credit card n collections

by jutta
(raleigh, nc/usa)

Several years ago I took out a Home Equity Loan with Bank of America. The agent at the bank suggested that it would be a good idea to pay off my credit card debt with the loan. For two years I paid the credit card off with the equity loan and vice versa. I, however, kept using the funds available from my equity loan for car repairs, home repairs, etc., (so there was not enough money left to pay off the credit card again). Last October I was to do another turn around only to find out that the agent was fired by the bank for bad practices and there was no more 0% interest credit card. I now was looking at a variable percentage rate and the minimum payment on a $23000 credit card jumped to $440 per month. I was able to refinance my house and the plan was to pay off the cc debt. Bank of America suggested I pay off the Home Equity Loan instead. I did exactly that but was no longer able to pay the minimum payment on my credit card. I finally stopped paying on my debt in March. Now the debt is with Northstar Collection Agency. I received a letter stating that I have 30 days to pay the debt or they will return the debt to Bank of America , who will forward it to a network of attorneys. I make about $25000 per year, and live from paycheck to paycheck. I want to pay my debt. What is the best step to take? I live in North Carolina.

Do I need a lawyer or can I take care of this myself? Thank you for your time and answers. JM

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Sep 14, 2010
home equity loan debt consolidation problem
by: Gerri & Mary


We are very concerned that you have been living off the equity in your home. Now that option is no longer feasible, you are going to have to make some difficult decisions about your financial future.

One option would be to meet with a non-profit credit counseling agency to see if they can help you get on a payment plan. However, given that you have been using debt to pay for your living expenses, it's unlikely that will work. Still, it's free and confidential so it's worth a try.

Another option will be to try to work out a settlement on the credit card. Again, that may be difficult, but if you want an honest assessment of that option for your situation, we recommend you at least listen to our debt settlement podcast to find out how that works.

The third option to talk to with a bankruptcy attorney who can help you understand your options. We would really encourage you to at least set up a a free consultation with a bankruptcy attorney to see what would be involved if you have to go that route.

Unfortunately, as you've discovered, you can't live off credit forever. There are very difficult times and we understand completely that it's not always easy to earn a decent living to cover your expenses. But the sooner you reach out for help with the resources we've suggested, the sooner you have a chance of starting to turn things around.

We wish you the best.

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