I got a call from a client this week, we will all him “John.”

Here is his problem

-       He has over $41,000 in credit card debt.
-       He has other unsecured loans totaling $12,000.
-       Although he hasn’t been late on his bills yet, he can’t seem to get caught up and doesn’t think he will ever dig himself out of this debt.
-       When he puts his debt into a debt reduction calculator, it says that it will take him 21.6 years to pay everything off at his current pace.

(Can you say …. STUCK?)

He emailed me and asked for my advice… I explained to him his three options:

Option #1 – Continue to pay the bills for 21.6 years.
Option #2 – File for Bankruptcy
Option #3 – Negotiate his debt with his creditors.

Let’s review…:

Option #1 – Continue to pay, which needs no explanation. This client did call the credit card company and got his interest rates lowered, however, by following their payment plan; he will be paying for 21.6 years.

That is like being held hostage by your credit card company for 21.6 years.  I say “held hostage” because I believe that.

Yes, he took out the debt, but to pay on $41,000 in credit card debt for 21.6 years… is a crazy thought and in my opinion, other options need to be looked at.

Option #2 –Bankruptcy. If he qualifies for a Chapter 7 bankruptcy, he will have no more debt, however, the bankruptcy will be on his credit report for 10 years.

He can easily repair his credit (to 720+) after the bankruptcy, which can be done in 1 ½ to 2 years.

There are two downsides to this option;

1) The bankruptcy on his credit report.  That will impact his ability to borrow for the next 2-3 years.

2) Does he qualify for a Chapter 7 Bankruptcy?  Believe it or not, many people cannot qualify for a bankruptcy because their income is too high.

If this is the case, he will have to file a Chapter 13 Bankruptcy.  That means he will have to repay all his debt plus have a bankruptcy on his credit report.

Let’s move on to Option #3.

Option #3 – Renegotiate his credit card debt with the credit card company.

Here is what I know for sure:

1)    Your credit card company will not negotiate with you unless you stop paying your bills.  They may tell you differently, but this is what I know to be true.

2)    Your credit card company will lie to you so you continue to pay.  I’m sure this is not their “policy,” but when you combine eager employees looking to get their bonus with vulnerable debtor – this happens.

3)    Once delinquent, they will put your phone number into an autodialing systems.  This means you will get up to 8 calls per day trying to collect payment. … Ouch!

4)    If you understand how to negotiate with your credit card company (and I don’t), I hear from numerous clients that they will offer you a settlement somewhere between 15-40%.

Meaning, if this gentleman did it right, he would pay off his credit card debt for between $7,950 $21,200.

You read that correctly, he would pay off $53,000 in debt for between $7,950 and $21,200.

5)    After you pay off your debt, our clients are getting back to a 720+ credit score in approximately 18-24 months.

The biggest problem with Option #3, is having the stomach to handle the negotiations… because it is very stressful and daunting.  And, if you don’t know the proper way to negotiate, you will pay more than you should.

If this sounds like your situation, listen up.

I’m going to put together free information designed for those that have more than $20,000 in debt and would like to know and understand all their options.

If you want to be informed about this information, give me your name and email here at this website.

Once I do the interviews or webinars, I’ll email them to you.

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Tune into Talk Credit Radio this week with Credit.com’s personal finance expert Gerri Detweiler, live from 4-5 ET/1-2 PT on WSRQ. Additional ways to listen are listed below.

Mind Traps That Can Hurt Your Credit

Do your beliefs really affect your credit—or is that just a bunch of “psychobabble?” This week on Talk Credit Radio, investment advisor and author Marc Pearlman dives headfirst into the subject and makes a compelling case for ways your money mindset may be contributing to your credit problems. He’ll explain common beliefs that keep people in debt, including the main reasons people overspend, how they sabotage their own financial futures and why poor relationships often lead to debt. And of course, he’ll offer concrete strategies for getting on track.

Marc Pearlman is the author of the Positive Money Mindset and is a sought after speaker who specializes in the area of money motivation and limiting beliefs. Marc has been quoted in the major media including Smart Money, CNN and Fox Business News. His work has been featured in numerous publications including Entrepreneur magazine and he regularly contributes to About.com, a division of the New York Times.

Currently, Marc maintains a successful investment management practice in New York and is the host of the Your Money Matters! radio show, which may be heard in 19 states.

Also this week on Talk Credit Radio, Gerri will share information on a new program that may put money in your pocket if you’ve been in or through foreclosure in the past few years. And you’ll find out why the mortgage rate quote you see may not be what you get—and why.

Finally, if you’re thinking about switching to a credit union on Bank Transfer Day, but you think a credit union can’t give you the kind of service you get from your bank, you may want to think again. She’ll share surprising facts about today’s credit unions.

Call in live or submit a credit question for Gerri or Mark Rukavina to answer on the show, and if it is used on the air, you’ll win a free copy of your choice of her books, Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights or Reduce Debt, Reduce Stress: Real Life Solutions for Your Credit Crisis. Call into the live program at 941-373-1220 or send your question by email to creditexperts@credit.com. (Be sure to note your question is for Talk Credit Radio.)

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There are those who would have invested in a Traditional IRA before they were made aware or realized the advantages and benefits of a Roth IRA. Refer to this page: roth-ira.org to find out which IRA makes more sense in your scheme of things. In such cases one can always choose to convert the Traditional IRA into a Roth IRA. The conversions, immaterial of what the method might be, are all treated as a rollover to which the IRS attributes certain condition.

The path to the other side
Upon satisfying the conditions that apply to rollover, a person who has invested in a traditional IRA can convert to a Roth IRA by contributing the distributions that they gain from a traditional IRA to a Roth IRA. However, this contribution must be done within 60 days of receiving the distribution from the traditional IRA.
The conversion can also be carried out through your trustees. When a trustee of a traditional IRA is authorized to transfer an amount from the account to the trustee a Roth IRA the account is conversion is automatically carried out.

