Credir card debt --staggering

This debt is not "Staggering". It out right pathetic. But the house of cards is falling and plenty will perish.

Friend of mine, heavy hitter in the Private Equity division of CITI stated, " We are pretending to Lend but are not lending".

I can only assume that the next shoe to drop, Credit devaults far worse than banks can handel. They are stacking TARP money to keep their banks solvent. This is just my theory.

I know people can get credit still. However, my fiancee's medical school just eliminated 90% of their lenders (They pulled out) and many first year students were denied Student Loans for summer 09. This is at Michigan.

IMHO, game over for credit in general. Cash is king.
 
With credit card debt, some people pay off their balance in full. So maybe not so bad as housing because few people pay off their house in full. With housing they sold the debt as securities, and people bought them and use leverage too, and swaps. I am not sure but I do not think credit card companys have big securitie market like housing, and credit default swaps. Do they?
But the charge off is very big, so how will they profit?
 
Quote from trendlover:

Ok, even if the rate is FIXED at 3.5%, and you take the cash to make 5%, then if you are not paying the balance off in full each month, you are not really paying 3.5% on the money you borrowed, but 3.5% of the money you borrowed, and 3.5% AGAIN on that same money...because you have balance forward. So even with FIXED 3.5% on a money, the rate of interest is Fixed, BUT the balance you pay that rate of interest on is bigger than initial credit balance. [/B]
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I apologize for going off the original topic but here is a simplified example of how this works as its been a pretty handy financial tool that I've been able to utilitze.

- Capital one sends you an offer saying you can take out cash up to your capital one credit card limit and you will pay a yearly 3.5% interest rate.
- You tap your credit and write yourself the capital one convenience check and deposit 30K into your bank account.
- You take the 30K in your bank account and invest it and get a 5% per year return.
- So the first month you will generate an interest payment with capital one of (.035/12)*30,000 = 87.5 so your balance due at month end is 30,087.5.
- At the sametime your 30K investment will also earn return in the amount of (.05/12)*30,000 = 125 so your balance on your investment at the end of the month is 30,125.

So now your balances are the following after 1 month:
You owe Capital One = $30087.5
You have in an investment = $30125
So your equity is 30125 - 30087.5 = $37.5 gain.
So you could simply take your investment money out and pay off the entire capital one debt and pocket the $37.5 profit which was generated out of money you didn't have. Obviously rather than pay this off you just simply rinse and repeat for a decade or as long as you can.

The secret is finding an investment that will give you the 5% return.
 
let me ask you this: when someone owes 5 or 8k on a credit card and they cannot pay,what can the credit card companies do? they sell the debt to a collection agency but what happens to the debt if the card holder cannot pay the collection agency either? what is the most likely process?
 
Quote from NY_HOOD:

let me ask you this: when someone owes 5 or 8k on a credit card and they cannot pay,what can the credit card companies do? they sell the debt to a collection agency but what happens to the debt if the card holder cannot pay the collection agency either? what is the most likely process?
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Starting at the default date - they tack on as many fees as they can = Late payments, over limit fees, etc. Next they massively increase the interest rate to the highest rate allowed in the state, usually somewhere north of 30%. Then they start the harassing letters and phone calls to get the guy to pay. They keep this up for about 6 months. Then if they believe the guy has equity in a home or some sort of asset and is just not paying anyways, they will slap a judgment on the guy to force wage garnishment if possible in the state. Otherwise if they think there are no assets and the guy is still not paying they charge the debt off (getting tax writeoff on bad debt), and sell to a debt collector company.

The debt collector repeats process of harassing letters and phone calls, and then sells to another debt collector. This process is repeated ad infinitum until bankruptcy is declared or it is paid back.
 
Quote from NY_HOOD:

let me ask you this: when someone owes 5 or 8k on a credit card and they cannot pay,what can the credit card companies do? they sell the debt to a collection agency but what happens to the debt if the card holder cannot pay the collection agency either? what is the most likely process?
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The collection agency will effect your credit score. Even after credit card company take away your debt to them with charge off, then sell your debt to collection agency, it is still your debt. I think it is 7 years the collection agency can try to make you pay your debt. With collection agency, they buy the debt very very cheap from the credit card company, so for the debt they do buy and get the money for, it is a big profit margin that they bet will beat the debt they bought but can not get back.
You are better if you not charge any more money, be responsible and pay back your debt.
 
