paying off credit cards???

**disneysteve** · 04-10-2011, 05:21 AM

Originally posted by janzz05 View Post

we have about 30k in credit card debt and will be in a position to pay them off soon. So my question is, can i offer the creditors a lessor amount than the amount due and not take a hit on our credit score? if so is there a formula so that i know what to offer them? Like maybe 75 to 80% of face value(actual statement balance)

Another question, i will be opening a trust account with my girlfriend as my trustee,The afore mentioned debt is actually all in her name.Would it be best not to open the trust account in the same bank as one of the credit card are issued on? (B.O.A.) Or is that not an issue since she will only be the trustee of my trust. In other words if i want to offer them less than stated value to pay off the credit card should i open the account in a differant bank other than the one holding the debt on her visa account. (so they arent privy to the balance in the account, and know that in fact we can afford the entire amount)

So your girlfriend legitimately borrowed $30,000 from her credit card companies. She now has the financial means to repay all that she promised to pay but you are looking for some advice on how to cheat the lenders out of $6,000 to $7,500. The fact that you are scheming about where to park money so that the lender doesn't see that you have it should be the red flag you need to know that what you are considering is unethical and immoral (and should be illegal though I don't know that it is).

She borrowed the money. She can repay the money. She needs to go ahead and pay her debts, not look for ways to elude them.

Negotiating a settlement with a lender is for people who, for whatever reason, simply can't repay the debt in full and have no reasonable hope of ever being able to repay in full.

In this case, I'm not sure that the trust question matters. If the debt is her her name and the trust assets are in your name, the lenders can't go after those assets anyway. Keep your finances separate from her assets until you are legally married. Let her worry about her bills and you worry about your bills. Combining finances when you are single can cause all kinds of problems, especially when one of you has a ton of debt.

**creditcardfree** · 04-10-2011, 07:21 AM

I agree with DisneySteve. You can't offer less if you will have the full means to pay these debts.

Offering less actually has tax implications, since the amount the lender writes off gets reported as ordinary income, for which your girlfriend will then have to pay taxes on. This is reported on IRS Form 1099-C (Cancellation of Debt) if you want to look into it.

**jpg7n16** · 04-10-2011, 07:53 AM

Originally posted by janzz05 View Post

we have about 30k in credit card debt and will be in a position to pay them off soon. So my question is, can i offer the creditors a lessor amount than the amount due and not take a hit on our credit score? if so is there a formula so that i know what to offer them? Like maybe 75 to 80% of face value(actual statement balance)

There is no way to settle a debt for a portion of what's owed without negatively impacting your credit score. I mean think about it - who would get a higher score: someone who paid their entire debt in full? Or someone who only paid back half (or 75-80%) of what they borrowed??

Which one would you rather lend to?

Obv the one who pays back only a portion is not as good to potentially lend money to - ergo, a lower score. Any sort of settlement will hurt her credit.

She should just pay back everything she borrowed. That would be the best thing for her credit, and her conscience. Pay off all the highest interest rate ones first - sooner rather than later.

I hope she's not piling up cash trying to have enough to pay them off in one fell swoop...

Another question, i will be opening a trust account with my girlfriend as my trustee,The afore mentioned debt is actually all in her name.Would it be best not to open the trust account in the same bank as one of the credit card are issued on? (B.O.A.) Or is that not an issue since she will only be the trustee of my trust.

Your trust is irrelevant to her assets. A trustee has no legal ownership, and is just a fiduciary for someone else. It would have 0 effect on any of her other financial dealings, cause it's not her money.

**snafu** · 04-10-2011, 09:44 AM

one more point...you are planning to give GF access to your assets via a Trust a/c even though she has a history of running up $30K in CC that she was not paying off until you intervened.

**janzz05** · 04-10-2011, 08:01 PM

thanks for the replys, well as is typical on these forums i didnt post the whole senario the debt was accrued by both of us during a time when we were both unemployed i have lousy credit because of a lifelong of bad choices she on the otherhand is more like most of you and has always done everything right. For some reason being the financial dummy that i am I thought the card co. would be happy to take a one time cash payment instead of years of payments. Shows you how much i know, Im the problem here not her but thanks to my mom who recently passed (93 yrs old) we will have the ability to repay all debt and purchase a home(first for me) 2nd for her OK well just wanted to clear that up and thanks again

**xitizkarkee** · 04-11-2011, 03:34 AM

one more point...you are planning to give GF access to your assets via a Trust a/c even though she has a history of running up $30K in CC that she was not paying off until you intervened.

