Credit card debt

[YitzyS]

So far, based on what was written here, I think there are 6 basic methods:

1 - get credit card counseling. This option can be done together with any of the others.

2 - keep paying minimum payments and try to pay off one card at a time.

3 - borrow money from a gemach or financial institution to pay off credit cards, and pay back the new consolidated loan with lower interest, or interest-free. Downside about this is that it's hard to be approved for a regular loan without a good credit score, and it's a hassle (I would assume) to get a gemach loan. (Also, a gemach would probably mean having others involved, and this is obviously a very private matter.)

4 - default on the loans just long enough to be able to negotiate a really good deal, which usually would not be available if the loan was in good standing. The deal could be one of two things, either pay off a reduced loan amount upfront, or pay off the entire loan over time with a reduced interest rate.

5 - enter a debt repayment plan through a third party. Basically the same as #3, but having it done by others. They do the work, but costs commission.

6 - declare bankruptcy. This obviously impacts credit score the most and impacts assets already owned (IINM).

[ExGingi]

+1. I think the solutions could vary significantly based on how much someone needs to protect their credit score. If you don't need a good credit score, you have a lot more flexibility than if you need a good credit score for something.

Don't ever put too much emphasis on credit score. Solve the underlying problem even at the cost of trashing credit score. It can be rebuilt in 2 years.

[ExGingi]

2 - keep paying minimum payments and try to pay off one card at a time.

This is only a strategy to enrich banks.

Rather figure out how much you can afford to pay towards all cards and come up with a strategy to eliminate the debt, either by starting with the lowest balance first or with highest interest rate first, and pay as much as possible towards that account. Eliminate them one at a time.

[Yakov15]

This is only a strategy to enrich banks.

Rather figure out how much you can afford to pay towards all cards and come up with a strategy to eliminate the debt, either by starting with the lowest balance first or with highest interest rate first, and pay as much as possible towards that account. Eliminate them one at a time.

And skip minimum payments? Wouldn’t that hit you with late fees etc?

[Yehuda57]

Hi guys,

With all of you knowledgeable people, I hope to gain some clarity.

Sadly, I have accumulated a significant amount of credit card debt that I am currently unable to pay off. I have been making minimum payments and dealing with high interest rates for months now.

I have decided to apply for a personal loan in order to pay off the debt and then repay the loan at a lower interest rate. I applied with Silverlake Funding, but unfortunately, I was declined due to a low credit score and other red flags.

However, they did offer me something called "Debt Modification," which they claim is not bankruptcy or credit counseling.

Essentially, they would consolidate all of my credit card debt into one account, and I would make payments to pay it off over a period of 3-5 years.

I would only need to pay the amount owed without any interest payments, and they would also reduce the total amount owed by a few thousand dollars. The payment would go into a FDIC insured escrow account, to which I would make monthly payments.
Additionally, all of my credit cards would be frozen until the debt is fully paid off.

So, my question to you all is: Is this a common solution for someone who has no other means of paying off their debt? Will this cause the banks to close my accounts (both credit and checking)? Is there anything else I should be aware of?

I would greatly appreciate your input!

I'm not going to answer your specific questions, as @ExGingi said, every situation is unique and needs to be tackled differently.

I will say kudos on reaching out. I know the feeling of being stuck there, and the worst of it is the lonely helplessness. But if you do reach out, people are incredibly generous and want to help. I don't mean financially, I'm talking about time and advice.

Aside from tackling the debt, (or perhaps not, that might be a good strategy), I would suggest reaching out to to a coach. Here are people who do it for free, if I'm not mistaken
https://livingsmarterjewish.org/financial-coaching/

[zh cohen]

1 - get credit card financial counseling. This option can be done together with any of the others.

FTFM. It is important to get guidance for finances generally, not to just deal with the CC debt.

[ExGingi]

And skip minimum payments? Wouldn’t that hit you with late fees etc?

No. Pay more than the minimum.

If possible try to make the minimum+the interest charge for that month. In any event be cognizant of the interest charge and be aware that only the amount of the payment over the interest charge actually chips away at the balance. Also whenever possible make the payment as soon as possible after statement generates to save a few days of interest.

[cozmohoot]

So far, based on what was written here, I think there are 6 basic methods:

1 - get credit card counseling. This option can be done together with any of the others.

2 - keep paying minimum payments and try to pay off one card at a time.

3 - borrow money from a gemach or financial institution to pay off credit cards, and pay back the new consolidated loan with lower interest, or interest-free. Downside about this is that it's hard to be approved for a regular loan without a good credit score, and it's a hassle (I would assume) to get a gemach loan. (Also, a gemach would probably mean having others involved, and this is obviously a very private matter.)