Quote from EMRGLOBAL:

This debt is not "Staggering". It out right pathetic. But the house of cards is falling and plenty will perish.

Friend of mine, heavy hitter in the Private Equity division of CITI stated, " We are pretending to Lend but are not lending".

I can only assume that the next shoe to drop, Credit devaults far worse than banks can handel. They are stacking TARP money to keep their banks solvent. This is just my theory.

I know people can get credit still. However, my fiancee's medical school just eliminated 90% of their lenders (They pulled out) and many first year students were denied Student Loans for summer 09. This is at Michigan.

IMHO, game over for credit in general. Cash is king.
More...

EMRG-

That's huge. Defaults on M.D. Student loans are near-zero. Unbelievable that that's happening. That's beyond huge. And hate to tell you this, but unless you have a $300K trust fund hanging around, you need those loans for med school.

Fortunately, your fiancee has you, I presume!
 
Quote from NY_HOOD:

let me ask you this: when someone owes 5 or 8k on a credit card and they cannot pay,what can the credit card companies do? they sell the debt to a collection agency but what happens to the debt if the card holder cannot pay the collection agency either? what is the most likely process?
More...

The first thing the credit card company does is send it to their own internal collections department. Collections will begin calling you at the numbers you gave them when you filled out your application, and that includes your work number. If that number goes to the receptionist switch board, that means she will be getting calls two or three times a day from Discover, or Citi or whoever it is and the message will be, "we can't leave a message, will you please have him call us regarding his account". so right away everybody at work will know you are behind.

Three to six months later, depending on any payments and communication, they charge it off. It is sold to a collection agency who gets very aggresive in collecting the debt. They call your neighbors, relatives and landlord if you are a renter. And they leave the same message, "he needs to call us regarding his account, that's all I can say". So now more people know you aren't paying, and the debt collector is as rude to them as they are to everyone else.

After a few more months the debt collector will sue you in court to collect the debt. If you do not show up in court, they win a default judgement against you. Depending on the laws in your state, they will eventually get a wage garnishment against you to collect the debt.

Want to avoid all that? Either pay it or go to bankruptcy court. Do not use credit counselling agencies to negoitiate for you with your creditors. Some people will tell you that most of them are scammers. I will tell you that all of them are scams.

Pony up the $1k to $2k for attorney's fees and get it discharged.

EDIT to add - It's probably not a good idea to negotiate with the credit card company or debt collector to pay off less than you owe in order to get it closed out. If you do that, the collector will report the amount of the debt reduction to the IRS as income to you via a 1099 filing, and you will owe taxes on it. So take that into account if you try to reach a reduced amount settlement.
 
Quote from huh:

I apologize for going off the original topic but here is a simplified example of how this works as its been a pretty handy financial tool that I've been able to utilitze.

- Capital one sends you an offer saying you can take out cash up to your capital one credit card limit and you will pay a yearly 3.5% interest rate.
- You tap your credit and write yourself the capital one convenience check and deposit 30K into your bank account.
- You take the 30K in your bank account and invest it and get a 5% per year return.
- So the first month you will generate an interest payment with capital one of (.035/12)*30,000 = 87.5 so your balance due at month end is 30,087.5.
- At the sametime your 30K investment will also earn return in the amount of (.05/12)*30,000 = 125 so your balance on your investment at the end of the month is 30,125.

So now your balances are the following after 1 month:
You owe Capital One = $30087.5
You have in an investment = $30125
So your equity is 30125 - 30087.5 = $37.5 gain.
So you could simply take your investment money out and pay off the entire capital one debt and pocket the $37.5 profit which was generated out of money you didn't have. Obviously rather than pay this off you just simply rinse and repeat for a decade or as long as you can.

The secret is finding an investment that will give you the 5% return.
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So you profit every month with $37.5 if you only pay $87.50 on the debt of $30,087.50. Ok. So you earn 1.5% ? It still a positive for you. :)
 
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