balances are actually owed to the bank that issued the credit card. Visa and MC just own the network infrastructure. The 800 on the card will eventually route you to the bank. Hope that helps.
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Is this really a common misconception? What credit card doesn't say the bank name on it?
 
jvgrad02 said:
I used to fix credit. With that said, the last person you want to speak to is an attorney. They have no clue on settling the debt and always advice bankruptcy. Wait to see how it turns out before jumping the gun.
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No kidding, makes sense since his name is RULaw and he's coming to the RU football fans for advice
 
wheezer said:
========
maybe not with people growing up in todays world.... I have been married 40 years and have
had a joint checking account, joint savings and mutual fund accounts, and no separate
accounts at all..... it works for me and the misses..... but not for everyone...

my newly married daughter and her spouse have separate accounts.
Click to expand...

Did you miss the point? I've been married 32 years and we have joint savings, checking, and IRAs as well as a joint mortgage. But we have separate credit card accounts. The advantage is that my wife doesn't inherit the money when I die because she already has a legal claim to it. However, credit cards debt is unsecured and she will not inherit that debt after my death.
 
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I used to work at a law firm that specialized in consumer credit.

A debtor is nothing but a number. Right off the bat, anyone should be able to settle for 10-20% less if dealing directly with the creditor. It costs the creditor that much to place the debt with a collection agency. However, spend an hour or so on Google to understand the impact that settling a balance will have on one's credit before anything else.

If you still want to settle, know that creditors consider ALL risk factors, the primary ones being a person's age and earning potential vs. current obligations. A 40 year old earning six figures leasing a BMW isn't going to have much luck. They also are keen on finding out if any attachable assets are available.

Based on what you've said in your OP, I'd say those accounts have high settlement potential -- just make your case as easy for the person on the other line as possible. You're likely initially dealing with a call-center rep who will need to appeal to higher ups for a decision. Ideally, you have copies of the latest statements and an easy to follow chart summarizing all the accounts in a format ready to email.

Most importantly, KNOW who you're dealing with and make sure they are legit before providing ANY personal identifiable information and try to get them to sign an NDA (standard copies available on the net). You're probably OK without one (industry is heavily regulated), but it never hurts to ask.

That's a tough situation to be in and I don't envy you. Good luck!

PS: you will probably need to have a Power of attorney handy before they will even talk to you about someone else's account(s).
 
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sherrane said:
Did you miss the point? I've been married 32 years and we have joint savings, checking, and IRAs as well as a joint mortgage. But we have separate credit card accounts. The advantage is that my wife doesn't inherit the money when I die because she already has a legal claim to it. However, credit cards debt is unsecured and she will not inherit that debt after my death.
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I now understand your point better..... I would only add that my wife and I do not run up separate debts that concern the other,.... and of course we pay the bill in full each month....

each marriage, each couple living together have different debts situations and different life situations.... in my case, if my wife were to die, anything she had put on the credit card that month would not be
a concern to me and I would pay the bill when the monthly statement came.....

a large part of our credit card bill might be food shopping each week, for example.... I would not feel right being able to avoid paying the credit card charge because she passed, or the reverse were to happen.

getting back to the OP.... I could see asking for the bank/credit card people having consideration not to tack on further late fees on someone who is in the hospital in a coma....I would guess that, in that situation, they would just freeze the account where it is....as far as
forgiving the debt entirely or even partially , they probably could not do that......

they might fear that anyone with a hospital stay could try to maneuver their way out of debt, trying to make a situation seem worse than it is.....

I personally do not like the idea of debt forgiveness in general....there is a recent report that about half of todays college students think that the college debt they are incurring will be forgiven.... I hope that they have to pay the loan, more so if they can afford it after graduation.
 
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I know people who have gone through it. Some have settled and some have gone through bankruptcy. Most had issues around 2010 after the mortgage bubble burst and cards started to raise rates from 6% to 20% making it difficult for the people I knew with balances to make minimum payments.

Be prepared for lots of phone calls every day as the accounts become delinquent. Disconnecting the home phone may be advisable and getting new cell phones and a pay as you go plan that you don't call the credit companies from can be helpful too.

Speaking to an attorney who specializes in this situation can't be bad but do your own research first since attorneys will want a retainer and probably advise the quickest solution.

Credit counseling companies can help but... many times they are for profit businesses. Some will say we will settle your debts for 40 cents on the dollar and you can pay us back a little each month with interest attached. In that scenario you are being promised that they can settle your debt for less than 40 cents on the dollar and properly settle where the card companies won't come after you for the rest in the future. Also, as for profit businesses you may not get the best deal from them since they make money by settling for as low as possible vs what they agree to with you. Then what you essentially have is a new loan at interest since you are now a high risk borrower. if you agree to settle 10k of debt for $4500 over 60 months they may have an agreement with the card companies for $2500 so they make $2k from you. If they add a 15% fixed interest rate then you may be paying $107 a month for 60 months totaling $6425. if you make all your payments over 60 months the settlement company can make a total of $3900 off your $10k debt that was settled for $4500 in your agreement with them. Of course if you lose your job and miss payments then your 15% rate jumps to the maximum amount and you may be sent to collections.

