Credit card debt. Which road to go?

[bunnyandabby]

This forum seems to be split on whether to default on your credit cards and try for a settlement. Or rather to try every means possible to pay back all that you owe because its money you have borrowed. My story has already been posted on here. Basically to make a long story short, I went from not having enough money to cover my bills to just breaking even. I've stopped the major bleeding but I still have the wound. My question is whether or not I should try to do what a debt consolation company would do and stop paying the minimums and save the money toward a settlement on my credit cards and all that it comes with that. Right now everything is up and up but I don't think I will ever be able to get out of this debt if I dont do something drastic. It's a big step to take because I'm not sure it's the right road. Not because it would be a tough road. Just wanted to get everyone's opinion on which way to go. Thanks!

[Granite]

I say bite the bullet, be patient and pay it off. You will just have to cut your expenses and increase your income.

[poundwise]

I would consider settlement as a next-to-last resort before bankruptcy.

You didn't give numbers but I'd suggest following a plan such as espoused by Dave Ramsey through his Total Money Makeover book or his FPU classes. Ramsey can be a polarizing figure sometimes, however, there is no questioning that many people have paid off what seemed like insurmountable credit card debt following his plan.

A second choice would be to contact a debt counseling organization like Cambridge or CCCS.

[boosami]

I don't think this board is split on the topic of credit consolidation companies. Almost every opinion I have seen is against credit consolidation, or perhaps to use it as a very, very last resort.

[creditcardfree]

OP, what part time job have you worked? What things have you already sold? What expenses have you cut out of your budget?

If you can't answer these questions...then you aren't doing enough to pay off your credit cards. If you want out of debt badly enough you will consider both of the above BEFORE you consider debt consolidation.

Working a part time job is something drastic, as is cutting expenses and selling your stuff. You can do this!

[boosami]

i agree boosami ----- so you say want a revolution " I can be wrong , but every time I see your post , the song from the best band in history [ the Beatles , white album if my memory does not fail me ] start playing in my head

Yes, it is a Beatles lyric

And as a quote it pretty much sums up my personal philosophy.

[poundwise]

Clarity:

Debt consolidation - combining two or more debts into one by means of a loan or line of credit. This is typically accomplished by 'rolling' multiple debts into one loan, aptly called a consolidation loan, in order to simplify the management of one's debts and, often, reduce the monthly outgo required to service the debt either by increasing length of term, decreasing the interest rate(s), or accomplishing both at the same time.

Debt settlement - reaching an agreement with a creditor to settle an account for a lesser amount than what is owed. Most often this is only an option when one is seriously delinquent. Many debt settlement agencies simply collect your funds from you, in addition to a fee, which is often substantial, and hold payment(s) until your creditor is willing to accept a lesser amount in settlement. In other words, when they have no reason to think you will ever pay them what is owed, they are prompted to take what they can get.

Debt or credit counseling - takes over management of paying your credit card bills and frequently has pre-negotiated arrangements with credit card companies to reduce interest rates and/or minimum payments. Some of these organizations are legit (CCCS, Cambridge) while others are less reliable or more costly.



I still say the best solution is to get serious and take on the issue yourself. A great many people, yours truly included, have overcome huge deficits to become debt free. It can be done. Again, I don't know your details but, in most cases I've seen, if you made the mess, you can (and should) clean it up.

[Runaway Finances]

I definitely believe we all should pay our debts no matter how long it takes. However, I have counselled people who had dug such a deep whole that they were unable to pay off their debts like the lenders wanted. They had no choice but to either negotiate with the card companies or declare bankruptcy. I always encourage negotiation first, but I also always suggest they negotiate a no interest rate solution that involves paying all the money back. Of course, in this situation, I also tell these people that they must eliminate ALL unnecessary expenses (including cable, internet, etc.) before they go to negotiate a settlement. Most are not willing to do that, and that is when I say "then the card companies shouldn't settle with you". I've learned that many people simply won't do what it takes to get their finances in shape. They just want someone to fix it for them. Those people can't be helped until they change their attitudes.

[disneysteve]

I've learned that many people simply won't do what it takes to get their finances in shape.

So very true.

OP, this isn't directed at you. Just a general comment. How many times has someone posted their situation here and responses have suggested selling a car, moving to a cheaper place, getting a 2nd job only to have the poster reply with a slew of excuses of why they can't do any of those things.

I see the same mentality at work every day. Patients come in complaining of various self-induced medical problems but refuse to stop the behavior that is causing them. I read a report just today estimating that 75% of ALL medical costs in this country are spent treating chronic, PREVENTABLE illness. The whole healthcare reform debate would be unnecessary if people would just stop being their own worst enemies. The same goes for personal finance.

[poundwise]

How many times has someone posted their situation here and responses have suggested selling a car, moving to a cheaper place, getting a 2nd job only to have the poster reply with a slew of excuses of why they can't do any of those things.

Often. And when they say they can't, they mean they won't.

I see the same mentality at work every day. Patients come in complaining of various self-induced medical problems but refuse to stop the behavior that is causing them.

That must be very frustrating. I know I furrow my brow and shake my head when an acquaintance tells me about the cost of his blood pressure and cholesterol medication while he finishes his meatball sub and heads out to have a smoke. Never mind that if he stopped buying cigarettes he could easily afford his meds. The fact is, if he stopped smoking and would have an occasional salad, he might not need them at all.