Credit Card Debt Question

[Tyme2fish]

I'm trying to help my son through a tough time in his life. Here is the short and not so sweet story.

His wife of a one year marriage and he divorced. She left him with the house mortgage (he bought it before they married and she destroyed it with her indoor pets) and $10,000.00 in CC debt. She (they) spent $25,000.00 more than they both made or paid in one year of marriage.

He currently pays $151.00 month at 8% interest on a balance of $9,500.00 on the credit card. That will take 82 months to pay off which is just under 7 years.

Options: 1.Degotiate with the Bank for a "final" pay off on the cc debt.
i.e. Would you (the bank) consider $5500.00 to settle this debt.?

2. Declare bankruptcy?

I am in the postion to "loan" him the money if the bank would negotiate the debt.

He currently works over 80 hours a week at two low paying jobs to pay all bills (Mortgage,Car,utilities,cc debt, etc)

I offered him the opinion tonight that maybe it would be better for him to just declare bankruptcy. I know that stays on your record for 7 years, but it will take him 7 years at the current rates to pay off this cc debt.

I also considered to offer the bank a package "offer" His car loan is something like 18%. Yeh I know that's a rip off. His ex-wife and he bought two cars at a buy one get one free place. Yeh right, free my backside.

Maybe a package offer to the bank. Settle the credit card for less than what is owned as a cash right now payment and re-finance the car loan at %10.00 or something.

This is all new to me as I was never upside down or overextended on loans in my life.

I quitired last year so my liquid funds are limited but I have enough to help him with his problem and then he can pay me back at $x a month at a much lower interest rate.


Please help me help my son with any advice or opinions. Thanks to all.

 

[DJ]

Re: Credit Card Debt Question

I would not advise the bankruptcy route over $10k in CC debt.

It does not hurt to attempt a negotiation. Will it work-who knows-but you certainly can try.

If the house is in his name, a Home Equity Loan may be available to consolidate the debt. At least the home mortgage interest is tax deductible and will be a heck of a lot less than 18%.

The car interest is the real issue here.

 

[mhlbnghm]

Re: Credit Card Debt Question

I agree with DJ, bankruptcy is not a valid option - I doubt it would even be granted anyway. Sell the car if possible. Does he have any equity in the home? Might be able to put the 10k of cc debt in the house and refinance. If he has (or you have) a good banker perhaps he could sit down with them and lay all the cards on the table and ask for help.

JMB

 

[Bob_VT]

Re: Credit Card Debt Question

Gotta love the kids! We as parents never really want to turn our backs on them. If you have money to "help" why not pay down a chunk of the debt and avoid the bankruptcy issues.

I guess whenever I reached into my pocket for my son I have learned to never expect a return..... I figure the loss on my account is better than watching him (and the grandchildren) suffer any more hardships.

With the economy we ar in and are anticipating the future..... have him renegotiate for a better rate and agree to make a lump sum payment to pay down the debt.

My suggestion.... help him and worry about getting paid back later...... much later.

 

[Limited-Time]

Re: Credit Card Debt Question

Whats the total debt excluding the mortgage? How much equity, if any does your son have in the home. And what does he owe on the auto vs the value of it?

 

[Tyme2fish]

Re: Credit Card Debt Question

Thanks for the replies.

 

[MERIT6419]

Re: Credit Card Debt Question

well I have made plenty of mistakes in my life and let me tell you when you wake up in the morning not with an alarm clock but from debt collectors it is no fun and can really knock someone's confedence down then you find yourself in a rut with no idea how to get out the fact that this fellows father is willing to help him out wheather or not he charges his son interest is a blessing. I on the other hand see no real way out except bankrupcy but you still have to come up with the cash to pay the attorney. sometimes there is only one thing to do go fishin and deal with life later.

 

[jay_merrill]

Re: Credit Card Debt Question

I like Bob's idea concerning the CC debt. If you can loan him $5,000 and have him pay the debt down to $4,500, he can get ahead of the situation. You might also want to look his equity situation on the cars. Depending on how that situation pans out, it may make sense to loan less on the CC debt but enough on the cars to get out of them, by trading down to a less expensive car.

Also, does the ex have one of the cars? If so she should either pay for it, or give it up. Obviously I don't know how this issue was worked out in the divorce, but if the problem still remains and can be worked out, I think it needs to be considered.

