My wife and I are currently dealing with a substantial amount of debt—around $100k combined between a car loan, credit cards, and a personal loan. Our annual income is pretty good, but I’m 100% commission-based, so my income fluctuates, which makes budgeting a challenge. The credit card payments are what’s hurting us the most right now. I contacted Discover to explore options, and they offered a slightly lower interest rate of 17.99% for a year. Our biggest credit card debts are $11k with Discover and $8k with Apple, both under my name only not my wife’s.
My main question is: should I consider letting my debt go to collections? My thinking is that my credit score would take a hit for a few years, but it wouldn’t affect my wife’s credit, so if we needed to finance something in the future, we could do it under her name. We don’t plan on financing anything else anytime soon anyway. By letting the debt go to collections, the interest would stop, and I could negotiate a lower balance with the collection agency. Is this a terrible idea?
Our combined income is about $140k a year, with $100k of that being mine. Given my commission-based income, some months I bring home $10k, while other months it’s only $4k, which makes budgeting very difficult.
You are still accountable even after it is sent to collectors.
The creditor may file a lawsuit against you and withhold your income until they receive their full amount.
I concur. At present, going through the lawsuit procedure. I would work harder and pay them off before deciding to let them go if I could go back in time. Particularly high debt levels. I wish you the best of luck!
Yes I know. Paying the collectors and negotiating a lower total is my plan. And it won’t attract attention in this way.
Here is a former collector.
Even while a debt is being collected, interest continues to accrue. They are also exempt from negotiating the entire amount owing. If you can prevent a debt from being sent to a collection agency, you’ll usually come out ahead.
That is, if your present creditor chooses not to sue you directly and instead sells your debt to a collections agency.
It won’t really help to negotiate hardship with the lenders, which is what it would be like to do with the debt collectors. You can check out debt management or debt counseling and they can help lessen the interest rates. You have the option to declare bankruptcy in order to start over from scratch.
Tried debt management and they couldn’t help. They claim that all of my rates are more competitive than theirs. We would only be eligible for Chapter 13, and I fear that would mean an even worse settlement for me.
Is it possible to open new credit cards? If so, you can typically get a 0% annual balance transfer offer for a year on new credit cards, which is far better than the typical credit card rate of 5%. If you are able to open more cards, you can keep rolling them over. Of course, you should make every effort to pay them off as quickly as you can, but doing so is preferable to dealing with collections.
Due to the large amounts on the credit card, they will eventually file a lawsuit and increase the debt by adding interest and late fees on a monthly basis. I find it incomprehensible that someone would accrue debt when they make that much money. To pay off your debts, you should ask your creditors to freeze your credit, apply for a loan with a lower interest rate, or use the debt snowball method. They will no longer decrease interest in CC after COVID. They did prior to COVID-19. Def take care of it and cease using those cards.
Probably, they’ll sue you. Do that only if you have virtually nothing to lose and very little revenue coming in.