Strategy – Negotiate Credit Card Debt Reduction Armed With Knowledge And An Experienced Attorney

Many people who have contacted my firm for help with a mortgage also have credit card debt problems. Most new callers do not realize that Chapter 13 bankruptcy may allow them to keep their home, cure mortgage arrears over 5 years and pay credit card debt less than 100%. This is very important to know, even if you have no intention of filing bankruptcy. Mastercard, Visa, Discovercard, American Express and other credit card companies and their attorneys know the laws that apply to credit cards. So should you. Otherwise you are at a severe disadvantage.

Did you know that sometimes, Chapter 13 plan payments to credit cards can be very low, even below 10%? Each case is different but the courts generally look at the equity in any real estate (which requires an appraisal) and at disposable income. In addition there is of course the protection a you can get from the automatic stay law in Chapter 13 which can stop both foreclosure and collection actions.

Ok, so let’s say you don’t want to file Chapter 13 or maybe don’t need to. It is still important to know what would happen in a Chapter 13 case if you have real estate to protect, mortgage arrears to cure and credit card debt you can’t pay down in full. Once you are armed with this knowledge, your attorney can assist you in trying to negotiate your credit card debt down. If a credit card company will only receive 10% in a Chapter 13 case, then an offer of 25% outside of a bankruptcy is a very generous offer. Some credit card companies may recognize this and work with you. Not all. But some. The main problem is that some of them may require you to pay a lump sum to get such a big discount. In some cases, it may make sense to delve into an exempt asset like a retirement account to get the funds if it means you will save 75% or more of your debt and avoid bankruptcy. For many people, this strategy, combined with a mortgage loan modification (which I have blogged about extensively) may solve their problem in full without bankruptcy. I tell this to all my clients. I am not a bankruptcy salesman. I will do whatever I can to help them avoid bankruptcy if possible. My attorney’s fees for debt negotiation are very reasonable. I usually offer a flat fee or a percentage of the money saved.