Hi, I'm new to the forum. I have two business debts (one credit card, one line of credit) that are unsecured with a total of $45,000. So far, I'm on time and have not missed a payment. I have a business lawyer on board to discuss options. What we've talked about is debt negotiation with the bank with the threat of bankruptcy. He believes that I can get anywhere from 25-50% down of what I owe. I can live with 50% if that what it comes out to be. My wife and I are still trying to decide if we want to do this. These are some of our concerns: - Obviously, this will put a mark on my credit, but how bad ? What would it say ? Is there a terminology for that ? - I still need to continue my business so will I never get a loan from a bank again with this on my record ? - Its with Wells Fargo bank. I want to close these accounts or might be forced to close so I would need to open a new account with a local business bank. Would this mark prevent me from doing that which would be bad for the business ? - I might have an option of taking out a mortgage and term out the two loans and pay off slowly. With different interest rates and term, the payment is the same as the minimum payment that I have now. Would this be a better route if the other route will harm my credit and possibly some banking options later ? Thanks for your help !
some answers... The mark on your credit will be substantial, but certainly better than bankruptcy or default would be. I would not expect to be able to get much credit for a little while. But like everything else, your credit will recover with time. You will have trouble opening up a new account with bad credit; do it now. If you take out a mortgage and can't pay, you'll lose your home. It's not usually a good idea to take unsecured debt and put it against your house. I'm surprised your lawyer hasn't answered some of these questions for you already and this might be an indication that the lawyer you picked might not be a good one to work with.
He is recommending the debt negotiation of course. It was my idea to open the account now and my idea to use a home equity for the loan. I'm glad you mentioned that to me. It is a bad idea, I can see that now. Does any one know what to look for in a good lawyer ?
The best option would be to settle the accounts. An important factor is the delinquency of the accounts. You should open new bank accounts immediately with a different bank. In your position I would settle the accounts work on repair the score and not apply credit in the short term if possible. If done properly it can by effective.
The accounts aren't in collections. If you can keep paying, that's the best move. If not, then go to the bank and talk to them. If you have prospects of bringing in more business in the future, let them know that. See if you can get a lower payment schedule or lower interest for a short time. Do you think your business will pick up soon?
Well its been a while since I got back into reading this. I spent the last 9 months doing all sorts of marketing and it really helped. My business picked up. So that is why I've been absent on the forum. But I don't know how long this pick up will last so I'm worried. Now I want to get back into the research and discussion to see where I should be thinking. Right now, the only debt I'm focusing on is the $40,000 of unsecured debt given to the business (20k on CC and 20k on line of credit). The debt does have a personal guarantee though. I'm on time on my business and home finances and credit is still good. But looking ahead, I might not get the income I need due to the winter coming and my business slows down. The first thing that would happen is I would miss my payments. I would do everything possible to keep everything on time with the house and be willing to bankrupt the business if necessary. But some questions arise from that: - If I bankrupt the business, then I have no chance to have some business when it picks back up. Or can I start another business name and do the same kind of work ? (I do private architectural design for residential clients.) - I'll look into talking to the bank to have 0% interest and make regular payments and see what that does. - But how easy or difficult would it be to pursue debt negotiation to reduce dept say from 40k down to 20k or 10k and say I'll pay them that ? Is this something the bank would never do ? Its Wells Fargo !
That's about typical talk for a lawyer. He might get you 20% or so off but that's probably about all. That means you would still owe them $30K to $40K. I can live with 50% if that what it comes out to be. And you are thinking in terms of $20K to $30K? I'd say you need to quit letting that lawyer pull your leg. Yes, but if I told you what it was I'd probably get kicked off the board. (LOL) It might be something to consider. Might even be worth doing now with the interest rates as low as they are. If you are going to do that you had better do it very, very quickly. Yes, I can give you that pound of cure but the ounce of prevention you just described would be far, far better than all the cure you could ever come up with.
Bill, there are several things that I'm considering doing but not sure which one to do first: 1) Mortgage modification. I have 5.75% right now on my mortgage and wonder about the modification program. Does it leave a mark similar to foreclosure ? 2) Approach bank saying I'm might be missing payments soon due to lack of work coming in. Can we negotiate something out for the credit cards ? 3) Approach the lawyer (different one now) asking for advise.
I don't feel qualified to answer that question. I don't feel qualified to answer that one either. Quite frankly if I felt that paying credit cards might jeopardize my mortgage or utilities, transportation or anything else I'd forget paying the credit cards and keep my house and vehicles paid up. Utilities too. Those are far more important than credit cards. I wouldn't ask a lawyer for advice about debt or collection matters at all. In fact, I wouldn't trust a lawyer to do the right thing or know the right information about much of anything. Some are good but far too many just don't know rice from maggots and probably wouldn't know what to do with either one. (LOL)
