Credit Card Advice (Delinquency)

In My Humble Opinion
1

Hi everyone,

I’m a long-time reader of SDMB, first-time poster. I’m hoping that I might be able to receive some advice, particularly from anyone who has worked in the banking or credit card industries. I should add that I reside in Canada (Ontario), so I am aware that I must fully consider any insight and/or shared experiences for applicability, but I really look forward to hearing from you!

THE “BIG” PROBLEM: My spouse and I are (normally and under the right circumstances) competent, intelligent, educated professionals, but are extremely delinquent in paying our credit cards (before anyone jumps all over me for this, wait until you get to the reason why please). Anyhow, we have not made a single payment in about six months’ time, including even the minimums, and we are seeking to resolve this.

THE REASON FOR THE PROBLEM: Our daughter, who is less than two years old, was in the hospital for six months suffering from a heart condition. The hospital (the nearest one that specializes in paediatric cardiology), is two hours away from home, requiring that someone stay with her. Therefore, a few things happened as all of this transpired: We have had to take turns taking unpaid time off work to be with our toddler, resulting in financial problems; we haven’t been home to pick up the mail, review bills, etc., nor did we delegate anyone to do this in our absence; and when we do actually have an iota of time, bill-paying was the furthest things from our minds. In short, this was not entirely intentional, although to be honest we would occasionally have that “oh yeah…the credit cards…have to get on that” discussion and then completely forget again as our daughter’s health was so pressing. Adding to this, two months before she ended up in the hospital, we learned that we were pregnant with baby #2, so to say that it has been a trying time would be an understatement (we’re due in one month). Our first-born is now out of the hospital and we’re trying to return to normal life…for the next four weeks!:wink:

Please understand that I am not trying to justify our responsibility-shunning nor am I seeking sympathy; simply differentiating that this wasn’t reckless spending that got out of control, but rather a result of unfortunate events that we neither foresaw, nor reacted appropriately to from the financial perspective.

THE “LITTLE” PROBLEM: Because our credit rating has certainly been adversely affected by all of this, we know that it will be some time before we will be able to apply for credit again. Therefore, we require that the credit card companies (we each had one credit card from one major cc company) with whom we have an existing relationship work with us to allow us to use these cards again, as opposed to cancelling our credit outright.

THE QUESTIONS/CONSIDERATIONS: We’re trying to determine the best way to resolve this with the credit card companies, so that we can still retain our credit cards. We fear that simply calling them and explaining the above will fall on deaf ears who simply want to cancel our cards and be done with us as customers. We want to ensure that we get someone who understands the circumstances and will work with us, impacting our credit rating as minimally as possibly (although we know that there will be an impact).

We’re talking amounts less than $5,000 on each of the two cards, but we’re not in a position to pay them off to zero balances right now because of the fact that we had to take so much unpaid time off work for reasons above.

Are we better to turn to a credit counselling service, where they have existing relationships with the credit card companies and banks, or are we better to handle this ourselves? We wonder if a counselling service would be in a better negotiating position than we would be? Would the cc companies be more willing to listen to them or us? Anyone have any advice or experiences they can share?

Thanks so much!

Nom de Plume

2

I recommend calling the credit card companies and telling them the truth. You’ve got a legitimate reason for the delinquency and are not really that far behind.

3

Seconded. Call them yourself. I recommend against a enlisting an agency; those are not free.
However, to kep this from being a repeat problem, have you thought about how you are going to stop this happenign when both babies are home? Can you enlist any help that will free you the time to manage your credit and bills? You could ask the CC company if they have services for that.

4

Yes, do call them, but I fear that the cards have already been charged off and sent to collections if you haven’t been able to make a payment for 6 months. Have the accounts been closed? How have you been handling the collection calls? Usually someone from the credit cards own collections department will call before they sell it off to a debt collection company. Hopefully you can get this straightened out soon.

5

I’ve worked in collections and here is how it works in the USA at least for me. The banks that issue the credit cards will generally keep you on the books for 6 months, after which they charge it off and sell the debt to third parties.

Some like AMEX (before they started allowing other banks to issue their cards) charge it off but don’t sell it. Those remain on their books forever. In otherwords you can pay AMEX and they reverse the charge off.

My advice is simply call the card companies an negotiate. First of all how bad is your credit rating. I don’t know how it works in Canada, but if it’s the USA it can be so bad that it’s not worth trying to correct, other than wait out 7 years.

What I would do is call the credit card companies and see if they are willing to work with you. They’ll tell you no. They always do. Inform them you are considering bankruptcy and you’d like to pay your bill in full.

Since you have dings on your credit history, ONLY pay these if the credit card company agrees to remove such information. If they refuse, there’s no incentive to pay an unsecured debt since you’ve already got bad credit. And that bad mark will remain for 7 years.

Obviously there is an issue of ethics, refusing to pay off debts you have legally contracted to, but my reason is, if big companies can do it, why can’t people. I mean why should comanies be allowed to negotiate debt, re-negotiate union contracts and pension obligations and not me. (But that’s another thread)

The thing is credit card companies are not going to be co-operative right out. When they realize they have nothing to gain by being mean they slowly start to give in. Also when you call ask to speak to a supervisor not the customer service rep, 'cause he can’t help you and you’re wasting his time and yours.

