As others have mentioned, you may be a good candidate for bankruptcy. But understand that you almost certainly make too much to qualify for a wipe-the-slate-clean Chapter 7, and would have to do a payment-plan-for-3-5-years Chapter 13. There are calculators online to help you get a rough idea of what that might look like.
Another path you can consider before bankruptcy is to try and work towards a one-time settlement for a % of what’s owed. Credit cards companies generally won’t consider making a settlement offer until they’re fairly convinced that getting something, even if it’s just a %, is better than nothing. So understand that this plan involves you stopping making payments and getting very behind, and instead building up a cash reserve that you’ll eventually offer as a settlement.
Some warnings about this plan:
Stopping payments on the cards will tank your credit. Likely not as hard as a full bankruptcy, but it’s still going to hurt. So if you need credit for something (not want, but need, like for an apartment application), get that done FIRST. Because it’s going to be awhile before your credit score improves.
Your creditors are going to be VERY vocal about your lack of payments. There are laws about when/where/how they’re allowed to contact you (research that and know your rights), but be prepared for them to chase you. Like you’re about to become the recipient of a LOT of phone calls, from people who are well trained in high-pressure techniques to extract money. This will NOT be comfortable. Don’t get drawn into long conversations and let them work you over. “I’m sorry, I can’t afford a payment this month. I’ll let you know if things change next month. Goodbye.” And then hang up. Repeat. Repeat. Repeat. You will get a lot of calls, so you’re going to need to get comfortable with doing this.
As for process - all those payments you’ve stopped making? You’re going to be setting them (and however much else you can) aside into a special savings account. You don’t touch this savings account unless something is bleeding and on fire. Because this is your settlement fund, and settlement = freedom, so you want us grow it ASAP.
Once you save up enough in that account to offer maybe 15-25% of one of the outstanding card balances, offer that as a settlement. Some guidelines on this:
Words matter, and the words are “settlement in full” (no payment plans, no partial settlement, literally “settlement in full”)
You don’t send them a single dime until they’ve sent you that settlement agreement (“$X is settlement in full for XYZ account”) IN WRITING. Email, snail mail, fax, whatever. But it HAS to be in writing, otherwise they might “forget” the agreement (“oh, Bob doesn’t work here anymore, we have no record of your conversation” type none sense) and keep on chasing you.
The agreement is not just in writing, but also physically in your hands!. “It’s in the mail” won’t work. No money sent until it’s in writing, in your hands!
THEN you pay them, via money order. NO personal checks, NO electronic access, or they might “oops” take more, and then you’ll have to travel to hell and back to try and claw that money back.
Wash, rinse, repeat the process with the other two creditors.
Also note, this settlement negotiation process won’t be as simple as “I’m offering you 20%. Oh, cool, here’s your settlement in full email precisely as you requested. Why thank you, kind sir, your cashiers check is in the mail.” Nope, Not by a long shot. Collectors are often paid on commission, so they’re going to spend awhile trying to convince you that you’re just the most terrible, horrible, no-good person ever for not agreeing to pay more than you’re offering. Some collectors are really scummy and will do this in truly nasty ways.
So again, combat the shenanigans by keeping these conversations short. You’re on the phone longer than maybe 30-60 seconds without an agreement? Then it’s time to just hang up. So “I’m offering $X as settlement in full.” And if they respond with anything other than maybe a legitimately reasonable counteroffer (like “I can’t accept $X, but how about $X + $500?), then just politely cut them off and hang up. Do not get sucked into the vortex of car-dealership-worthy high-pressure sales techniques. Just hang up, then call them back in 2-3 days and repeat your exact same offer. Rinse, repeat, until they accept. May take weeks, possibly months if they’re really stubborn.
Also note, one of the most common scare tactics involved in this process is them threatening to sue you. They’ll make it sound absolutely dreadful, and like they’re ready to file tomorrow. Well:
This is generally a bluff, as it costs them time and money to sue, and they’d much rather avoid all that. I mean, that’s why the collector’s job exists - to avoid dealing with the costs and hassles of attorneys and court prep and enforcing judgements. So recognize the scare tactic for what it is.
