Consolidate or Bankruptcy, Which Will Hurt Me More?

[Unsurity]

Help!

 

I have 3 credit cards in my name, with Chase Visa. The limits were 5,000, 5,000, and 2,800. In 2006 they were used for personal expenses, food, bills, helping a struggling family member out, and business expenses. I’ve been going through a time of several months struggling to pay my bills while waiting on an expected raise that will help me out (though at this point I'm no longer sure it will happen). The 3 cards were nearly maxed out and I wanted to start paying them down as soon as I was able to, but my property taxes, raised to $500 a month in Florida , and having gotten behind on my mortgage when I lost my former job/business at the end of last year, was making it very difficult, as my expenses had climbed over my income. I hadn't used the cards for several months since the start of the year, although some small charges accumulated such as a $7.99 a month Chase Fraud Detecter, and another company’s Payment Protector, and another lousy benefit program that I had cancelled but got billed again for, etc., and a few dollars here and there for food until a couple of months ago on one of the cards. Then I got the monthly purchase-finance charges, which ballooned to a couple hundred dollars per card per month, which I had trouble paying but did so anyway. Until...

 

Due to overwhelming stress and trying to pay off other bills including the mortgage, I missed the due payment on the 3rd card. So I received late fees followed by over-limit fees, and Chase increased my purchase % to 29.9%, which increased my minimum payment on the card to over $500 (including purchase fees, late fee, etc.). Then they transferred that % to my other 2 cards, or else because in the madness I missed the other two card payments a week ago, and now I have 3 cards with minimum payments due of 540-560 each.

 

I am struggling to pay my bills and mortgage as is, and have already been fearing that I would lose everything if I couldn't get caught up, and now this makes it seem even more impossible to overcome at my salary. I had taken out $10,000 in loans since December in an attempt to pay my bills to avoid being behind and getting bad marks on my credit report. I had built up good credit, and a good credit report until late last year when my new business crumbled, leaving me broke. I began a new job that would increase in pay after a few months, and I only wanted to hold everything together until that point. I took out the loans to pay my monthly expenses that I was behind on, and help cover the next few months. Before long, it was all spent on mortgage and other non-adjustable bills. I can’t take out any more loans. I cannot refinance or get a home equity loan either, as my condo is on the market (though there doesn’t appear to be any hope in selling it in this market, but I had no choice but to put it on the market several months ago).

 

I simply don’t stand a chance of being able to pay down the cards when I have 1,500 in interest per month on all 3, which will increase every month that I am behind, every month that I am charged such large finance fees. If I close the cards down immediately to stop any more late fees and purchase charges, will that prevent me from being able to get another credit card in the future? It seems like in this day and age you can’t do anything without having a valid credit card so I worry about that. Will shutting the cards down destroy my credit (I had read once that closing down CC accounts hurts your credit score and chances with lenders) or should I accept that it is pretty much unrecoverable regardless? I had spent the last few years paying my debts and building up my credit to a decent score, and it is apparent that all my efforts were for naught due to my stupid mistakes in the last year.

 

Is there a way to get relief/help from the overwhelming fees? Is bankruptcy something I should consider? What about debt consolidation? What will hurt my credit more, consolidation or bankruptcy? I dread the idea of bankruptcy for a number of reasons; principle being one of them, having my deep sense of personal failure reinforced being another. But truly, I don’t know what else to do.

 

My question is, should I call Chase and tell them to close all 3 cards at once, or will doing it that way hurt me down the road rather than help me? Or is there another way to get out from being crushed by the fees?

 

 

I apologize for making my first post such a long one, and I hope that it will not hurt its chances of being read, but I wanted to tell as much of my story as possible so you might see that I didn't get myself into trouble spending lavishly, and that I've been trying very hard for many months now to pay my debts and stop them from exploding.

Edited April 24, 2007 by Unsurity

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[Unsurity]

Help!

 

I have 3 credit cards in my name, with Chase Visa. The limits were 5,000, 5,000, and 2,800. In 2006 they were used for personal expenses, food, bills, helping a struggling family member out, and business expenses. I’ve been going through a time of several months struggling to pay my bills while waiting on an expected raise that will help me out (though at this point I'm no longer sure it will happen). The 3 cards were nearly maxed out and I wanted to start paying them down as soon as I was able to, but my property taxes, raised to $500 a month in Florida , and having gotten behind on my mortgage when I lost my former job/business at the end of last year, was making it very difficult, as my expenses had climbed over my income. I hadn't used the cards for several months since the start of the year, although some small charges accumulated such as a $7.99 a month Chase Fraud Detecter, and another company’s Payment Protector, and another lousy benefit program that I had cancelled but got billed again for, etc., and a few dollars here and there for food until a couple of months ago on one of the cards. Then I got the monthly purchase-finance charges, which ballooned to a couple hundred dollars per card per month, which I had trouble paying but did so anyway. Until...

