Expert: David - 2/21/2009

Question
QUESTION: Hi, first thanks for providing this service.
I have a lot of credit card debt acquired during
the start up of a business. We are trying to hold the
business together,but are working for unemployment wages
right now..we have reason to believe that we will again
have revenue from the business.
So, the problem is that I cannot pay the credit cards with their horrible interest rates. I do want to pay them back but so far they are only offering 10 per cent interest and no additional charges. The total amount per month is over what I can pay right now (at 10%)
What recourse do the credit card companies have(I live in California)when I don't pay them, besides ruining my credit?
Do they have any legal way to go after our house?
Do you think debt consolidation companies actually can work?

thanks a lot, this is a pretty stressful situation..


ANSWER: Gary,

I'll give you a brief overview of how CC collection generally works.  You can download the Fair Debt Collection Act and California Statute of limitations for debt collections as well.

CC are unsecured debt...they can not take your house.
If you stop paying the accounts will go into collections.  You'll be pestered by the cc company collection dept for several months.  
After that the account will either be sold to a separate collection agency or you'll be sued for judgement(the larger the debt the faster this happens).
The next step for them is wage garnishment.  They also be able to lien your bank accounts(you'll walk into the bank and find your checking account empty).

In most cases it takes at least a year to get to this point from when you stop paying the minimum amount.

My opinion on debt consolidation companies is that they can work but rarely do.  They hurt your credit just as much as BK and take years to get you out of the red.

I can help you increase your credit score whichever way you go, but your first priority should be cash flow.  Set down, research all your options and then decide which one keeps the most monies in your pocket.  Feel free to call or e-mail if you need additional info.

David McArthur
219-718-8566
financialscoring@sbcglobal.net
www.financialscoringsolutions.com


---------- FOLLOW-UP ----------

QUESTION: Thanks again for your help. It is sounding like I need to try to negotiate a reasonable monthly payback for each of the individual cards. Do you have any idea what kind terms they might consider reasonable?  I am thinking I may be able to handle a total of 10% of balance inclusive of interest on the debt?

Answer
Your welcome.  Each card will be different.  They are a lot easier to negotiate a payoff with than reasonable monthly terms.  Call and see what they can do for you.  If they won't work with you start stashing cash away and in a few months use it to try to get reduced payoffs.