I am an independent film maker. In April of 2007 I went into production on a small but warm film with only a $500,000 budget. I had a single investor and it was the culmination of a decade’s work to get the film made. As we started shooting we went over budget, and at the same time my investor became ill and was hospitalized. It was impossible to speak with him at the time about covering the over budget expenses and I was faced with the choice of shutting down production or financing the expenses myself. I wound up putting $212,000 on seven different cards with six different banks. Then my investor (and good friend) passed away. I was left to service the debt myself at a time when I had no income because I was still responsible for finishing post-production on the film, so I couldn’t go look for other work.
My goal was to finish the film and sell it to recoup the money and pay off the debt. I continued making $3600 monthly payments with that intent. However, when we had a finished film, the housing market had already collapsed, the credit collapse was just hitting, and more than a year later the film still has not sold. I was running out of cash and desperately trying to stay current on my mortgage (adjustable rate and through the roof for much of this period).
Though my investment was in a film, I believe there are many small business people who have found themselves in similar situations, taking out loans for their businesses and then finding that the economy isn’t supporting their business. Perhaps many of these people, like me, also find themselves turning to credit just to cover basic living expenses.
I finally made the difficult choice to stop making payments on my credit cards for the first time in my life. I’m 41 years old and was actually proud of my credit score that hovered near 800. I then spent the better part of a year taking sometimes five calls a day from banks and collection agents on the many accounts. It was a long, often frightening, sometimes painful experience that, in the end, not only successfully reduced my credit card debt from $212,000 to $30,000, but also taught me many lessons about how to separate myself from the emotional judgment that often accompanies debt.
In the end, I emerged a stronger person. I saved $115,000 in the negotiations. I did this without using a “service,” many of which are getting very bad press these days as being scams or doing more harm then good for their customers. I did it myself and tell the whole story in my book, “The Do-It-Yourself Bailout,” in detail. What the phone calls sounded like, how I got settlement agreements, I even put copies of the settlement agreements and amounts into the book. I want others to have as much information as they can to work through their own debt.
I believe, in this economy, that every individual has the right to consider him or herself the President and C.E.O. of their own corporation, the corporation of “You,” and the right to treat debt with the same attitude that businesses do. It is a commodity and the C.E.O.’s responsibility is to deal with it as best he or she can for the health and benefit of the shareholders, which in the corporation of “You” is the family.
I truly feel that my experiences will give people countless insights into how they can prepare themselves to navigate the process of negotiating through their credit card debt.
For more info on “The Do-It-Yourself Bailout,” please visit http://www.settleyourcreditcards.com
Tags: bailout, debt reduction, debt settlement
hi, thanks again for writing the book. i have 3 american express cards, did you have any of theirs? i wonder how their collection differs from a regular bank.
also, i would love to make one lump sum settlement instead of going thru 3 of them separately.
Although I’ve chosen in my book to keep the details of my settlements unassociated with particular banks, I can say that I did have one bank that carried two separate cards, much like you have three accounts with AMEX. In my case, they would not combine the cards and I had to negotiate on each separately. However, one of my cards was a personal account and the other was a business account, which could have been the reason for the forced separation. My suggestion would be to call Amex and ask them if you can combine the accounts for the purposes of negotiation
hi ken,
im waiting for your book however i wanted to know if you have delt with capital one. They will not settle at this point we have not made a payment since february. Should we wait it out??
What have the phone calls been like with them so far? Have you indicated that you are interested in settling? If so, what has their response been?
Every Credit Card company has been willing to accept a settlement, except for Capital One. Is it just too soon? Have you heard anyone else having trouble with Capital One. Do they ever settle?
Thank you
What isyour current credit score?
I haven’t checked it in a couple of months. It was still above 600 after settling all of my credit card accounts as described in “The Do-It-Yourself Bailout.” It was in the mid-700’s before I started. I recently missed a couple of mortgage payments, though, and I haven’t checked it since then. What is your situation? Credit card debt? Burdensome mortgage?
Kenny
http://www.settleyourcreditcards.com
hi, looking back, do you think if you made a nominal payment of $50 or so would be better or worse, or would it drag the thing out longer.
i recall you mentioning the collection folks can see you are still makig payennts on some cards.
tia
Hi Tia,
It’s hard to say because I didn’t go that route so I wouldn’t feel confident predicting the results. My question to you would be, why would you continue to make $50 payments? If you want to settle, save the money.
Kenny,
I am in a very similar situation due to a house building project that took 2 years and 200k more. since I don’t have any reserves left and can’t get a line of equity in this market. here a few questions:
- can I settle for payments rather then full settlement pay-off’s?
- will they try to foreclose since I have equity in the house/
- have you considered the use of debt consolidation agencies and if yes why didn’t you use it?
thanks for your input
marc
Hi Marc. We are in similar situations. You built a house. I built a movie. But the time frame and level of debt are about the same. As an overall, I don’t know that I can speak exactly to your situation, though, as I had unsecured credit debt and it sounds like you have a building loan. But I’ll try to give you input from my situation that may help you in yours.
