A desperate debtor's option: hardship programsBy Todd Ossenfort
Dear Credit Guy,
I've
talked recently to two different credit card consolidators and explained that
my husband's second job has taken more than a $10,000 cut this year. I am not
able to work. Slowly, we have gotten ourselves in a jam and are unable to pay our
credit cards. The consolidator said that she would recommend a hardship
program. How exactly do I go about this? I need to do something soon.
-- Barbara
Dear Barbara,
You
are absolutely correct that you need to act quickly. Before you do anything,
however, you need to know exactly what you can afford to pay each month toward
your credit card accounts. It would be counterproductive to ask for and qualify
for a repayment program that you ultimately cannot afford. Once you determine a
realistic monthly amount you can pay on your credit card accounts, you will
then need to keep in mind that the amount must cover all accounts you currently
owe. For example, if you have four credit card accounts and $400 per month to
cover those accounts, you will need to be sure the repayment programs you agree
to (for example, $75 per month to creditor A, $85 per month to creditor B, $140
per month to creditor C and $100 per month to creditor D) do not exceed a total
of $400.
I
am assuming that the credit card consolidators you talked to did a full
counseling session with a full budget analysis. If they did, you called the
right agency. If they didn't, call someone else. I recommend you only speak to a
qualified nonprofit credit counseling agency for assistance. You can find help
from a trusted agency by visiting a local office of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. A certified credit
counselor will review your current financial situation and make recommendations
based on your income and expenses. If it makes sense for you to enter into a
debt management plan (DMP), your counselor will explain how the plan works and
let you know any fees associated with the plan. On a DMP, you will make one
payment to the credit counseling agency. The agency will then disperse the
money to your card issuers. Most DMPs will have your creditors paid in full in
five years or less.
Many
card issuers are now more willing to work with consumers than they have been in
the past. Most have what is considered a "hardship program" offered through the
nonprofit credit counseling agency that allows you to pay what you owe with a
lower monthly payment than your current minimum payment. Each card issuer will
have varying requirements you will have to meet in order to qualify for the
program. Keep in mind that you will not be able to add to the balances of any
card accounts that are placed in a hardship program with your card issuer.
While
coming to an agreement with all of your card issuers, you will need to pay what
you can on time and as agreed. Rather than paying nothing on any of your
accounts, make minimum payments in full on as many accounts as you can, and pay
nothing on the others until you quickly find a lasting resolution.
Take
care of your credit!
See related: Card issuers don't make hardship programs easy, 9 things you must know about debt consolidation, 8 steps to picking a credit counselor
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to The Credit Guy.
Published: December 7, 2009
 |
 |
 |
|
Three most recent The Credit Guy stories:
|
|
 |
|
 |
|
|
|
|
CreditCards.com's newsletter
Did you like this story? Then sign up for CreditCards.com’s weekly e-newsletter for the latest news, advice, articles and tips. It's FREE. Once a week you will receive the top credit card industry news in your inbox. Sign up now!
 |
|
|
|
|
|
