A New Way To Avoid Bankruptcy

(CBS)  Janine Cain prides herself on a tidy home.

Her finances, however, are in a state of disrepair, ever since her husband lost his full-time job and their mortgage payments rose, CBS News correspondent Priya David reports.

Now they're working four jobs between the two of them - but it's not enough to pay off their credit card bills.

"It wasn't any extravagant items that we went out, or jewelry, or TVs or anything like that," Cain said. "It was basically stuff to live with."

How high is their credit card debt?

"It's around $23,000 total for both of us," Cain said.

The Cains are part of a growing group economists call the "near-bankrupt."

On Main Streets across America, as jobs dry up and adjustable-rate mortgages increase, consumers are taking on more credit-card debt to try and bridge those gaps.

"The average American household has assumed unprecedented levels of debt. And they can't afford to repay all of their debt, but they could pay a portion of it," said consumer finance expert Robert Manning, author of "Credit Card Nation."

Most debt-management companies require people to repay all of their debt - or declare bankruptcy. But Manning, who works at the Center for Consumer Financial Services, says he's got a better way.

It's a formula that determines how much a borrower can actually repay, based on income, local cost of living and local taxes. The consumer avoids bankruptcy, and the lenders get some of their money back.

His innovative program is administered by two credit counseling agencies, InCharge Debt Solutions and Hope Financial. So far it's available in 25 states.

Manning's program helped save Phyllis and Barnett Hoffman's Lakeport, Calif., home.

"I was afraid, yeah we're gonna lose our place because we got three notices of foreclosure," Phyllis said.

Unable to pay their ballooning mortgage, they had racked up $50,000 in credit-card loans and owed $350,000 on the house.

"I've been through some tough times, but I never thought I'd have to go bankrupt," Barnett Hoffman said.

Using Manning's formula, the Hoffman's credit card lenders agreed to clear the couple after they repay 37 percent of what they owe. And counselors got the Hoffmans' mortgage payments of $3,000 cut almost in half, to $1,700.

"It's very important for everyone to take a realistic approach and the realistic approach is 'let's reach a compromise,'" said Adam Levin, chairman and co-founder of Credit.com.

Compromise, with this approach, means lenders recoup at least some of their losses - and borrowers get a chance to wipe their debts clean.

[wjbjr1130]

Please allow me to state that I needed no prompting to generate this letter. I feel extremely obligated to write it. I am, and will be eternally grateful to the H.O.P.E program and it's representatives, Ms Tracey Williams in particular. I have stressed out over my mortgage issue for the last 9 years. I was a victim of deceptive practices by some unscrupulous lenders. I was encouraged to re-finance my $1200 / month mortgage payments, believing that the result would be lower payments. I steadfastly turned down all offers of receiving any money from the process. I only had one desire, and that was to reduce my monthly payments so that in the event of economic collapse, I could make my mortgage payments if I had to take on a low paying job.

When I got to the closing, none of the numbers matched up. I protested vehemently, but was told that the writers of the documents made a mistake. Before the closing, I had been told that I would have no mortgage payment for the month preceding the closing. I committed the funds elsewhere. At the table, I was informed that I could reschedule the closing but I must make the monthly payment. My hands were tied, and I was forced to accept the terms.

I found out that I was switched from a fixed rate to an A.R.M rate and that my mortgage payments shot up. I tried 3 times to correct this and EACH time I was played by the lenders. Each of whom had sent me mailers promising a fix to my problem. When the dust had cleared, my mortgage went from $1200/ month to a whopping $2600/ month!! I complained, and wrote letters about the policing of this refinancing practice, to no response. I couldn't believe that the government would not protect me from this thievery.

I was about to be thrown out of my home after my attempts to qualify for the Home Modification Program continuously kept getting derailed. My lenders put me on for 3 months, then took me off. I was told a variety of reasons, most being that they did not receive requested documentation. I had indeed submitted all that they requested. EVERY time I called, I received a different answer?..EVERY TIME. That's no exaggeration!

I received an intent to sell for my home and an eviction notice. I had no where to turn, until I came across the people from H.O.P.E I apprehensively sought counsel from them. THE MOMENT I MADE MY INQUIRY, they took charge of my account. Ms Williams did EVERYTHING she promised. She made calls for me, she guided me through the paperwork, she even followed up about the progress. I'm telling you, she absolutely rescued me from financial and emotional ruin. Unfortunately, problems cost me my marriage. Ms Williams asked me to be patient and hang in there with her. She even included the following tag line at the end of all of her correspondences:

There is always help with H.O.P.E.