4 - default on the loans just long enough to be able to negotiate a really good deal, which usually would not be available if the loan was in good standing. The deal could be one of two things, either pay off a reduced loan amount upfront, or pay off the entire loan over time with a reduced interest rate.

5 - enter a debt repayment plan through a third party. Basically the same as #3, but having it done by others. They do the work, but costs commission.

6 - declare bankruptcy. This obviously impacts credit score the most and impacts assets already owned (IINM).

Regarding the Gemach. It should not be a hassle and even if you involve others it doesn't need to be embarrassing as there can be many reasons to need a loan.

[avromie7]

re: cc debt
my experiece: stopped paying all accounts for a few months, missed one payment and next month when payments were double i wan't able to afford paying. after a few months i got offers from the cc company. none of them were good so i kept ignoring, paying only a few accounts. eventually after about 4 or 5 months they sent some accounts to collection. I was able to negotiate with collection and got some pretty good deals. some needed to call a few times but i eventually got all the loans set on 5 year autopayment plans with an apr of 6 percent. those were the accounts with only a few thousand dollars on them. one account with about 10,000 and one account with 13,000 were sent to law firm, not collection. Those i was able to set on a 3 year plan with zero interest. if i can keep up these payments i will have saved tons of money, without using any outside company.
So interest on my biggest accounts went down to zero and on my smaller accounts to 6 percent.

If you want to go this route, the best option is to miss 1 payment and then contact the CC company to negotiate 0% (or very low) interest. If your payment is less than 30 days late it will not impact your credit score, but they should already start working with you.

Tell them you're unable to make the minimum payment...  and are considering bankruptcy.

Even without this, you can contact each company and request a rate reduction, some of them may be willing to do it while others will refuse.

[AsherO]

@ExGingi has told other stories about where negotiation becomes available only once default has begun

It’s true, but then your credit is dented further and that might remain even once the debt is paid off until 7-10 years later.

[dm123]

I know the feeling of being stuck there, and the worst of it is the lonely helplessness.

Wow thanks for sharing Yehuda57! Great write up on the Dave Ramsay thread!

LMK if you want to write a post for DDMS of the steps you took to climb out of debt and what (if anything?) you could have done differently when falling into debt.

Did a write up of personal story(ies?) with various ideas of how to get out ever make it to DDMS?

[MeilechG]

https://gemachcy.com/

You can check out this Gemach. I'm not sure how it works but I've seen their ads plenty

I searched "Credit card debt"  and could not find anything

I would like to pay off about 20k in Credit Card debt with the least amount of interest possible. My plan is to do a balance transfer now and pay what I can and in about a year do that again until I'm done. 

3 questions from a novice who wants to pay off debt

1. Does doing a balance transfer affect my abillity to apply for credit cards?
2. Will it somehow stop me from getting all those balance transfer offers? like if you do it once, somehow the other CC companies stop sending you the offers because you did it once? 
3. What are your ideas for paying of credit card debt?

[ExGingi]

https://gemachcy.com/

You can check out this Gemach. I'm not sure how it works but I've seen their ads plenty

Someone recently told me about Gemach Chasdei Yosef which may be helpful to you, I have not used it but perhaps someone here knows more about it?

I know of them well. They don’t offer much you can’t do yourself , and their fees are quite high.
IMO they shouldn’t call themselves gemach.
Don’t want to publicly post more about a Jewish business

Has anyone seen any other bona fide gemach advertise (other than for fundraising events)?

[yungermanchik]

http://www.hakhel.info/gemach-list.htm#Money

[herb]

Now you understand why all these banks turn a blind eye on all the 'gaming' that goes on

[moko]

Now you understand why all these banks turn a blind eye on all the 'gaming' that goes on

add a poll, how many here carry credit card debt

[shlomoandtam]

Now you understand why all these banks turn a blind eye on all the 'gaming' that goes on

It is possible that all money owed to your cc is considered cc debt and this report is including even people that pay up every month.

[yuneeq]

It is possible that all money owed to your cc is considered cc debt and this report is including even people that pay up every month.

It is debt. They should clarify if it’s only outstanding debt.

[Redbull3]

It is possible that all money owed to your cc is considered cc debt and this report is including even people that pay up every month.

Yep. If a statement closes you owe your CC money, how are they going to know you are paying it back in full by the due date and never paying interest? It's for sure included imo

[ckmk47]

Yep. If a statement closes you owe your CC money, how are they going to know you are paying it back in full by the due date and never paying interest? It's for sure included imo

That's why when you're going to need a good credit report you're supposed to pay your credit cards right away.  Although you may want to leave a small amount to be reported so it shows you know how to use cc's.