 

Due to overwhelming stress and trying to pay off other bills including the mortgage, I missed the due payment on the 3rd card. So I received late fees followed by over-limit fees, and Chase increased my purchase % to 29.9%, which increased my minimum payment on the card to over $500 (including purchase fees, late fee, etc.). Then they transferred that % to my other 2 cards, or else because in the madness I missed the other two card payments a week ago, and now I have 3 cards with minimum payments due of 540-560 each.

 

I am struggling to pay my bills and mortgage as is, and have already been fearing that I would lose everything if I couldn't get caught up, and now this makes it seem even more impossible to overcome at my salary. I had taken out $10,000 in loans since December in an attempt to pay my bills to avoid being behind and getting bad marks on my credit report. I had built up good credit, and a good credit report until late last year when my new business crumbled, leaving me broke. I began a new job that would increase in pay after a few months, and I only wanted to hold everything together until that point. I took out the loans to pay my monthly expenses that I was behind on, and help cover the next few months. Before long, it was all spent on mortgage and other non-adjustable bills. I can’t take out any more loans. I cannot refinance or get a home equity loan either, as my condo is on the market (though there doesn’t appear to be any hope in selling it in this market, but I had no choice but to put it on the market several months ago).

 

I simply don’t stand a chance of being able to pay down the cards when I have 1,500 in interest per month on all 3, which will increase every month that I am behind, every month that I am charged such large finance fees. If I close the cards down immediately to stop any more late fees and purchase charges, will that prevent me from being able to get another credit card in the future? It seems like in this day and age you can’t do anything without having a valid credit card so I worry about that. Will shutting the cards down destroy my credit (I had read once that closing down CC accounts hurts your credit score and chances with lenders) or should I accept that it is pretty much unrecoverable regardless? I had spent the last few years paying my debts and building up my credit to a decent score, and it is apparent that all my efforts were for naught due to my stupid mistakes in the last year.

 

Is there a way to get relief/help from the overwhelming fees? Is bankruptcy something I should consider? What about debt consolidation? What will hurt my credit more, consolidation or bankruptcy? I dread the idea of bankruptcy for a number of reasons; principle being one of them, having my deep sense of personal failure reinforced being another. But truly, I don’t know what else to do.

 

My question is, should I call Chase and tell them to close all 3 cards at once, or will doing it that way hurt me down the road rather than help me? Or is there another way to get out from being crushed by the fees?

 

 

I apologize for making my first post such a long one, and I hope that it will not hurt its chances of being read, but I wanted to tell as much of my story as possible so you might see that I didn't get myself into trouble spending lavishly, and that I've been trying very hard for many months now to pay my debts and stop them from exploding.

 

 

 

Sorry again about such a huge post. It's a lot to read. Short and simple:

 

 

 

I have 3 cards bumped up to 30% interest, requiring about $550 minimum payment for each one, because of the interest and late fees. This is killing me. I simply don't have the money and never will, anytime soon. Would consolidation be a good option, or bankruptcy? Which would hurt my credit worse? I want to try to salvage my credit score, and find a way to pay without the massive interest, which I can't afford. Is there a way to resolve this?

 

Any advice and info would be much appreciated...er, desperately appreciated.

Edited April 24, 2007 by Unsurity

[chriswufgator]

Believe it or not, credit counseling will hurt your credit more than the BK.

 

Plus, with BK, the court will set up a repayment plan that will allow you to stretch out the house payments, rather than having to pay them all at once.

[Klesko]

My first action would be to call chase and see if they have a hardship program which basically lowers your apr to as low as 0% for 12 months. I am sure others on the board will know this though.

 

The next question is can you afford to pay them at even 0%? And I dont mean just pay, you need to be able to pay more in a way to work yourself into a situation where you can pay bills off.

[Jen32]

BK is worse

[CTSoxFan]

BK is far worse..for these reasons

 

- last 7/10 years on your CR with low chance of removal beforehand. If you pay Chase completely you may be able to goodwill them into removing the lates. Many Prime issuers will decline if you have BK on your report regardless of what you do to recover (from experience I know this).

