Negotiating credit card debt

[Fru-Gal]

Can anyone share tips on how to negotiate a credit card hardship repayment program with multiple companies? (This is not for me.) Thanks!

[eyesonthehorizon]

Posting partly to follow because this might be relevant for someone in my life. You may know this, but: be sure you are not on the person’s phone call, or if you are, be very extremely cautious you never say any word or phrase about accepting/ agreeing to anything, even on behalf of the debtor - the line is recorded & they will be glad for you personally to take responsibility for the debt you didn’t create.

[Fru-Gal]

Good point!

I just realized I can share one tip from my own long-ago experience: We once used a debt-reduction company and I really soured on that. You pay a fee and they may or may not renegotiate anything for you. If memory serves we didn’t even see any reduction, despite making payments to this new firm. So I would not recommend that, I think those companies are predatory.

Now I have excellent credit so I am careful about not messing it up.

In this particular situation, the first part was hard: Getting them to quantify the problem. They finally did it, though and listed out the accounts and balances. They have already consolidated some debt and ideally would not want to do that again. However, that might be the best option if hardship plans aren’t accepted.

Next step will also be hard: Getting them to make the calls. I can be there to coach but it’s not my debt therefore I can’t be on the phone. I assume?

They are very avoidant about debt. Previously had excellent credit. The hardship put them underwater and they are too proud to ask for help.

I am also curious if any kind of proof of hardship would be required. Would not be hard to prove that, just wondering if it would be via email or mail or if it could be done over the phone.

Obviously the goals would be
1) reduce or get credit for late fees
2) renegotiate balances
3) renegotiate interest rates
4) hardship payment plan

Or failing all that, go back and get another consolidation loan from the lender that did the existing one.

[plog]

It depends.  Is this truly a temporary hardship?  Or is it actually someone in over their head?

What's the hardship?  Loss of job? Medical condition?  Divorce? How long will this last?  Can you give a specific time frame? How sure are you about how this hardship period ends? What kind of relief are you seeking--waive interest, fees, suspend payments? 

I don't need details for the questions above, but those are the questions you should answer when discussing things with the credit companies.  Reassure them that ultimately you have things in control and have a plan.

[sonofsven]

So what's the worst case scenario if they ignore the debt and pay nothing, their credit rating takes a nosedive for seven years?
I don't think creditors can do much of anything except make threats.
Obviously this is very irresponsible but it sounds like they don't care.
So no car loan, mortgage, re-fi, or new credit card for them.
Would this push them into poverty or force them to operate on a cash only basis? It's hard to get into debt if you only use what cash is available to you.

[Metalcat]

Whelp, we managed to make one call (like pulling teeth) to Capital One, and that was some BULLSHIT. Damn. Almost 30 percent interest rate, all we managed to squeeze out of them was a "special program" where for 3 months no late fees. And they waived one $29 fee.

I'm talking about a person who had good-to-excellent credit and a very long history.

I only got this idea from reading a Nolo press article and one somewhere else about hardship payment plans. Now I'm thinking it's bullshit. The hardship that this person suffered is right in line with what these articles claimed could be used to negotiate a payment plan, or interest/fee/balance reduction.

I may or may not be able to convince this person to let me help them call about their USAA card. Now they are saying they were right and I was wrong, and it's pointless to negotiate.

Right now the debt is up to half their annual salary, with most interest rates around 30%. Hair-on-fire situation IMHO. Oh well, they seem to think it's nothing to worry about.

It sounds like you care A LOT more about preserving this person's credit than they do.

I would just leave them alone to figure out what is best for them.

Trying to preserve their credit will take extraordinary effort and cost in this scenario, it's very possible that letting everything slide into collections and settling for 50-60c on the dollar may be a more desirable outcome.

It all comes down to how important their credit is to them.

And from the sounds of it, it doesn't sound like protecting their credit is a major priority at the moment. So I would.just stay out of it and let them determine what their priorities are.

Plenty of perfectly functional adults walk around with shit credit for a handful of years due to periods like this where they end up in over their head for numerous reasons. This isn't at all an unusual thing to happen to otherwise responsible people. It's also not the end of the world to have bad credit for awhile, it's inconvenient, but if this is a truly temporary life event, it will bounce back steadily.

This doesn't sound like a situation where you need to be saving someone from themselves. Let them decide for themselves what their priorities are. If they aren't too fussed about their credit, let them destroy it and rebuild it, it's not a complicated process.

[TMB]

The general rule is a person needs to default before a credit card company gets really interested in trying to create a workout program that provides much benefit.  There are certainly times where they are willing to provide special rates or payment plans without default (COVID saw a lot of temporary programs) but in my experience, it isn't common.


Depending on the state the debtor is in and their finances/assets, a default may not result in any real consequence beyond bad credit for a while.   I'd look up the local laws on judgment enforcement to determine the risks there. 

[ChickenStash]

I watched some family members go through this maybe 8-10 years ago. What they did was stop paying on the cards (not even the minimum) for a few months. They dealt with the incessant phone calls from the CC companies. Eventually, the CC companies would offer a payoff amount of 30-50% of the balance owed when it went to collections. Their credit rating was, of course, ruined for a number of years so they had to do cash only (not sure about a debit card). After a few years they stabilized and were financially fine having learned a big lesson.

Another couple went the full bankruptcy route. The court set them up with an overseer who put them on "bread and water" while they paid most of the debts off. They had a decent amount of income at the time so the court didn't allow wiping all the debt. I wasn't close enough to know the details but they also had ruined credit for a few years and eventually pulled through. It was a rough lesson, though.

As far as maintaining their credit score, don't bother. That ship sailed long ago. If they are at the point where the only options are negotiating payments then they are hosed and need to start learning how to live within their means now since they apparently never learned how earlier.

[GilesMM]

Some tips for you:


https://www.bankrate.com/finance/credit-cards/how-to-negotiate-with-credit-card-companies/


https://www.nerdwallet.com/article/credit-cards/how-to-negotiate-credit-card-debt


https://www.forbes.com/advisor/credit-cards/how-to-negotiate-credit-card-debt/