Credit card protection programs or stop paying credit cards?

[onthebrink]

I am evaluating a number of options to fix our debt problem, BK among them.

We have a near-term cash flow problem. I have been UE but am due to start a pretty lucrative consulting project, the problem is that we won't get any income from this until May. In the interim the combination of my UE check and my wife's income won't be sufficient to cover our monthly mortgages, CC debt and living expenses without completing depleting our savings. Moreover, we owe a fairly large property tax, which is due in April and I am expecting that we will have to pay taxes this year after we file.

My wife and I met with a credit counselor at a Credit Counseling Center, who suggested that we contact each of our credit card programs to find out if they have any deferment programs. I need 6 to 12 months to start getting some income and try to get a loan remodification. I met with a BK attorney today, who told me that I should pursue the loan modification first because it would be extremely difficult to get the loan modified after filing BK.

My question is, does anyone have experience with credit card protection programs? We have half our cards enrolled. The idea of being able to not have to pay for up to 12 months is appealing.

The other option we are considering is not paying the credit cards that don't have the protection program or that won't let us join.

Any advice?

Thank you

[flyinbroke]

From what I hear the protection programs are a scam and another way to weasel more money out of you. They actually protect under VERY few circumstances as they come full of loopholes. Since you are alreaady unemployed, for example, you would not be eligible for the benefits.

http://www.bankrate.com/brm/news/cc/20090316-credit-card-protection-a2.asp

http://www.bestrateforcreditcards.com/blog/2009/05/credit-card-protection-too-many.html

I would try to see about deferring payments, but don't be surprised if they won't. I tried to forbear a private student loan, and they gave me a whopping two months. I requested 5 or 6.

[catleg]

Most of the protection programs just defer payment/collection and for a hefty price, about 2% of balance per month.
There are a few which will make the minimum monthly payment for you, but generally for a short period of time.
I looked into this because I anticipated going on long term disability but I'm still working, surprisingly.
Bottom line I think you can get the same "benefit" through simply negotiating some kind of hardship arrangement with the lenders.

[flyinbroke]

Catleg, even disability has a loophole. I had one of these come in (on a closed account no less...I opted out of the stratospheric APR) and "disability" meant you could not work ANYWHERE. So if one was a mechanic, and became disabled, it would not stop him from becoming a telemarketer therefore the "insurance" would not apply.

[robertg]

Regarding the modification: it's next to impossible to get the loan modified if you file BK for a few reasons. The fact that you aren't getting income until May would preclude you from a modification until that time, anyways.

Regarding the credit card question: based on direct life experience I strongly recommend prioritizing your Home and Savings above your credit card debt. If that means don't pay on the cards, then don't pay. You can always pay later on down the road when you are in a stronger financial position.

Robert G
[Active advertising link removed. Against forum rules.]

[onthebrink]

Thanks all!