 

- Personal property may be impacted (ch. 7)

 

- You will never get another Chase card if you BK them (blacklist) (although I know there are plenty of options)

 

- Doesn't compromise your morals/personal feelings of failure

 

My suggestion:

 

1st option) Call Chase - see if you can get into a hardship program (best option)

2nd) Use Credit Counseling service (second best option - although not great)

3rd) Consult attorney about BK if other 2 do not work out.

 

Just my opinions from experience...

[brwneyez52]

Bankruptcy is much worse. My exhusband did bankruptcy and his credit is trashed now. I actually did credit counseling (6 years ago) it helped me so much I became a credit counselor.

[LadyT]

What are your total balances owed? Do you just have balances on those 3 cards? Any other open tradelines?

[bakerman]

be very very very careful with credit counciling, they are the very reason that I had to file BK. There seems to be no surefire way to find a good one, it is a shot in the dark. The credit counciling is what trashed my credit, my score has done nothing but climb since my BK. Many get great credit cards from CUs (better IMHO) after bk, so it's not the end of the world.

 

Chase will continue to run wild with interest and fees until you do something. If you can get on a hardship program, and be diligent about paying it down, I mean really squeezing every penny for all it's worth, this would be the best bet.

 

Good luck to you, this board has a wealth of information, and you will get through this.

 

MAC

[Unsurity]

be very very very careful with credit counciling, they are the very reason that I had to file BK. There seems to be no surefire way to find a good one, it is a shot in the dark. The credit counciling is what trashed my credit, my score has done nothing but climb since my BK. Many get great credit cards from CUs (better IMHO) after bk, so it's not the end of the world.

 

Chase will continue to run wild with interest and fees until you do something. If you can get on a hardship program, and be diligent about paying it down, I mean really squeezing every penny for all it's worth, this would be the best bet.

 

Good luck to you, this board has a wealth of information, and you will get through this.

 

MAC

I talked to reps at Chase on one day for 20 minutes x2 different persons, getting nowhere...and another daqy for an hour and 15 minutes with a helpful woman. The first time, I was told that I could not get on a hardship program because I had not had the cards for a full year (which isn't fully true because I did have one of them for over a year). The woman I spoke to the other morning, for 1.4 hours, told me that if I did go on a hardship program that it would destroy my credit worse (in my attempts to salvage what left I have, and rebuild it) because it would go on my credit report that the bank had revoked the cards; that with the cards shut down there would be no way to build the credi (score) back up again on closed cards.

 

But, she said, if I did a consolidation loan, the cards aren't closed and I can still build my credit back up by using the cards and paying off the purchases.

 

She urged against credit counseling completely, as you have and have some people on this board too because she said it hurt my credit worse.

 

Her ultimate reccommendation was to take a Chase consolidation loan. However, I do not know if my credit where it stands will enable me to get a laon with them. I don't know where my credit score is at this point and I've thought about using one of the 3-in-one credit check offers by Transunion or the other 2 agencies. But to be honest, I'm afraid to look.

 

However, the woman at Chase told me that if I paid $116 on one card by May 9 and $187 on the 2nd card by May 9th, I could avoid having past 30-days late on my report. On the 3rd card, however, I have to pay at least $216 by May 20th to avoid having 2 months past due on my report, because that one is already past 30 days past due. These amounts are only the minimum to cover what is past due, not counting the interest, from April.

 

I don't have this money. If I had it I would certainly have paid the cards down before I missed payments.

[Unsurity]

A family member, who owes me a lot of money, and who also owes a lot of money on 2 of the cards, but is broke, urged me to close the cards down so that they would stop accruing interest and late fees, which he is convinced would stop being added once I shut the cards down. I refused to do it, pending further research, because I already knew that closing down active cards hurts your credit.

 

The woman at Chase told me that closing the cards will not stop the recurring fees; the interest, overlimit, and late fees. She said that as long as I owe a balance on the cards, the fees will continue no matter what. A friend who used to work for a credit card collection department (a small card, not anything like Chase) agreed with that when I asked her about it. I had wanted to be sure that the Chase rep was not denying me a solution that would save me long term money and gain Chase less interest and fees.

 

To the posters of Creditboards I come to for a 3rd opinion. I cannot escape the fees by simply closing the cards, correct? I would think not, or else there wouldn't be so much debt in this country if the solution were so simple.

Edited May 4, 2007 by Unsurity

[Chicnltn]

Have you thought about an extra job temporarily on the weekends? These aren't extraordinarily high amounts. Snowballing the debt??? Read about that in the money management forum.

[Unsurity]

What are your total balances owed? Do you just have balances on those 3 cards? Any other open tradelines?

Chase cards:

1- 5100

2- 5100

3- 2900

 

Citibank/Rooms to Go, furniture loan/credit card:

3000...no payments or interest due until the late fall.