In terms of payments rather than full settlement pay-offs, not only was I able to do this, and did in one case, but nearly every creditor offered the option to me. I believe that they feel if they can get you to sign a contract for a settlement and make payments on it, that’s better than continuing to pursue you. Be wary of the collectors who say they’ll take a “payment schedule” on your debt that isn’t a “settlement.” That’s just the same as making monthly interest payment, though maybe for less than they wanted. I settled one card, a $23,000 balance, for $9300 and made three monthly payments of $3100, but it was clear in the settlement agreement that it was a $9300 settlement in full on the account, broken into three payments, not three $3100 payments on the full balance.
As for the foreclosure, I wouldn’t attempt to counsel you. I am, myself, just looking at the mortgage refinance, foreclosure, short-sale options right now and couldn’t speak to what your particular loan agreement says in terms of the lender holding the property as collateral. However, my previous post on Mortgage Refinancing does have a contact name for an expert in this end of the business. Adam Rodman. I’m sure he’ll be happy to hear from you. Please tell him I sent you.
I looked at some of the websites and advertisements for many of the consolidation agencies right around the time that a lot of bad press was coming out about them. I was hearing stories of companies who were front loading fees or not really pursuing their client’s best interest by recommending they take high percentage settlements in order to close deals quickly and move on. I won’t say that these practices are common among all such agencies and I’m certain that there are some honest companies out there who fight long and hard for their clients and take their fees as settlements are reached. Personally, I felt I had good counseling in my bankruptcy attorney and preferred to approach the process myself. In the end, I feel I learned much more than I would have had I used a service agency, and that I reached better settlements because I was willing to stay in it for months to get the best deals I could to protect my own financial well-being.
I hope that helps. Kenny
kenny
what is your take on telling collectors you will have to consider bankruptcy, as in liquidation. your case you have a house etc. but for people with basically no assets.
the collector will prob dismissively say that’s what they all say. but do you think it is a good threat to get him to back off or it would just make the situation more confrontational. thx
In my experience, the likelihood of bankruptcy is a strong factor in motivating creditors to settle. Once you begin settlement negotiations, they will pull your credit and all public information on you, which would include whether you own a home and what you paid for it. In my case, a couple of my creditors requested full financial details (there is a big section in “The Do-It-Yourself Bailout” that talks about how I felt submitted financial details during negotiations. Have you had a chance to read the book, yet?You’ll love this section.)
It seems to me that most banks these days would be narrow minded to toss off a bankruptcy possibility under the scope of “everybody says that.” Because, in reality, so many people are facing it. If you own a house and are severely upside down on it, that is a motivator. If you own a house and have a lot of equity, the banks will be less likely to settle. If you have no house, no assets, very little in the bank, aren’t working and have high debt, tell them. Showing them numbers like that will increase their likelihood to believe they really should take a settlement from you whether you mention bankruptcy or not.
Lastly, I personally don’t like the word “threaten.” Though some of the collection agents who called me were aggressive, I always attempted to maintain an even demeanor on the calls and treat the entire process as a business negotiation without the need for threats or intimidations. Again, the “The Do-It-Yourself Bailout,” you’ll see detailed transcriptions of the collection calls and examples for how to keep the calls cordial, both for the purpose or reaching a settlement and to maintain my own emotional well begin during the process. I hope all that helps.
http://www.SettleYourCreditCards.com
I recently contacted BofA about three accounts that are current. I told them that I will not have any income for the next 6-12 months at least. I asked them if I could settle the card balances and close out the accts. They told me they would settle for 60%. Do you think that its better to settle for this now trying to save more of a credit score or follow your guidelines and try to hold out for 70-80%. The total debt is about $70,000
Hi Greg. I try to avoid giving my readers direct advice on how to handle their finances. Whether or not it is better to settle now or wait longer is a conversation for you to have with your bankruptcy attorney, tax advisor, spouse or yourself as it involves decisions about how much cash you have, how much you can put toward the settlement, what your situation will be afterward, etc. However, in my experience, the banks I dealt with made their first offers in the 85% range, came down to 55-60% after a couple of months, then down to 30-35% in a couple more months. Waiting, however, will more than likely require you to miss a couple of payments, which may affect your credit score, and will almost certainly bring collection calls. I describe what this process looks like in detail in “The Do-It-Yourself Bailout.” If you are willing to go that route, it is possible that the bank will further reduce their settlement offer down the line.
Ken
I am trying to settle with BofA, Chase and WAMU. What is your experience if any with these three in regards to the settlement process.
So far WAMU has been very hard to work with and not offered anything. Chase has offered a settlement of 75 cents on the dollar on our first call, and I am waiting to see if they can do better. BoA offered 60 cents on the dollar on the first call, and I did not accept it.
So at this point to I just sit and wait. I know they can do better based on all the info I have gathered. Its been 90 days on each account since I quit paying.
Thanks
Matt
Hi, Matt. The pattern you are describing looks quite similar to the experiences I went through. 60-75% on the first call is actually better than the first offers I received, which ranged from 85-92%.
