Early in today’s show, I took a call from Mike who said he had filed for bankruptcy 9 years ago, amid a tough and expensive divorce battle and custody fight. He managed to re-establish his credit, but had rebuilt his credit card debt to about $30,000.

He’s working three jobs (he said he has no problem working all those hours) but the credit card companies had put the squeeze on him by raising the rates on his debt to 30 percent. He said he couldn’t make the payments anymore and wanted advice.

I told Mike that he should call the companies and declare himself a hardship case. My understanding is that most of the big credit card companies have programs for folks like Mike. They’ll lower the interest rates on the cards to somewhere around 7 or 8 percent but they will then freeze the credit or close the account.

Jeff called in near the end of the show to share his experiences. Two years ago, Jeff had 20 (that’s right TWENTY!) credit cards with thousands of dollars in debt that he acquired during a failed business. He said that most of the companies increased his interest rate the more debt he charged. He called them for relief, but he said he wasn’t able to get any relief until he was 30, 60, or even 90 days late on his payments.

After negotiating with 20 credit card companies, he learned a few things:

  • None of the credit card companies would help him until he was late paying the bills. He said that at 30 to 60 days late, he received a lot of robot calls asking for payment. But once he was 90 to 120 days leate, he was able to get credit card companies to talk to him.

  • Jeff learned this “window” doesn’t last forever, he said because once you’re 7 to 9 months late paying, you’ll be turned over to a collection agency, and your ability to negotiate is substantially limited.

  • You’ll need to know the “lingo” to get anywhere. Jeff said to ask to be declared a “hardship” case. Hardship cases are offered interest rates from zero percent to 9 percent, and the card will be “closed at your request” rather than closed at the company’s request, which is much more favorable to your credit history and score.

  • In about one-third of the cases, credit card companies asked Jeff for an income statement and a statement of expenses, like for your rent or mortgage, car payments, etc. Jeff said that if you underplay your income so much that it seems like you can’t even make a modest payment, you won’t be offered anything and your account might be shuttered. You’ll have the most leverage by letting the credit card company know you can still make some payments.

I know that some credit card companies are working with consumers even if they aren’t late in paying. To reduce the interest, expect to have the card closed. Just be sure to ask that it is closed at your request, not the company’s request.

Want to know how your debt affects your credit history? Join me at my Ilyce Glink Money Makeover event in Atlanta on May 9, at the Renaissance Waverly hotel. You’ll meet folks from CCCS of Greater Atlanta and Equifax. For details, go to www.thinkglink.eventbrite.com or hit the EVENT button on the right navigation. Sign up now for our early-bird special. I hope to see you there.