Here is his problem..
- He has over $41,000 in credit card debt.
- He has other unsecured loans totaling $12,000.
- Although he hasn’t been late on his bills yet, he can’t seem to get caught up and doesn’t think he will ever dig himself out of this debt.
- When he puts his debt into a debt reduction calculator, it says that it will take him 21.6 years to pay everything off at his current pace.
(Can you say …. STUCK?)
He emailed me and asked for my advice… I explained to him his three options:
Option #1 – Continue to pay the bills for 21.6 years.
Option #2 – File for Bankruptcy
Option #3 – Negotiate his debt with his creditors.
Option #1 – Continue to pay, which needs no explanation. This client did call the credit card company and got his interest rates lowered, however, by following their payment plan; he will be paying for 21.6 years.
That is like being held hostage by your credit card company for 21.6 years. I say “held hostage” because I believe that.
Yes, he took out the debt, but to pay on $41,000 in credit card debt for 21.6 years… is a crazy thought and in my opinion, other options need to be looked at.
Option #2 –Bankruptcy. If he qualifies for a Chapter 7 bankruptcy, he will have no more debt, however, the bankruptcy will be on his credit report for 10 years.
He can easily repair his credit (to 720+) after the bankruptcy, which can be done in 1 ½ to 2 years.
There are two downsides to this option;
- The bankruptcy on his credit report. That will impact his ability to borrow for the next 2-3 years.
- Does he qualify for a Chapter 7 Bankruptcy? Believe it or not, many people cannot qualify for a bankruptcy because their income is too high.
If this is the case, he will have to file a Chapter 13 Bankruptcy. That means he will have to repay all his debt plus have a bankruptcy on his credit report.
Let’s move on to Option #3.
Option #3 – Renegotiate his credit card debt with the credit card company.
Here is what I know for sure:
- Your credit card company will not negotiate with you unless you stop paying your bills. They may tell you differently, but this is what I know to be true.
- Your credit card company will lie to you so you continue to pay. I’m sure this is not their “policy,” but when you combine eager employees looking to get their bonus with vulnerable debtor – this happens.
- Once delinquent, they will put your phone number into an auto dialing systems. This means you will get up to 8 calls per day trying to collect payment. … Ouch!
- If you understand how to negotiate with your credit card company (and I don’t), I hear from numerous clients that they will offer you a settlement somewhere between 15-40%. Meaning, if this gentleman did it right, he would pay off his credit card debt for between $7,950 – $21,200. You read that correctly, he would pay off $53,000 in debt for between $7,950 and $21,200.
- After you pay off your debt, our clients are getting back to a 720+ credit score in approximately 18-24 months.
The biggest problem with Option #3, is having the stomach to handle the negotiations… because it is very stressful and daunting. And, if you don’t know the proper way to negotiate, you will pay more than you should.
If this sounds like your situation, listen up.
I’m going to put together free information designed for those that have more than $20,000 in debt and would like to know and understand all their options.
If you want to be informed about this information, give me your name and email below!
Once I do the interviews or webinars, I’ll email them to you.
I know this is a long email… thanks for reading!
If you have debt over $20,000 and this post seems to be written for you, submit your name and email below. I’ll provide you additional free information that I hope will help you choose the right option for yourself.