Have you made a counter offer to them? Have you suggested that you would be willing to settle and in what range? I had to wait about six months for the offers to start coming in around 35%.
As for the cards I kept current, one did drop my credit line from $20,000 to $12,500, which is how much I had on it so it basically was then maxed out and unusable. I’m not sure if they did it because I wasn’t paying on the other cards or because most banks seemed to be wrangling in their exposed credit in Sept and Oct of last year. But yes, I did lose access to $7500 in credit on one of the cards I was keeping current.
One way to take advantage of open credit if you are concerned it might be taken away is to use it for a large ticket item you’d be paying for anyway with cash, like your mortgage. Then then take the cash you would have put into your mortgage and put it into a newly opened and separate bank account that then acts like the credit you would have had access to through the card. In the end, this will cost you more (since you’re paying interest on the card you’re keeping current) but is a way to have access to the funds if you need them.
I have about 50,000 dollars woth of credit card debt. I would loike to purchase your book but I would like a hard copy like the one on the news tonight. (CBS 11PM)
Also, I have a line of credit with Wells Fargo. I have my business accounts with them too. Can I settle that debt as well?
I settled personal credit cards, business credit cards and business lines of credit. As far as I can tell, these different names are just marketing, in the end, all unsecured credit seems to be treated the same from a settlement perspective. Of course you can get a printed copy of the book. It is available on the website, just go to http://www.SettleYourCreditCards.com, click on Order or Buy it Now, that will take you to an order page where you have a choice to buy the printed copy (top button), or the digital download below that. The printed copy is also available on Amazon.com. Good luck.
Hello Ken
I saw you on the Channel 2 news at 11:00 in L.A.
You are what I have been looking for. I have around 47,000.00 in debt on credit cards. A lawyer I saw regarding bankruptcy mentioned negotiating my debts down like you did but did not tell me how.
Must I stop paying on the cards to negotiate with them?
I lost my job 2 years ago because I was rear ended on the freeway on my way to work. I received damage to my neck and low back.
A very bad attorney which I have since fired told me to put all my expenses on credit and pay them off at the end of the case. 3 years later I have all this debt. The case is still not finished with the good attorney’s I hired after the bad one was fired. I still can not work and do not know when or if I will ever be able to again.
I do have some small income left from investments so I can not file for bankruptcy.
I am afraid credit card company’s will see my investments that provide me with an income of less than half of what it was before and will sue me to take it away. If that happens I will be completely destitute!
I have only been making the minimum payments with help from my Dad but now that he will no longer help.
My health insurance premiums are $803.00 a month and my income is 1,900.00 a month. i just do not have enough cash to make the payments without using the cards to survive(gas etc.) because of the payments on the cards. They are around $785.00. I can not afford to lose my insurance because I am still receiving treatment for my back and neck injuries.
What do you suggest I do?
Wow, Elizabeth. What a story. I’m so very sorry to hear of your car accident and injuries, and even as someone talking about settling credit card debt, I can’t believe your attorney advised you to live off credit cards while waiting for an accident settlement. Given that you want to avoid the risk of a lawsuit and anyone having the opportunity to claim your invested money which you are living off of, rather than go straight to settlement mode (which could lead to a lawsuit, as it did for me), my first suggestion would be to call your banks to whom you owe the $47,000 and tell them your situation. Very often, in such situations, banks will lower your interest rate (if you’re paying 15-25% right now you could get it down to 4-5%, sometimes in one phone call), which could instantly reduce your monthly payments to a more manageable level. You could also ask them to reduce your payments to below interest level, which will increase the overall loan amount but give you more time to hope for the accident suit to be settled, or even ask them to suspend payments entirely for six months or more. The first time you call, if they say no to these things, follow up with a letter. Call again, follow up with another letter. If it comes to it, then consider skipping a few payments, and when they start calling from collections, point to your previous calls, your letters, your attempts to communicate and work with them, and ask for reductions and suspensions again. If you have the accident lawsuit, accident report, medical reports and bills, etc. that you can send to them to support your case, you might find them willing to help you.
If you’re still considering going through the settlement process, I highly recommend you take a look at The Do-It-Yourself Bailout as that will give you a good idea of the pro’s and con’s of settlement to help you make informed choices.
I wish you all the best, Elizabeth.
Kenny
Hello Kenny
Thank you for your suggestions.
Will the credit card companies still lower my rate even if it is around 9% ?
That way I could maybe make the payment. If they do not I just will not have enough money to pay them next month.
I have a Visa with USAA, an American Express card and a MasterCard with Citibank. They are the worst. Last month they did not properly credit me for a payment and jacked up my rates to 25%. I was very relieved I could prove when it was paid. They backed down. I also was forced to opt out a couple of months ago. They were more than doubling my interest. With the opt out I am still locked in at my previous rates which are from 2.99-4.99 for lots of balance transfers and 9.99 for new purchases.
If I can not pay that card next month and they jack it back up will I still be able to negotiate with them?
I really want to get your book but I do not have the money and I can not put anything on my cards now.
Thank You
Elizabeth