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MacMadame
07-09-2011, 01:24 AM
Since I lost my job, money has been tight. Now it turns out we owe the IRS $9000 for TY09. I have been getting these mailings for years about debt reduction programs that lower your consumer debt. I have never looked into them because the mailings feel like a scam most of the time -- the way things are worded in particular. OTOH, I know there are legitimate programs out there. Does anyone have an experiences with them?

Note: I don't want to declare bankruptcy and I don't even want to reduce my car loan. It's just my credit cards that are killing us and I feel like the CC companies are taking advantage of us because at this point we've paid about 3x what we've spent to them (or possibly even more) and there is no end in sight because whenever we have a setback and can't make more than the minimum payments, the balances go right back up to what they were before we paid them down.

skipaway
07-09-2011, 01:35 AM
I listen to Clark Howard's financial show and he really recommends.

nfcc.org (http://nfcc.org/)

also, check out his website for very good advice on financial issues.

Clark Howard (http://www.clarkhoward.com)

He has a scam alert on debt settlement programs:

Debt settlement (http://www.clarkhoward.com/news/clark-howard/personal-finance-credit/debt-settlement-outfits-make-hollow-promises/nFHz/)

PDilemma
07-09-2011, 01:43 AM
If you haven't already done so, go through the tax bill with a fine tooth comb.

We received a notice that we owed nearly $4000 for TY2009. We didn't. They owed us $212. Which they payed. With interest.

barbk
07-09-2011, 04:40 AM
Second PDilema. It would be very worth it to find a CPA or Enrolled Agent (not an H&R Block type) who would review your returns and the IRS notices. The IRS also has compromise offers that could help in situations where someone has lost their job or had major health issues...

The one thing you can't do is ignore it.

redonthehead
07-09-2011, 04:52 AM
We did the debt consolidation thing back in 2002. Mistake! We did pay off the credit cards but when I did it, I took us from being able to buy anything we wanted with great credit scores to over night not being able to get anything. It dropped our credit ratings from the high 700/low 800's to 500 over night. I just wanted to pay them off instead of having that debt hanging over us. As you pay them off, your rating comes back up but we were told it was worse than bankruptcy when we were trying to get a new car.

Most CC companies now though have their own debt reduction programs. Call them and ask what they can do for you before you go with an outside agency. You might be surprised. I know I was with Discover.

MacMadame
07-09-2011, 05:40 AM
We can go on a payment plan with the IRS. It's part of the paperwork they sent us.

I'm also going over the taxes now as I assume there were other mistakes. (I know for sure Charity contributions was under reported.)

I didn't know how these programs affect the credit rating. Ours is actually pretty good right now. I don't know if I'd care if they went down for a while. I'll have to think about it.

Anita18
07-09-2011, 06:49 AM
We can go on a payment plan with the IRS. It's part of the paperwork they sent us.

I'm also going over the taxes now as I assume there were other mistakes. (I know for sure Charity contributions was under reported.)

I didn't know how these programs affect the credit rating. Ours is actually pretty good right now. I don't know if I'd care if they went down for a while. I'll have to think about it.
I second redonthehead's suggestion of calling the CC companies and seeing if they'll work with you. Really couldn't hurt at this point.

As for credit scores, it'll depend on what you plan on buying in the next 6 months or so. If your credit score goes down, it isn't forever, but it will affect the big ticket items most.

Good luck!

Cherub721
07-09-2011, 11:37 PM
Do you own a home and have equity in it? A few years ago my mother did a cash out refinance and used it to pay down all her credit card debt. The interest on the mortgage was much lower than the interest on the ccs, and is tax deductible. That didn't have a major impact on her credit score other than the fact that she took out the loan (her credit score is still excellent and she has had no trouble getting any other types of loans). Now she pays the balance of her cards in full each month except when she has a card that is zero interest for a period of time.

Garden Kitty
07-10-2011, 12:04 AM
I think a lot of the commercial ones are a bit of a scam., but I know Suze Orman sometimes recommends CCCS. Here is an interview with them from her site. (http://www.suzeorman.com/igsbase/igstemplate.cfm?SRC=MD012&SRCN=aoedetails&GnavID=84&SnavID=20&TnavID=&AreasofExpertiseID=3)

Although I might also try to talk to the credit card companies on your own first.

Aceon6
07-10-2011, 12:49 AM
Agree with others that the paid "debt help" programs are either scams or give advice that will lower your credit score overnight.

Hold off until you can make sure the 2009 tax return is as close to correct as you can make it. Then, counter offer a payment plan that works for you. As long as you seem to be interested in paying your taxes, the IRS should work with you. Once you know your payment and frequency, you can think about other options.

One thing, make sure your husband's income is covered going forward, either through withholding or quarterly estimated payments.

MacMadame
07-10-2011, 04:54 AM
Do you own a home and have equity in it?

We own a home but our equity is negligible. Housing market tanking impacted us but not so we're underwater. We're right about even right now.

redonthehead
07-10-2011, 03:55 PM
I second redonthehead's suggestion of calling the CC companies and seeing if they'll work with you. Really couldn't hurt at this point.

As for credit scores, it'll depend on what you plan on buying in the next 6 months or so. If your credit score goes down, it isn't forever, but it will affect the big ticket items most.

Good luck!

It actually affects them for longer than 6 months. Our's has been paid off for over 4 years and our ratings are just now coming really coming back up to where they were.

Also, remember if you do this or if you talk to your cc companies and they work with you to pay them off, as you get them paid off...close those accounts! Your credit rating will take another hit but it's better to have "closed account at consumer's request" on your record than open accounts on it. Another hard lesson learned!

purple skates
07-10-2011, 04:04 PM
Also, remember if you do this or if you talk to your cc companies and they work with you to pay them off, as you get them paid off...close those accounts! Your credit rating will take another hit but it's better to have "closed account at consumer's request" on your record than open accounts on it. Another hard lesson learned!

I disagree. You should keep at least one open - with the highest limit possible - and don't use it! Well, charge something on it each month, like a small recurring bill and then pay it off each month so they don't close it. The reason being is that one of the criteria for the credit score is debt to possible debt ratio (can't remember how they put it). In other words, the closer you are to your maximum allowable debt the worse it is for your score. If you have an open card with a lot of available credit on it that is a good thing.

Nomad
07-10-2011, 04:19 PM
CCCS helped get me out of a debt nightmare several years ago. The whole process took two or three years, I had to hand-deliver a cashier's check to them every month, but they did consolidate my debt and stop the escalating interest rates on the cards I was paying off.

skateycat
07-10-2011, 08:10 PM
Agree with others that the paid "debt help" programs are either scams or give advice that will lower your credit score overnight.

Yep, if you do consider any of those programs, check Better Business Bureau, Yelp, and any other reviews or news stories on them.

I have not been in your shoes, and I imagine it is a scary place to be.

See what you think about what Dave Ramsey says about your situation. I think he would say that you are in a place where you need to focus on taking care of the 'four walls.'

The four walls are

food
basic utilities
basic transportation
your rent or mortgage payment.

If you've got those things, and you've got anything left, then you can use the rest to pay credit cards. But if you're in survival mode anyway, the credit cards are the lowest danger thing to leave unpaid. It's not like you don't want to pay them. You'd pay them when you could.

http://freshstartmoneycoach.com/2009/02/09/four-walls/

See what you think.

If your situation is better than that, consider Dave's debt snowball approach. Pay minimum payments on everything, attack the little one with everything you've got left over.

Dave's not for everybody, I have to do a take what I like and leave the rest approach with him, and I don't use his name with my husband. But many of his personal finance concepts have been a) comprehensible to me and b) helpful.