In case of a common trustee for both your traditional and Roth IRAs you can authorize him/her to make the transfer between the two IRAs. In converting a Traditional IRA into a Roth IRA using a common trustee, one can simply re-designate the traditional IRA as a Roth IRA instead of opening a new account or issuing a new contract.

Updating yourself with the IRS guidelines help you make the most of the IRAs, to that effect those who held back from converting their accounts owing to the fact that converting into a Roth IRA was not allowed for those who draw an income that exceeds $100,000 be they single or married can now convert their accounts. The income limit was repealed by the IRS in 2010.

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If you had dropped by my apartment this morning, you would have found me in PJs, confused but happy. I would have been surrounded by paper—all of the letters I had received over the past two months about student loan choices: forbearance, grace periods and online access. But I would have had a smile on my face because I had just paid off my loans. After years of planning and saving, I am officially debt-free. Whoo-hoo!

This celebration was hard-won after learning lessons by making mistakes. To balance out my little victory dance, let me share with you some of the mistakes I’ve made and what you can learn from them:

• Lesson: watch interest rates closely. I used to stash my Christmas and birthday gifts of money in a checking account. I earned a measly 0.2% when I could have gotten 10 times more through a simple upgrade to a savings account. I passed up hundreds of dollars over five years because I forgot to make my money work for me.

• Lesson: apply for scholarships. During my senior year of high school, the last thing I wanted to do after endless months of college essays and anxiety was to comb through a huge directory of scholarships. I was lucky that my parents were paying my tuition and so I relaxed. Big mistake. I gave up the opportunity to help out my parents by writing essays and filling out forms—something I was a pro at by that time. When graduate school came around, I was aggressive with finding scholarships.

• Lesson: assign numbers to dreams. Before I started working, retirement seemed vague. I thought, “Eventually, I’ll be one of those senior citizens in the life insurance ads, but until then, I’ll do what I can.” Wrong. To keep myself motivated and focused, I needed to put dollar signs on my goals. Splurges are so immediate that I had to make my goals just as urgent, too.

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For consumers that have been working to repair credit and get finances back into a stable place will still find that applying for a new credit card will likely involve getting a high annual percentage rate despite improved credit.

Creditcards.com’s October 7^th survey showed that most new credit card offers come with record high APRs, averaging around 14.97%. This is the highest APR seen since tracking began in 2007.

Credit repair efforts are more important than ever since most lenders and credit card companies are looking for excellent or better consumer scores. Those that maintain decent to good credit scores may still find it difficult to get the best interest rates on personal loans, credit cards, and mortgages. Credit repair allows consumers to up their consumer credit scores in a reasonable period of time if the work is done to correct past credit mistakes.

These credit repair efforts for consumers involves paying all creditor bills on time and not applying for new lines of credit or overextending existing lines of credit. Regularly checking credit reports and scores will enable consumers to stay involved in credit repair tasks to improve scores where they need to be.

With high APRs on credit cards, consumers who are not able to make a monthly payment obligation in full to clear the balance could end up jeopardizing their credit score and falling in debt rather quickly. Tacking on such a high percentage rate to existing balances month after month is often the trigger to one’s debt spiraling out of control.

If consumers with existing bad credit anticipate applying for a new credit, it is highly recommended that repair efforts to boost credit scores be completed prior to the application. There are some lenders, including First Premier’s Gold MasterCard which will charge upwards of 49.90% APR for subprime credit holders.

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Consumers in West Virginia are being warned, by their Attorney General Darrell McGraw, about a scam that offers the promise of fast and easy loans. These promises are coming from advertisements produced by the Royalty Resource Network (RRN), a Canadian based scam operation, that is appearing in local West Virginia publications.

Attorney General McGraw stated: Consumers should use extra caution when responding to any sort of advertisement regarding lending and finance. Thieves will use newspapers, websites, e-mails, telephone calls, any medium at their disposal to help you part with your hard-earned money. No legitimate company or organization will require you to wire money in advance using a wire transfer service in order to qualify for a loan, grant or any other financial aid.

RNNs advertisements claim you can obtain a loan ranging from $2,500.00 up to $1 million, with no consulting, application or processing fees. Too good to be true? What actually happens is, the consumer sends an advance portion of the money they intend to borrow through a reputable wire service where a fake RNN loan offers collects the money and disappears.

Many scans of this type surface frequently on the internet. It appears that this particular instance the company in question is using smaller newspapers and publications to reach consumers. In this instance a large ad was ordered and placed in The Ad Bulletin. Not only were consumers scammed, The Ad Bulletin was too. RRNs scammers used a stolen credit card to pay for the advertisement.

Scammers are able to quickly open and close a scam in a matter of days, by using disposable cell phones, free e-mail accounts and remotely routed toll-free numbers. In this case if you call the toll-free number given by RRN it rings as a fast busy signal. Other companies related to this scam are the Vintage Consumer Network and Forum Family Services. The names were possibly choose for their friendly connotations.

Attorney General McGraws Consumer Protection Division has referred the complaints against these three companies as well as other across-the-border advance-fee loan scams, to the Canadian Anti-Fraud Centre. The Centre is a joint task force of the Ontario Provincial Police, the Royal Canadian Mounted Police and the Competition Bureau Canada.

These advance fee loan scams unfortunately attract a number of people who are desperate to get loans and sadly pay money, never to see it again.

This guest post is by Steve Rhode. Steve is a consumer debt expert that helps people for free to learn and avoid scams. Feel free to report a scam if you know of one.

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