As long as your making the minimum payments they probably won’t cut you off, as they would’ve long since before.

$5,000 is not a huge outstanding debt, that’s what I call a “second job” debt. And I’d hate to declare bankruptcy for such a small amount. But the bottom line is if you’re credit is bad, bankruptcy often isn’t much, if any worse.

Again this is for the USA not Canada.

6

You’re better off calling them directly and explaining what happened. I agree than $5K on each isn’t that much for two professionals; it should be manageable if they’ll let you pay it off. Do not use an agency or declare bankruptcy over less than $10K. Three suggestions:

  1. Do not speak to a first line customer service rep. Call, say you have a serious matter to discuss and wish to speak to a manager.

  2. Have documentation ready. A sob story is a sob story. A sob story with documentation - dates, places you were, hospital information - is proof you might be a decent risk in the future.

  3. As has already been suggested, don’t take their first no for an answer.

7

Correct me if I’m wrong, but it’s my understanding that once the debt is sold, the buyer can file a claim in court to recover the money and, if you’re found liable, a judgement is entered into the record, in your name, and added to your credit report. Also, now, not only are you responsible to pay back your cc balance, but a whole new boatload of fees and surcharges are added in and the highest interest rate allowable by law overrides whatever rate you were paying to the bank and begins accumulating on the day the judgement is entered into record. Another added little bonus to this process includes demands of wage garnishment being sent to your employer.

I would think a judgement on your credit report would weigh heavier, negatively, than a 30, 60, 120 days late type status.

Does it sounds as if I speak from experience?

8

Thanks everyone. To respond to a few of the comments and questions:

Really, the main reason this occurred was because I was not at home. Surprisingly, the hospital encourages us to place first-born in daycare, as the exposure to viruses and kiddie germs actually helps to build her immunity and a stronger heart. Being home means being here to pay the bills!

From a financial perspective, living in Canada has its benefits: One parent can take up to one-year of parental leave after the birth of a child, and receive up to 55% of their income (to a capped amount) in government-funded (well, tax-payer funded) employment benefits. Additionally, some employers (such as government employers) often top up these benefits. I’m in that situation through a private employer. It didn’t apply when daughter was sick because this started after the one-year mark, hence taking leave without pay.

Collection calls would have been a great reminder, but there’s another :smack: for you: When all of this started, again, because the hospital is two hours away, every time spouse and I spoke (one at the hospital the other at home), it was long distance. Therefore, in January we changed to a web-based telephone service provider, so that all North American phone calls were free (no long distance). This required a change to our phone number as we had to adopt a different exchange. We e-mailed friends and family re: the changes, but that was the extent of it, given the other priorities. Because the switch was from one provider to another (and not a new phone number with the same provider), there is no “that number has been changed to” info with the old number.

Exactly…we’re nowhere near that, thank goodness. Truly something that we can overcome, just not all at once.

Again, thanks everyone. I really appreciate it!

NdP

9

Obviously laws are different in Canada than in the US so I have no knowledge there. BUT - I concur with the other posters that the first thing to do is call the credit card companies.

Are you in a position to pay a little on the cards? 50-100 dollars here or there? My suspicion is that, though there are doubtless a LOT of penalties, fees, and interest that have gotten slammed onto the balances, the banks would still rather you start to get things caught up, and ultimately remain customers, than to have things get completely charged off, go into collections, etc.

Credit counselling agencies: There are true nonprofit agencies here in the US (as opposed to the scammers we see advertising on TV) who can help negotiate with the card companies. They might be able to help get some of the penalties etc. reduced. especially if you show that you’re going to be making an effort to start paying things down. Just do the research before going through such an agency, and make sure it’s not one of the scammers.

Oh, and congrats on baby #2, and I’m sorry to hear of your rough road with baby #1. There’s little so terrifying as a sick child. I gather she’s a bit healthier now?

10

I’ve got no advice to offer beyond what’s already been given, but I thought I’d point you to a couple of Canadian personal finance boards where you might get more Canada/Ontario specific advice:

Canadian Money Forum
Red Flag Deals Personal Finance Forum

Lots of knowledgeable posters on both boards.

Edited to add:

You might also try writing to Ellen Roseman. She’s had great success acting as a consumer advocate and yours is the type of sob story that would play well on her blog.

11

Call 416-228-DEBT and get some advice. That’s what I did. They’re Credit Canada and they’ll direct you to a counselor in your area.

When I spoke with them, they sent me to a counselor in Peel Region, where I lived, and we did a debt management plan. That might be all that you need.

It didn’t work for me–I had a LOT more debt that you describe–so I ended up at a trustee, and did a “consumer proposal”, where I paid back most of my debt and was forgiven the rest… at the price of 42 months of threadbare living.

I am now debt-free. :slight_smile:

(Oh, and welcome! :slight_smile: )