 

[Shizzy]

Re: Credit Card Debt Question

what of the debt is "theirs"? loans taken out while married and CC in both names are the responsibility of both parties even after a divorce. Is the Ex wife responsible for any of this? he does need to call all of the card companies and see if something can be worked out. I got in to some troubles years ago when I went through divorce and I found that 9 of 10 times the card company was willing to at least listen to you. Give them the sob story, let them know you want to handle this, but you need their help.

 

[JB]

Re: Credit Card Debt Question

Been there, done that, T2F.

Son used 2 cards in my name to run his business. The crash of '01 wiped him out and left me with 2 cards, each with balances of $15K.

I negotiated one down to $11K closure and the other to $10.5K. He swore he would pay me back. I have, to date, seen about $5K.

If you have the cash available you can get negotiated settlements for a lot less than the balance and get the noose from around his neck.

However, consider the payoff a gift, rather than a loan.

 

[Tyme2fish]

Re: Credit Card Debt Question

The son I refer too was picked on and bullied in high school. He hated school and really had no social life or male and or female friends.
He had no desire to consider higher education.

The first summer after he got his driver's license I informed him that he would not sit at home and vegetate and that he better find a job. He went and got a job at a local fast food establishment.

He finished high school and the only thing he liked in school was Navy R.O.T.C .
He was proud and looked good in the uniform.

He maintained the fast food job for a couple of years after high school graduation. He was still living at home with us but paid us "rent" since he declined to pursue advanced education. Dad was not going to allow a freeloader to exist in his house.

He had saved up some money and was "tired" of that job and sought opportunities in other fields. Nothing panned out and he was shortly broke. In that financial interlude I suspended his rent payments to me. He finally obtained a job in a local super maket in the deli department cooking chickens,etc.

The female that he had asked to the Senior Prom years ago was working in that same store. In short, it was his only date that he had ever really had. After a short courtship he asked for her hand. He was still living at home at that time.

So intead of getting an apartment or going to college he buys a house in anticipation of his new bride moving in and helping with finances.

Weeks before the closing of his house I informed him that I had "saved" all his rent payments to me and was giving those monies back to him as a wedding present and down payment for his house. His soon to be wife then asked if my wife and I would be giving them any additional wedding presents.

Fast forward a year and she left him high,dry,in debt, and broke.
The divorce was a DIY affair with no lawyers (no money on his part) and she and he filled out the required forms and filed and settled. I kept informing him that she was liable for the debts they had accrued during the short marriage but he refused to acknowledge that advice. "Dad!! I know what I'm doing."

So now he will suffer from one year of marriage for the next 8 years to settle the debts incurred during his short year of "bliss".

I should have advised him to rent some service from some of the "local girls" on a pay as you go schedule.

This is difficult for a father to state, but my son is not the sharpest knife in the drawer.

That being stated, he is a kind,caring,loving individual and deserves better than what he has received.

I apologize for this rambling discourse but I just seek some advice on what I can do at this time to help him emotionally and financially.

 

[Tyme2fish]

Re: Credit Card Debt Question

Been there, done that, T2F.

Son used 2 cards in my name to run his business. The crash of '01 wiped him out and left me with 2 cards, each with balances of $15K.

I negotiated one down to $11K closure and the other to $10.5K. He swore he would pay me back. I have, to date, seen about $5K.

If you have the cash available you can get negotiated settlements for a lot less than the balance and get the noose from around his neck.

However, consider the payoff a gift, rather than a loan.

JB: You have always given sage advice. The "loans" I have given and will probably still give I never expect to have returned. I'm just worried about the question if I can support my wife with the funds we have left after I pass.
Just months after I left the work force I became diabetic with two Aortic Aneurisms and a stenosis. Healthy as a mule for all of my life and now this .
I know that the son in question will love and support his mother after my passing from this earth.

I consider my wife and myself self sufficient but I worry if I pay his debts I may leave my wife short on funds in the future.

Maybe too much info but I'm baring my soul to my iboats brothers.