Tell them, quite honestly and matter-of-factly, that theirs is by far not your only debt, and if they sue you’ll almost certainly get forced into bankruptcy, which could result in them getting far less or even nothing.
And if they actually do sue you (which is again, unlikely, especially if they’re presented with a reasonable settlement offer), then you can evaluate bankruptcy then.
Final note: yeah this is a really, really crappy situation. I know you’re scared, exhausted, ashamed…and I know because I’ve been there. But you are FAR from alone, this CAN be fixed, and while it’s certainly a big hurdle to figure out, it does NOT define you. You are worthy of love and peace and respect, yes, even though you currently have a negative net worth. I mean, I’m a stranger on the internet who can not only attest that it’s possible to come through the other end of a similar situation in one piece, but have gone on to get my finances in good shape, and have so much empathy for what you’re going through that I took the time to write basically the War and Peace of settlement descriptions.
So hang in there.. You are worthy. It will get better. You can absolutely make it past this and go on to great things!
PARA9535307 t1_iyantcm wrote
Reply to Help! Drowning in debt. by nah_just_ocd
As others have mentioned, you may be a good candidate for bankruptcy. But understand that you almost certainly make too much to qualify for a wipe-the-slate-clean Chapter 7, and would have to do a payment-plan-for-3-5-years Chapter 13. There are calculators online to help you get a rough idea of what that might look like.
Another path you can consider before bankruptcy is to try and work towards a one-time settlement for a % of what’s owed. Credit cards companies generally won’t consider making a settlement offer until they’re fairly convinced that getting something, even if it’s just a %, is better than nothing. So understand that this plan involves you stopping making payments and getting very behind, and instead building up a cash reserve that you’ll eventually offer as a settlement.
Some warnings about this plan:
As for process - all those payments you’ve stopped making? You’re going to be setting them (and however much else you can) aside into a special savings account. You don’t touch this savings account unless something is bleeding and on fire. Because this is your settlement fund, and settlement = freedom, so you want us grow it ASAP.
Once you save up enough in that account to offer maybe 15-25% of one of the outstanding card balances, offer that as a settlement. Some guidelines on this:
Also note, this settlement negotiation process won’t be as simple as “I’m offering you 20%. Oh, cool, here’s your settlement in full email precisely as you requested. Why thank you, kind sir, your cashiers check is in the mail.” Nope, Not by a long shot. Collectors are often paid on commission, so they’re going to spend awhile trying to convince you that you’re just the most terrible, horrible, no-good person ever for not agreeing to pay more than you’re offering. Some collectors are really scummy and will do this in truly nasty ways.
So again, combat the shenanigans by keeping these conversations short. You’re on the phone longer than maybe 30-60 seconds without an agreement? Then it’s time to just hang up. So “I’m offering $X as settlement in full.” And if they respond with anything other than maybe a legitimately reasonable counteroffer (like “I can’t accept $X, but how about $X + $500?), then just politely cut them off and hang up. Do not get sucked into the vortex of car-dealership-worthy high-pressure sales techniques. Just hang up, then call them back in 2-3 days and repeat your exact same offer. Rinse, repeat, until they accept. May take weeks, possibly months if they’re really stubborn.
Also note, one of the most common scare tactics involved in this process is them threatening to sue you. They’ll make it sound absolutely dreadful, and like they’re ready to file tomorrow. Well:
And if they actually do sue you (which is again, unlikely, especially if they’re presented with a reasonable settlement offer), then you can evaluate bankruptcy then.
Final note: yeah this is a really, really crappy situation. I know you’re scared, exhausted, ashamed…and I know because I’ve been there. But you are FAR from alone, this CAN be fixed, and while it’s certainly a big hurdle to figure out, it does NOT define you. You are worthy of love and peace and respect, yes, even though you currently have a negative net worth. I mean, I’m a stranger on the internet who can not only attest that it’s possible to come through the other end of a similar situation in one piece, but have gone on to get my finances in good shape, and have so much empathy for what you’re going through that I took the time to write basically the War and Peace of settlement descriptions.
So hang in there.. You are worthy. It will get better. You can absolutely make it past this and go on to great things!