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A desperate debtor's option: hardship programs

Dear Credit Guy,I'vetalked recently to two different credit card consolidators and explained thatmy husband's second job has taken more than a $10,000 cut this year. I am notable to work. Slowly we have gotten ourselves in a jam and are unable to pay ourcredit cards. The consolidator said that she would recommend a hardshipprogram. How exactly do I go about this? I need to do something soon. -- Barbara

Dear Barbara,Youare absolutely correct that you need to act quickly. Before you do anything,however, you need to know exactly what you can afford to pay each month towardyour credit card accounts. It would be counterproductive to ask for and qualifyfor a repayment program that you ultimately cannot afford. Once you determine arealistic monthly amount you can pay on your credit card accounts, you willthen need to keep in mind that the amount must cover all accounts you currentlyowe. For example, if you have four credit card accounts and $400 per month tocover those accounts, you will need to be sure the repayment programs you agreeto (for example, $75 per month to creditor A, $85 per month to creditor B, $140per month to creditor C and $100 per month to creditor D) do not exceed a totalof $400.

Iam assuming that the credit card consolidators you talked to did a fullcounseling session with a full budget analysis. If they did, you called theright agency. If they didn't, call someone else. I recommend you only speak to aqualified nonprofit credit counseling agency for assistance. You can find helpfrom a trusted agency by visiting a local office the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. A certified creditcounselor will review your current financial situation and make recommendationsbased on your income and expenses. If it makes sense for you to enter into adebt management plan (DMP), your counselor will explain how the plan works andlet you know any fees associated with the plan. On a DMP you will make onepayment to the credit counseling agency. The agency will then disperse themoney to your card issuers. Most DMPs will have your creditors paid in full infive years or less. 

Manycard issuers are now more willing to work with consumers than they have been inthe past. Most have what is considered a 'hardship program' offered through thenonprofit credit counseling agency that allows you to pay what you owe with alower monthly payment than your current minimum payment. Each card issuer willhave varying requirements you will have to meet in order to qualify for theprogram. Keep in mind that you will not be able to add to the balances of anycard accounts that are placed in a hardship program with your card issuer. 

Whilecoming to an agreement with all of your card issuers, you will need to pay whatyou can on time and as agreed. Rather than paying nothing on any of youraccounts, make minimum payments in full on as many accounts as you can and paynothing on the others until you quickly find a lasting resolution. 

Takecare of your credit!

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