Will banks cooperate once payments are missed?
Been helping out a close family member for a while now. They are in a financial mess. It's been ongoing for a while now, and although they listened to a lot of what I said (such as get MBNA 0% cards, lower interest rates on CC's, etc), they never made the financial sacrifices to actually pay down the debt. They've just added more and more debt over the years and now they're barely keeping their head above water. They just don't have any financial sense at all
Anyway, they are on the verge of missing payments. They have maybe 6 months left at most and they will be missing payments. There's about $100k in debt. They make a lot too, so paying it off is possible, just not with the current rates, terms, etc.
They put me on the phone with a couple of their banks to try to figure something out. I tried converting a LOC and CC into a loan (all from the same bank) which would have resulted in much lower interest rate. The bank wouldn't approve it, even though that bank isn't taking on any extra risk, as they are not giving out any extra credit.
Another bank I spoke to wouldn't lower the interest rate of the CC. They said they had no products available (they don't on their website).
Another bank wouldn't lower the rate on their LOC. They had increased it several times recently due to his poor credit score.
In the end, I had no luck. None of them would budge. I explained he's going to start missing payments, but they didn't seem to care.
So my question is, once he starts missing payments, which he will in time, will the banks work with him to pay off the debt? I'm struggling to understand this mentality. If they shut down his revolving credit and give him a loan at a decent rate, they get their money. If they don't, he misses payments and likely ends up in bankruptcy or consumer protection. I am trying really hard to help him save his credit, but it's to the point where his income isn't high enough anymore. He needs lower rates, but the banks won't budge.
Should I tell him to just go see a bankruptcy trustee now or is there a chance the banks will be more willing to worth with him once he falls behind? I don't know what other options he would have available to him.
Anyway, they are on the verge of missing payments. They have maybe 6 months left at most and they will be missing payments. There's about $100k in debt. They make a lot too, so paying it off is possible, just not with the current rates, terms, etc.
They put me on the phone with a couple of their banks to try to figure something out. I tried converting a LOC and CC into a loan (all from the same bank) which would have resulted in much lower interest rate. The bank wouldn't approve it, even though that bank isn't taking on any extra risk, as they are not giving out any extra credit.
Another bank I spoke to wouldn't lower the interest rate of the CC. They said they had no products available (they don't on their website).
Another bank wouldn't lower the rate on their LOC. They had increased it several times recently due to his poor credit score.
In the end, I had no luck. None of them would budge. I explained he's going to start missing payments, but they didn't seem to care.
So my question is, once he starts missing payments, which he will in time, will the banks work with him to pay off the debt? I'm struggling to understand this mentality. If they shut down his revolving credit and give him a loan at a decent rate, they get their money. If they don't, he misses payments and likely ends up in bankruptcy or consumer protection. I am trying really hard to help him save his credit, but it's to the point where his income isn't high enough anymore. He needs lower rates, but the banks won't budge.
Should I tell him to just go see a bankruptcy trustee now or is there a chance the banks will be more willing to worth with him once he falls behind? I don't know what other options he would have available to him.