 

Citibank loan:

2,500

 

HFC/HSBC loan:

8,000

 

Suntrust car loan:

about 14,000 left on a 28,000 loan

 

Indybank mortgage:

211,000 left on a year and a half old interest-only loan for 211,000 (one of the stupidist and costliest mistakes I've ever made).

[Chicnltn]

You're correct just closing the cards won't stop any fees.

[t-bear]

It's kind of hard to get a good feel for this without knowing your budget, but first suggestion- dump that car payment. Sounds like you're not upside down. (?) Do you have any equity in the car? Can you get 3-4 thousand out of a trade? Buy a 1997 or later solid car for cash and find a friend or a relative who knows someone who's a mechanic and can offer you a discount on any potential repairs.

 

Next- what do you have left over after the mortgage, utilities, gas, and a very strict food budget? You have to work with what you have to figure out how to make these payments.

[toopooor]

I talked to reps at Chase on one day for 20 minutes x2 different persons, getting nowhere...and another daqy for an hour and 15 minutes with a helpful woman. The first time, I was told that I could not get on a hardship program because I had not had the cards for a full year (which isn't fully true because I did have one of them for over a year). The woman I spoke to the other morning, for 1.4 hours, told me that if I did go on a hardship program that it would destroy my credit worse (in my attempts to salvage what left I have, and rebuild it) because it would go on my credit report that the bank had revoked the cards; that with the cards shut down there would be no way to build the credi (score) back up again on closed cards.

 

They won't usually offer the hardship unless you are late a month or two. Sounds like you have one late already - i'd probably let them all go late again and see if they change their tune. closedby grantor is no big deal and the lates can be goodwilled away later once you are back on your feet.

[Unsurity]

It's kind of hard to get a good feel for this without knowing your budget, but first suggestion- dump that car payment. Sounds like you're not upside down. (?) Do you have any equity in the car? Can you get 3-4 thousand out of a trade? Buy a 1997 or later solid car for cash and find a friend or a relative who knows someone who's a mechanic and can offer you a discount on any potential repairs.

 

Next- what do you have left over after the mortgage, utilities, gas, and a very strict food budget? You have to work with what you have to figure out how to make these payments.

You want to know my budget? It's a nightmare. I have to get a second job because I'm not making enough money to cover all my expenses. I have also been trying to get a roommate but none have taken the second room yet. I'm also talking to people about refinancing my condo. Selling it hasn't worked, as the buying-market is currently dead in south Florida.

 

Monthly income: $2,000

 

Mortgage including property tax: 1900

 

Car payment: 385

 

Utilities: 70

 

TV and Internet: 70

 

Credit cards minimum payments (not including interest) to avoid being reported as late: 216, 116, 187...but the ful payments are an average of 550 each.

 

Loan payments: 90 + 120

 

Car insurance: 180

 

I know I'm missing some, but that's the basics.

 

Total Monthly bills: 3,334 (or 4,465 when you count the interest)

Total " " income: 2,000

 

When you do the math, it appears in no way lightly, that I am in trouble. So as you can see, there is no extra money to work with. I have avoided getting a second job while I ran ads for a roommate, and showed the place and interviewed potential roomies. But none have taken the room yet, even though they have mostly claimed that they liked it, only to want to see a couple of other places first. I think that I would have a better chance of impressing them if I could paint and fix up the room. But alas I have no money to do that.

[t-bear]

How about renting the condo outright and moving in with someone else who will 'kind-of' support you? Is that a possibility? I know it's a distasteful option, but if you don't do something drastic you will have no choic but BK. In fact- in your case I'm not sure BK isn't your best option.

 

Are you sure there is no possibility of the condo selling? It sounds like you need to get out of it now. Maybe you could try a rent to own?

 

If the $335 monthly savings from dumping the car payment would cover the debt minimum balances, then I'd suggest that, but since it won't, I'd keep paying for my car and start paying the credit cards 30 days late minimum balance and see if a second job or roommate materializes. If those things don't materialize, BK.

Edited May 6, 2007 by t-bear

[DJ]

Believe it or not, credit counseling will hurt your credit more than the BK.

 

Plus, with BK, the court will set up a repayment plan that will allow you to stretch out the house payments, rather than having to pay them all at once.

 

 

You know, EVERYONE says that.......I guess I must have been VERY lucky, because I did credit counseling, and my scores skyrocketed. No negatives at all.

[t-bear]

Another thing I would suggest- it's not pratical advice, really, but based on how you described the situation in your first post.

