How to Stop Foreclosure and Consolidate Credit Card Debt

Avoiding foreclosure while consolidating credit card debt is tough to do all at once. It's likely your credit score has already taken a beating if your house is nearing foreclosure, making it impossible to be approved for a debt consolidation loan at a reasonable interest rate. Potential creditors will see from your credit report that you have been missing mortgage payments, and that you may have a problem with credit card debt as well. Despite that, you can consolidate the credit card debt and avoid foreclosure with the help of reputable credit counseling.

Instructions

1

Schedule a meeting to discuss foreclosure and credit card debt with a nonprofit credit counselor certified by the U.S. Department of Housing and Urban Development. The counselors specialize in foreclosure avoidance and debt management. The Federal Trade Commission strongly recommends that you seek the advice of nonprofit counselors and avoid for-profit companies, especially those marketing solutions for foreclosure avoidance. Nonprofit counselors are available in virtually every community. Find a counselor near you by checking the HUD website.

2

Gather information needed to provide the credit counselor with an accurate view of your financial situation, including a recent pay stub, a copy of your mortgage agreement and card card statements. Also create a list of all other monthly expenses including groceries, cable television and transportation costs. Document every thing you spend money on so that the counselor can recommend a budget that will be helpful during a three-way discussion with your mortgage company and with credit card companies.

3

Review your budget with the counselor to identify possible savings, such as eliminating cable television or taking public transportation. Then ask about options for consolidating the credit card debt. With a likely poor credit score your best option may be debt management plans, which are offered by credit counseling agencies. For a monthly management fee the counseling agency will contact all your credit card companies to negotiate lower monthly payments and lower interest rates. You must agree to remain in the program for four or five years and to send the counseling agency a lump sum check each month covering at least the minimum payments on all your cards combined. This effectively creates credit card consolidation without taking out another loan. Ask for details about a debt management plan and enroll to consolidate the credit card debt.

4

Ask the counselor to contact your lender with you on the phone to discuss stopping the foreclosure. You should start the conversation by telling the lender you are getting your finances under control with the help of a government-certified credit counselor. Then have the counselor describe your progress, including a new household budget and a debt management plan to consolidate credit card debt.

5

Negotiate a suspension of the foreclosure proceedings by asking the lender for time to present printed documentation about the debt management plan and your new household budget. Follow up as promised and permanently end the foreclosure with the counselor's help as you negotiate with the lender for a solution such as loan modification, which allows the lender to change any or all of the terms of the loan to make it more affordable. Other options include forbearance, which allows your missed payments to be tacked onto the end of the loan, or a payment plan for paying a little more each month until the mortgage is current. Get all the details of an agreement in writing.