 

[jay_merrill]

Re: Credit Card Debt Question

Based on the additional information that you have provided, I think it may be time for a bit of tough love. It sounds to me like you have been bailing him out for a long time. Perhaps it is time to cut the strings and let him get himself out of this - even if it mean bankruptcy. No father wants to do such a thing, but you just might be doing him the biggest favor of his life.

 

[Docknocker]

Re: Credit Card Debt Question

I'd negiociate the CC debt with the Issuer. Depending on the age of the debt, since all the "late fees", "over limit fees", "finance charges", ect are non-sense anyway (which the Issuer also knows) you can probably negotiate a close out amount of 50% or more. Push real hard - you have absolutely nothing to lose.
Upon reaching a close out amount, tell the issuer you will fwd the agreed amount ONLY after they send you written acknowledgement that they will classify and report the debt as satisfied in full and closed within 24 hours after receiving your payment.
DO NOT SEND A DIME UNTILL YOU RECIEVE THIS LETTER FROM THEM.

 

[SS MAYFLOAT]

Re: Credit Card Debt Question

Being shy of 2 months, it was 4 years ago I entered a contract with Consumer Credit Counseling Services Organization. In 8 more months, my 25K+ debt will be done. They negotiated interest and payoff solutions. Works well with me. One thing is that you cannot apply for credit while under contract with them. Sad part is if we was able to go this long without charging, why couldn't we do it all along,,,,,,,,,,,,,,,,,,,,It was the GOT TO HAVE IT NOW attitude. Now we are all paying for it. Will be down to only one card for emergency purposes only, but will use our rainy day funds first. The card will only be used if the rainy day funds is not enough to deal with the problem................SS

 

[PW2]

Re: Credit Card Debt Question

From what I've read, the CC is not the biggest problem.

The first thing he needs to do is lay out, on paper, a detailed budget.
That he can stick to.
Everything needs to go on it, including "fooling around" money.

In one column, income.
The other, expenditures.

Then you can individualize a strategy for dealing with debts systematically.

It may be he needs to sell the car and buy a junker.
He may even need to sell the house, or even take in a roommate.

But the biggest step is to do the budget. Only then can you determine how draconian the steps need to be to solve it.

 

[ezmobee]

Re: Credit Card Debt Question

The car payment is probably the biggest problem. With the market what it is he probably can't sell it for what he owes. What he may be able to do though is trade it in on another car with you cosigning for a better interest rate. Just as an example my wife and I had a 2004 Chrysler Pacifica with a payment of $420 a month (7% interest rate). It got terrible gas mileage and my wife and I have a long commute so we couldn't afford to drive it. We ended up trading it in on a 2007 Chevy Impala that was GM Certified so they were (and are) running a 2.9% financing deal. Even with rolling some negative equity onto the Impala or payment went down to $330. Something to look into.

 

[cbavier]

Re: Credit Card Debt Question

Only a couple thoughts. In bankruptcy there are different plans. The Attorney/Credit Councelsor will advise the best plan. Whether it's chapter 11 reorganize or chapter 13 completely disolve all assets or Chapter 7 in which I'm not sure what that is. It's true the bankruptcy will go on record for seven years but it will also give your Son some time to mature and re-think his financial future. I think you have gotten some good advice but LEGAL ADVISE is better. You never said where is the second car? If she has it she is still responsible to make 1/2 the car payments. The court will assign a debt manager and your son will make payments to that person/ firm and they will pay the creditors. Interest is stopped on the cars and crdit cards. He gets to keep the house and one car. I think you and your son need to see a reputable credit couselor ASAP. Just my two cents. I've been there and done that over 20 years ago from an accident that left me out of work almost two years, out of almost three years. The payments are based on your income and ability to pay.

 

[DJ]

Re: Credit Card Debt Question

Wow! PW2 and I agree.

As I mentioned, the real anchor is the car debt. And, PW2 is 100% right that a budget needs to be developed before a plan can be implemented.

There is no sense setting out for a destination if you don't know exactly where you are.

 

[Tim Frank]

Re: Credit Card Debt Question

......
I apologize for this rambling discourse but I just seek some advice on what I can do at this time to help him emotionally and financially.

It's often dangerous giving or receiving advice, so I'll just highlight something that YOU wrote that was particularly positive....

He finished high school and the only thing he liked in school was Navy R.O.T.C .
He was proud and looked good in the uniform.
......