If you want to settle, see if you will have cash available. One person I knew received a work bonus and tax refund which paid for the settlements.

The card companies will sell the debt to collection agencies after about 90 days late. They start with 50-60% for settlements but after you don't bite initially it can go down to the 20-35% settlements. It may take 4-5 months for that to happen. By telling them you are planning to declare bankruptcy may help in your negotiations since they risk getting almost nothing in that situation.

Just say they owe 10k, you need to see what cash you have to settle with. If you have only 4k don't tell the card companies / collection people that since they are good negotiators. If the 10k is spread between 3 cards of 4k, 4k, and 2k tell the 4k cards you only have $1500 to use for all your debts and tell them the best you can do is $750. They will turn it down but a month later they may take it.

Where the lawyer helps is to review the settlement letters to make sure there is nothing hidden in them. The last thing you want is to settle and then find the debt is not closed. Also, while difficult you can try to negotiate for no negative comments on the credit report and a paid in full comment.

If bankruptcy is the answer you also need to do your research. If you can do chapter 7 then it can work out since money owed can be dismissed but if you have property and earnings you may have to do chapter 13 where a trustee controls your finances for a period of time and actually pays your creditors some money each month..The laws changed a number of years ago. Our current president was able to take advantage of Chapter 7 before the laws changed.

With bankruptcies some debts will not go away. I believe student loan debts is one such debt so if your father owns a student loan debt for a family member that won't be dismissed in bankruptcy.

A last piece of advice, if you have bank accounts with the company where you are delinquent with credit cards, move the money to a new bank. Some banks as part of their customer agreement can take money from a savings / checking account to apply to a delinquent credit account. If that money was for a mortgage or car payment then you can risk missing those payments.
 
I would talk to an attorney. Different states have different rules. For instance in Florida if you get an attorney and they notice the credit card companies, they can not harass you. If they call or send a letter after notice they are liable for damages. I am not saying I agree with this practice but it is the law and I have a lawyer in the office next to me that specializes in sending letters to credit card companies on behalf of people with large debt then suing them for large sums of monies for harassment - often getting his clients debts taken care of.

The bankruptcy laws have changed also so be careful that you fully understand your options if you go that route. How old is the guy. I had a situation like this with an older guy and actually advised him to just let the debt go. He was 83, working full time with 30k in credit card debt and just had a triple bypass. His credit was already ruined and would never be repaired in his life so why pay anything. He didn't pay but also had very little for them to come after upon death. For the next 2 years at least he didn't have to worry about money.

The issuing bank takes all credit card losses but moves the bad debt off their balance sheet to what we call a "bad bank". It's real money and they will try and collect as much as possible thru agencies or internally. However, they know the probability of collection under all different circumstances and will evaluate every case. Again, how old is the guy and what is the situation. If he is young and you want to preserve his credit, call the card companies today and try and work something out. If he is old, call in a few months. You can't call today and expect relief if he has been paying his bills. They will assume that even though he is hospitalized he still has the means to pay. If you want to preserve his credit they might forgo interest for a few months.

The one thing you need to remember is that all the credit card company can do is really look at his credit bureau and his relationship with them. That information only tells them what he owes and how he is managing it. It tells them absolutely nothing of his income or assets. So just because he is in the hospital, if his bills are paid up, even with high credit card debt he obviously has the means to manage it and why would they assume he does not have that cash in the bank yo pay his bills.

You really need to decide what you want the outcome to be before you decide a course of action.
 
RUJohnny99 said:
It figures. A school with a paltry 7% alumni giving rate would have a thread on how to Welch on non-secured loans, and get a bigger response than any thread about fundraising.
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Lol. I thought kinda the same thing. Not passing judgements, because it makes sense to do what you can. But funny that not one response was - just pay it.
 
Well maybe people should put the Build Fund donation on plastic and go bankrupt. That's one way to get the money.
 
Prayers for your uncle. Having gone through this with a family member, we found him a company that negotiated a single monthly payment to all of his credit card companies at a reasonable interest rate. It took him about 18 months to pay off all the debt but he avoided bankruptcy and enjoyed the dignity of meeting his financial obligations.

Hope everything works out for your family.
 
RUfinal4 said:
A last piece of advice, if you have bank accounts with the company where you are delinquent with credit cards, move the money to a new bank. Some banks as part of their customer agreement can take money from a savings / checking account to apply to a delinquent credit account. If that money was for a mortgage or car payment then you can risk missing those payments.
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Good advice IMHO.
 
It's unsecured debt so the banks are SOL should he pass. At best I'd offer to settle at 25 percent of the balance. They can take it or leave it. Went through this when my father passed.
 
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