 

You sound like a person who is successful, not a failure. People who experience adversity are not failures. They are people who are experiencing adversity. Your real debts are approaching 223% of your income and you have no equity in your home. (I don't know if you have any appreciated value, but you say the house won't sell, so maybe it's a moot point.) On the basis of those facts, there are only two possibilities barring a roommate willing to pay half your mortgage and a second job that pays as much as your first job or a buyer for the condo. File BK, or make drastic changes like getting a cheaper car (it will not kill you) and move in with a relative or friend and use all your income to pay off your loans. Sell off your furniture.

 

One way or the other, you are going to have to give some of the comfortable things you've been used to having. That's just life.. it doesn't mean you're a failure. The psychological part of it- what you tell yourself about what you are experiencing- will be much worse than the actual experience of starting over financially.

[Guest canyoncat]

I would see a BK atty and look at filing ASAP. You certainly have enough debt now, and it sounds like you would be a great candidate for a start over, if you could just wipe the slate clean.

 

BK to me is not a moral failing. Just be honest, and enjoy your new life without debt. You can easily get new credit cards within a few months of your BK, especially if you declare BEFORE you rack up tons of derogatories on your credit report.

 

I've read so many posts on here where people have struggled and struggled only to file BK after their entire credit history was in the tubes. Better to admit defeat (you only plan to do this once, so don't kill yourself over it) and begin the new life that BK offers. You won't believe how much better you'll feel without the stress of trying to work miracles. After the BK look at your budget and live within it. Good luck

[Oasis]

I was in a very similar situation. I tried the "Hardship programs" with Citibank and I still couldnt keep up. Let me just say that the creditor has absolutely nothing to gain by recommending BK or Counseling Programs so dont expect anything different when you ask them their opinion. Of course they will gain if they tell you to get a consolidation loan because they will end up getting paid. It would be highly unlikely that the creditor that you owe will grant you any loan if they know you are struggling... they will advise you to go elsewhere... and then they really win because you become someone else's loss.

 

I ended up filing Bankruptcy. The only thing I regret is that I didnt do it sooner. After an avalanche of increasing debt and jumping thru hoops to stay afloat I finally admitted defeat. At that point I was so far under that I couldnt even afford an attorney ($1250) to file the BK. I wished then that I had quit sooner, and used my money at that point to file the BK rather than throwing it all into an abyss that last two months. I would have gotten my fresh start much sooner rather than delaying the inevitable. Instead, I had to unplug phones to avoid debt collectors when I quit paying them and saved up to file.

 

I ended up with a fresh start. Im doing just fine now....alot better than I thought I would. Again, I say... I only regret not realizing that I was fighting a hopeless battle and filing sooner. Checking out the BK Forum on this board will show you that many have/had the same fears as you. You can see how people got thru the same situation and did just fine.

[Genna]

What are your total balances owed? Do you just have balances on those 3 cards? Any other open tradelines?

Chase cards:

1- 5100

2- 5100

3- 2900

 

Citibank/Rooms to Go, furniture loan/credit card:

3000...no payments or interest due until the late fall.

 

Citibank loan:

2,500

 

HFC/HSBC loan:

8,000

 

Suntrust car loan:

about 14,000 left on a 28,000 loan

 

Indybank mortgage:

211,000 left on a year and a half old interest-only loan for 211,000 (one of the stupidist and costliest mistakes I've ever made).

 

 

Why do you say that? Is that comment related to buying a home in general, or is it because you took an interest only loan?

[toopooor]

The only thing I regret is that I didnt do it sooner. After an avalanche of increasing debt and jumping thru hoops to stay afloat I finally admitted defeat. At that point I was so far under that I couldnt even afford an attorney ($1250) to file the BK. I wished then that I had quit sooner, and used my money at that point to file the BK rather than throwing it all into an abyss that last two months. I would have gotten my fresh start much sooner rather than delaying the inevitable. Instead, I had to unplug phones to avoid debt collectors when I quit paying them and saved up to file.

 

I ended up with a fresh start. Im doing just fine now....alot better than I thought I would. Again, I say... I only regret not realizing that I was fighting a hopeless battle and filing sooner. Checking out the BK Forum on this board will show you that many have/had the same fears as you. You can see how people got thru the same situation and did just fine.

 

 

I have to agree - we struggled for weeks / months trying to stay afloat when i shoulda just said screw this and left them CO sooner. I suspect everyone faced with the inability to pay their bills drags it out a lot longer than they should, hoping for good luck to get them back in the black... and it ain't gonna happen (unless you have a rich aunt die... and i only know one person that lucky... )