Debt settlement with Citibank
I met an old friend whom I hadn't seen for quite sometime, at the 4th of July party. After having a few beers, he told me the story of a debt settlement with Citibank. Both, he and his wife got into major credit card debt and struggle mightily for a while. Finally they managed to settle for around 28 cents on a dollar. They wrote a nice debt settlement letter and their credit scores were butchered in the process, but the settlement by itself is quite remarkable and inspiring. With so many folks literally drowning in debt, the strategy they used to settle with Citibank is something to learn from. When it comes to unsecured debt, you should try to settle as long as you can afford it and bankruptcy is not an option.
Debt settlement with Citibank - how it started
It began quite innocently a few years ago with several large purchases for the new and expensive house he and his wife bought too close to the housing market bubble. They gave 20% down payment on 5-year interest-only ARM loan with Washington Mutual and immediately got back 10% as a home equity line of credit, which was used for furniture, decor, landscaping and so on. That was quite bad, but the road to debt problems and eventual settlement really started when they both got Citi CashReturns MasterCards with 0% interest on purchases and balance transfers for 12 months. The credit limits were $30,000 for him and $40,000 for her.
In less than 8 months, both cards were maxed out. Citibank raised his credit limit to $36,000 after 2 years, but also raised the interest to 12.99% which if you think for a minute was quite decent. But when you owe $36,000 which he did at 12.99%, and your wife owes $40,000 at 14.99%, plus you have a fat $600,000 mortgage, 2 luxury cars, property taxes, lush landscaping that needs to be properly maintained and all the expenses of well-off family, even $400,000 a year combined gross income is not enough. And that was their situation.
Debt settlement with Citibank - here comes salary cut
The real fun however started when he was laid off and had to take a less paying but still very decent position, most of us can only dream about. They got smart in a hurry and manage to sell the house, basically breaking even. I do not know how but they did it. They bought a smaller one and then decided to pay off their credit card debt. But 2 months after they bought the other house, the wife lost her job. They went to some non profit debt settlement agency which told them they would not qualify. They missed a few payments on both Citibank credit cards, but at that point, they really did not care about their credit histories.
Settling debt - what they did
As he put it, the only thing they wanted to do is to settle the debt with Citibank. If debt settlement counselor said they couldn't, they would offer much less than they thought to offer before. His biggest worry was like - I am not really a confrontational character, can I pull this off, can I negotiate credit card debt and achieve a debt settlement on my own?
So after receiving a few more calls from a collection department with various threats which were rather mild and pleadings to pay, they offered 2 very low settlements. According to him, he offered $5,000 on his Citi MasterCard and $7,500 his wife's ... on the phone. He said that he was afraid to be yelled or laughed at, but instead he was asked to submit the offers in writing. Then in 2 weeks he got counter offers on both credit cards. To make long story short, in less than 6 weeks, he and his wife did what they thought would be almost impossible to achieve - get a debt settlement with Citibank. The final amounts are 10,000 on $36,000 balance and $11,300 on $40,000.
I congratulated him with a successful settlement, and here are main points that everyone with debt problems should understand,
1. They managed to sell their biggest burden, the house. It was tough decision as they loved it, the neighborhood, the schools, etc. They, however, did not lose any money which was rather remarkable considering the second mortgage and already bad housing market, and managed to buy a smaller home in the area. Had they waited a bit more, they would have lost money on the sale, and worst yet, could have foreclosed.
2. They managed to make all the payments to keep their credit histories nice and clean. Sure those maxed out revolving accounts hurt their scores, but that was nothing compare to the damage late payments would have caused. Once they closed on that new house with 30 year fixed mortgage, they did miss credit card payments, but at this point, credit scores and ratings were not that important.
3. Realizing that they would not qualify for Chapter 7 Bankruptcy, they managed to negotiate credit card settlement and settle with both creditors for very reasonable amounts. It took guts and a little courage to go through some uncomfortable moments while negotiating, but by the end such a debt settlement was totally worth it.
Wed Jul 20, 2011 12:07PM | Copyright: www.bad-credit-advisor.com | More in Credit Card Debt | Comments (0)
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