**jpg7n16** · 04-11-2011, 06:25 AM

Originally posted by janzz05 View Post

For some reason being the financial dummy that i am I thought the card co. would be happy to take a one time cash payment instead of years of payments.

The credit card companies would actually love it if you kept a really high balance for a very long time. It's not in their best interest for you to keep the balance low over time, because they can't charge you as much interest on a lower balance.

The situation you describe, where you went from $0 cash to $100k's overnight is different (I didn't know this was your situation, and sorry to hear how you came into the cash). If you suddenly come into an inheritance, it is in your best interest to pay down as much debt as possible, as soon as possible. Preferrably, pay the entire balance off today.

Seeing as I didn't know how you came across the money, I had in my head a person who was paying the minimums, while saving up cash on the side - hoping to build up enough cash to pay the balance in full. And I was hoping that wasn't the case.

**snafu** · 04-11-2011, 07:42 AM

janzz: I suggest you look at the interest rate you are being charged on CC debit and add up the interest charged each and every month on CC for however many bills you can round-up. The total will be shocking! The lower your FICO score, the more CC charge you.

Since you acknowledge your knowledge of financial planning is limited, I suggest you outline your money spending plan for the inheritance as input here might help you make your money work hard for you. It's important to avoid making mistakes about money in this difficult economy.

**JoshuaHeckathorn** · 04-11-2011, 12:41 PM

Originally posted by janzz05 View Post

thanks for reading, we have about 30k in credit card debt and will be in a position to pay them off soon. So my question is, can i offer the creditors a lessor amount than the amount due and not take a hit on our credit score? if so is there a formula so that i know what to offer them? Like maybe 75 to 80% of face value(actual statement balance)

How do you approach the cc companys to make an offer? verbal,email,written letter etc.

Ethical argument aside, you can certainly offer your creditors less than what you owe. There's no magical formula to follow though, as every situation will be different depending upon the type of debt, how much debt you owe, and the parties involved.

If you're going to tackle this on your own, keep everything in writing and document, document document! Another important point to remember is that a "paid" collection or charge off is just as damaging to your FICO scores as when it's unpaid. So, don't expect your credit to magically heal itself as soon as you negotiate agreements with your creditors and your credit reports are updated to a paid status.

**naomibatac** · 10-25-2011, 04:55 AM

When this similar situation happened to me, I requested the credit card issuer to waive some of the interest and I will pay the unpaid balance in full in order to settle the account. The bank agreed and the penalties and surcharges were waived, but not the regular interest on the purchases. It was a big savings on my part. I guess you can always talk to your creditors. The only answer they can give you is either yes or no. Fortunate for you if they will say yes.

**dczech09** · 10-26-2011, 05:27 PM

Look bro, settlements are for those who do not have the means to pay off their debt. You do have the means, thus settlement is not for you.

Do you think that arguing a settlement amount with a bank would be just as easy as a "magic formula?" Think again buddy. Banks are in the business of charging interest; not settling debts. When a bank settles a debt, they lose money that they were supposed to receive. They "write-off" a potential income, report that to the IRS as a loss, and get tax benefits for the loss. So now the IRS is at a loss of money because the bank got a write-off, so where is the IRS going to go for the money in return? Perhaps the person who just saved a bunch of money through settlement? BINGO!

The point is credit will be impacted negatively as the bank will see you as a bad risk. You will also get nailed with a tax penalty. Granted you will still save some money, you will not get off that easily.

You borrowed the money. Okay? Are we clear? You promised the bank that you would pay it back under the terms that were signed. That means you have the responsibility to pay the money back in full. You have the means to do it, so DO IT!

It sickens me when people try to get out of their responsibility like this. I am not necessarily speaking at you; I'm speaking generalities regarding this society we live in where people are under this mindset that banks are evil, thus its justified to cheat them. You aren't doing yourself any favors by looking for a shortcut. Honestly, the shortcut is the hard way out. The easiest way out is to simply fulfill your obligation and pay in full. Thanks for dropping in bro!

**Eric80** · 11-01-2011, 04:26 PM

well the best thing to do first would be to speak to someone who has knowledge on how to deal with this such as a debt advisor where they will be able to accommodate your lifestyle and give advice on the best way to repay your debt.

paying off credit cards???