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Question for the Money Doctors

Question submitted on Nov 28, 2012.

Question

We have a home equity line as well as a personal line of credit with our bank (KeyBank). These were established years ago and continue to carry balances that we are unable to pay down. Is there a way for us to reach a settlement with a bank for these types of debt?

Answer

You can certainly attempt to negotiate a settlement with the bank, but keep a couple of considerations in mind. First, the home equity line is secured by your house. So, you could be subject to foreclosure proceedings if you do not satisfy this obligation. Second, any settlement you reach will adversely affect your credit rating. Before pursuing a settlement, you may want to engage a qualified financial planner in your area to assist you with monthly budgeting and cash flow management. That person may be able to help you find extra money within your current monthly spending. Even an extra $100 per month going toward paying down these debts will improve your outlook psychologically as well as make a real difference in the amount you owe.


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