Thursday, October 21, 2010

A little dirty laundry

Scott and I are trying to get out of credit card debt. When our prescription costs went way up, we leaned on our cards for living expenses. It's scary and it needs to stop.

Our first step was to close out our accounts with larger limits and only keep one with a very small limit for online purchases and the occasional stop gap.

On our largest balance, we decided to try and settle the debt. We feel crappy about it, but our situation is such that something had to give and this particular card was it. It sucks and I feel like an asshole.

I did a bunch of research on the net and learned we shouldn't hire anyone to do this for us, it's possible to negotiate on our own. The process involves calling to make an offer, getting their counter offer and going back and forth until you reach an agreement.

This process can't start until the account is behind by at least 90 days, preferably 120-150 days. I waited until 100 days had gone by and called the first time. I made our offer and was turned down flat. I'd expected that, so no surprises there.

I started to wonder what the consequences would be if settling didn't work out. If we were able to come to an agreement, it would state on our credit report that we'd settled for less than the amount owed, we'd have to declare the amount not paid as income. If we didn't settle, what could the credit card company do?

The state of Texas doesn't like credit card companies much. The property that can't be seized for auction includes a person's house, cars, furnishings, clothing, two handguns, foodstuffs, pets, and any property used for work. If the household property doesn't exceed $60,000 nothing can be taken by the bank, paychecks cannot be seized and bank accounts cannot be frozen. A lien can be placed on a home but after 10 years the judgment is no longer enforceable.

So, our credit would take the hit and we'd have a lien on our house. That's if the company decides to push through with a judgment.

With this information in mind, I called back to make my offer again. It was noted in our file that we'd attempted to settle the month before. I explained how our medical/prescription costs had increased and we had to make some difficult choices.  I told the very nice woman on the other end of the phone that I was really embarrassed and making these calls was difficult for me. She told me what the general guidelines were, but she was going to grab her supervisor anyway.

This time, I was told that when they looked at our credit they saw our other accounts were current and with our other accounts current, we can't be considered to settle the debt.

Doesn't that sound crazy? Our credit is too good to settle even though I'm willing to pay the full settlement amount immediately? But I can understand that, if there appears to be any chance that we will be able to resume payments they'll bet on that before agreeing to let us pay less than the full balance.

Since Texas is so consumer protective, if we default,  the credit card company gets nothing and we just have bad credit. We do own our home and our children are in school, we're not planning on selling our house for a long time meaning they wouldn't even collect on a lien.  

But, I could also tell that the women I talked with that day were just as frustrated as I was.  I could hear in their voices they wished they could put this all to an end.  I know the person I was speaking to sighed just like I did when I said good bye.

It would appear that we're going to need to wait at least six months before trying to settle with them again and even then, if we keep current with our other accounts we won't be able to come to an agreement.

After all this, I am really confused. I know we're the ones in the wrong. I know we made our bed and we need to lie in it. But we've fessed up and we're trying to do what we can. It's embarrassing knowing we messed it up. It's embarrassing calling to say we messed up and trying to make it better. It feels like telling your parents you broke the rules and taking your punishment.

And the settlement process feels like my parents are saying "Well, yeah, you got an F.  Let's wait and see if you get another F next term and then we'll discuss how long you'll be grounded."

 I can't figure it all out today so I'm going to bake cupcakes for the bake sale.

Amanda's beauty tip of the day:  If you're out of perfume put a drop of vanilla extract behind each ear.

No comments: