Expert: Jim Meadows - 9/30/2004

Question
I live in Massachusetts, am unemployed and owe $40,000 on 4 credit cards plus a personal loan.  I haven't made any payments in 2 months.  I own a condo worth $240,000 and owe $60,000 on the mortgage.  I have some money in the bank and just got a large credit line against my condo.

Question: How do I best pay off the credit cards - can I get discounts for paying them off?  Do I call and make an offer or wait for them to sue me and make an offer on the resulting judgment?  My understanding is that people pay off judgments at a big discount.  Should I have someone represent me?

Charlie


Answer
Charlie, The best postion to be in to negotiate a settlement is to be able to convince your creditors that there is no reasonalbe expectation that you have the means to pay your debt in full. The bad news and good news is that you apparantly have the ability. Why not just pay what you owe? If you are determined to attempt to negotiate, you will most likely have to disclose your assets. In your case this wouldn't help your position.     

If you let your creditors have a judgement they are not obligated to negotiate. They can search for assets & can garnish wages (assuming you are working then), lien your bank accounts and execute the judgement against your real estate. Judgements also bear interest & can be renewed forever. Keep in mind that you can't sell your home without satisfying the judgement lien.

Attempt a partial settlement if you must. You can do so in writing. Don't lie but emphasize that you are unemployed and don't wish to file banksuptcy.  Good luck, Jim