Question

I just found out my husband has bad credit and a lot of debt in his past.  The collections bills are now starting to roll in and we just had a debt collector come to our door the other night for 8000.00.  What are my options?

Blake H.

Answer

Blake

Sorry to hear about this but this is a common problem in marriages; spouses bringing in old credit history into the new marriage.  It is very important for you both to sit down, talk about your combined financial picture and work out a plan together.  Above all, keep communicating to each other!

As far as the debts go, you have a few options…

1)      Debt Acceleration.  If you get on a spending plan together, you may see you have extra money coming in each month.  If you do, start applying this extra monthly month to one of these bills.  Once you have paid off one, apply all the money that was going to the now paid off account and apply it to the next bill.  You can continue to do this until all your bills are paid off.

2)      Family and Friends.  It is getting more common now to borrow from family and friends.  If this option is available, make it official.  Sign a note with them that clearly spells out the repayment terms and the interest rate and by all means pay them back on time!

3)      Credit Counseling.  There are non-profit companies out there that can renegotiate the payment terms with your creditors.  They will draft your account once a month and handle all of the re-payment process.

4)      Debt Settlement.  There are agencies out there that can negotiate a settlement for less than full balance of what you owe.  This could be a good way to save money on some old debts.

5)      Bankruptcy.  If all else does not work, bankruptcy may be an alternative.  You would have to meet with an attorney in your state and discuss whether a Chapter 7 or a Chapter 13 would help in your situation.

Blake, if you would like to have a free referral to a debt specialist, give us a call @ 800-445-8540 and we can match you to a reputable partner.

Good luck.

Candice

Question

I am overwhelmed in credit card debt and would like to try the debt settlement.  A company called Zwicker and Associates has already taken over my Discover card.  What can they do to me?  Is debt settlement a good idea?

Julianna H.

Answer

Julianna-

Debt settlement is usually a good program for old unpaid collections, charge offs, judgments or tax liens.

Usually, in the cases I just listed, you can get a 40 to 60% reduction in the balance that you owe.

There a few pitfalls to be aware off.

1)      The remaining balance that you do not pay on your settlement may be considered income by the IRS and is taxable as ordinary income.

2)      Your credit report will be updated as a “settlement for less than full balance” which can be a red flag for future creditors that you may apply for new credit with.

3)      Lastly, some settlement companies will take monthly payments from you until you have enough to equal the settlement amount.  Be aware that these monthly payments are going to the settlement company and not your creditors.  This means that the creditors still have the right to attempt to collect the debt including garnishing your wages, getting a judgment or seizing your assets.

Let us know if we can be of any assistance finding a reputable partner for you.

Candice