In a society where slick marketing is used to mask deficiencies in the name of profits, your tag line was true to it's claim. I will be forever grateful to your program and the caring personality of Ms Williams.

I am so overcome with joy and relief after FINALLY being approved for the modification. THANK YOU, THANK YOU, THANK YOU. I would shout from a building if it would help all of those who were innocent victims of this historic scam, to feel the joy that I feel now.

May GOD bless all of you.

[dphammer]

A mortgage modification is a LOT different from credit card debt.... I hope you did not pay HOPE for them to do what anyone could do....

[dphammer]

Hope Financial USA created a payment plan for us that was non-viable and refused to refund back a portion that they felt was theirs.. After finding out that no creditors would work with them to reduce the debt and the money we were paying Hope as per their contract would put us upside down by over $400 a month, we decided that bankruptcy was the only answer. They refuse to respond now and that extra $1200 they owe us could come in handy right now.

[jdmjohn]

Its hilarious that inCharge and Hope obviously have some great PR people. The real story should be about how these guys mislead customers. I have family members that used both and ended up using www.greenleafdebt.com to finally clear up their financial situation.

[dxbanchee]

This company Hope Financial is a total scam!!! I have had two different clients call me asking why their accounts that go to court again become their issue even though they have been paying into the Hope program for months. The truth is that Hope does not care about anything but the money. There are good programs out there check out www.pdsdebt.com.

[joseph070]

5. In our debt settlement program, your monthly payment is deposited directly into your new special-use savings account at an FDIC-insured bank. The funds that accrue in this account will be used to settle your debts, and we guarantee to do so for 50% or less or we will pay the difference. I called your company just like I thought your organization is deceiving consumers just like the rest of the debt settlement companies your charging consumers upfront fees, and banks don't like your debt settlement companies. you're not so special either you claim to have attorneys helping consumers negotiating their debt when they get sued but in reality your attorneys can't represent the defendant in the court. Your better of do it yourself or contact non profit credit counseling organization these companies want your money they will drain you, and in the end you end up bankruptcy court.

[dxbanchee]

This company Hope Financial is a total scam!!! I have had two different clients call me asking why there accounts that go to court again become there issue even though they have been paying into the Hope program for months. The truth is that Hope does not care about anything but the money. There are good programs out there check out www.pdsdebt.com.

[aldee41]

Ain''t nobody as broke as Uncle Sam. Two wars and a "good buddy" bailout leaves Obama with an empty treasury and an economic mess.
Individuals that wish to break even any time soon should bankrupt before the rush and start over.

[mollydtt]

The main difference between the depression of the 30''s and now is the existence of credit. Back then, when you didn''t have the money to pay for something, you didn''t buy it. Now, you can charge it and hope that the usury rates charged by the credit card companies will somehow not be applied. But, the credit card companies know they will tack on every surcharge and penalty that they can (legally! yes!)
Trying to stay out of trouble requires practically a law degree these days (or winning the lottery). There are tough times ahead, and I''m sure most people have just stopped buying anything but food and medicine. Maybe even not that, but still, food and medicine can be charged on credit cards and those companies will be hounding you for your payment. That is the difference between the 30''s and today.

[rocknroll33s]

It wasn%u2019t until I received a phone call saying my CHASE credit card payment was delinquent. I knew I had got it mailed off so why went back and my checked records and found that I had made a mistake in writing out the checked I had spelled out Two Hundred dollars and missed spelling out the Seventy. I did get the $270.00 amount in rite. if they would have called me right away when they receive the payment I would have had enough time to correct my mistake before the due date. But they waited to a until after the due date to contact me, Putting my account default.
I call them right away and explained to them about my brother -in-law passing away. and that It I had made a honest mistake in writing out the check and that I would pay the $70.00 by phone right then. CHASE told me Regardless to of the situation that I did not of to get my minimum payment in time and my account is in default my interest of from 13.65% to 28.99% It didn%u2019t matter that I had never been late on a payment before.

[eggy1620]

There was nothing we did WRONG - Posted by pepper416

Yes there was, you got into the WRONG small business.

[cbscrash072]

I already spend less than I make. Its just that the government thinks its entitled to a portion of my pay. I can''t afford the government. Paying my own way is not the problem paying for the rest of you is.