How to Get Out of Debt - Free Help

California State Employee is Suffering From Pay Cut Disease. – Martha

Steve Rhode — Sat, 07 Nov 2009 02:53:31 +0000

“Dear Steve,

Married couple, I am a CA State Employee who had a reduction of pay of approx. $700.00 a month. We have two car payments and a mortguage, in addition we have credit cards debt of approx. $25,000. THe payments of the credit debt is approx 1,4000 a month and seems that we are living paycheck to paycheck and we hate it.

We would like to reduce our credit debt but because of paycut we are only paying minimum payments. I did contact B of A on one of the credit cards and they reduced the finance rate on one card to 7% and they told me that the account will reflect closed by customer. How can we reduce our interest rate and get out of financial debt without any affects on our credit? I hate the situation we are currently in. We need help,

Martha”

Dear Martha,

If you can afford at least your regular monthly credit card payments but want an interest reduction then a debt management plan is the best bet. However, while your credit report won’t reflect you are in a debt management plan, the cards included will be closed by the creditor and that could impact your credit score.

But while the credit report and credit score are important, that’s not the real problem is it? The real problem is that the reduction in pay has left you at the breaking point each month and all it will take is one unexpected expense to throw you under the bus and all your credit will come tumbling down.

You should explore the debt management solution but after looking into it, if the payment seems to high to sustain for a long period of time, come back, let’s talk about other more drastic options.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: California State Employee is Suffering From Pay Cut Disease. – Martha

I’m Getting Married and Discovered She Has a Mountain of Debt. – Sammy

Steve Rhode — Fri, 06 Nov 2009 21:07:40 +0000

“Dear Steve,

Thank you for providing such a valuable service during these difficult economic times.

I am getting married in the spring of 2010. We have been discussing each other’s finances and unfortunately she will be bringing with her a mountain of debt. She is 50yo, Gross income is $120k, $45k of credit card debt, a condo that is valued at $100k that she owes $145k on, No savings, $60k in retirement adding $0k/yr. I am 47yo, Earn $85k gross, have a condo @ $225k/30yr @ 5.0%, $55k savings, $125k Retirement adding $15k/yr and a 50% Pension. From what I read she earns too much to declare bankruptcy, would it be wise for her to let the bank take her condo and tackling the $45k in credit cards with my savings?

Thx >

Sammy”

Dear Sammy,

Savers attract spenders. It’s the old opposites attract thing.

Purely from a practical point of view I think the best thing to do is tidy this mess up before you are joined in wedded bliss.

It sounds like you are not going to keep her condo anyway after you get married and selling it really isn’t an option. Also, she’s maturing and currently not saving any money towards retirement.

While some others might chastise her for considering bankruptcy, just purely from that practical point of view I mentioned, I don’t think it is entirely unreasonable.

Let’s look at it like this. Let’s say she hands the condo back and then enters a Chapter 13 bankruptcy for the next three years. It would be best to do that now before you are married. At the end of three years she’ll be totally debt free and you’ll have a clean slate to start from. You can help her to be responsible and start saving.

I admit that sometimes I can be a bit cynical but I think if you simply bail her out with your savings you are sending the wrong message. You don’t want to sacrifice your good savings by investing to try to address her bad behavior. Besides, I think a dose of pain will help her to wake up and get back on track.

Let’s not forget that it’s not going to be just $45,000 of credit card debt. The bank is also going to come after her for $50,000 or so for the deficiency from taking the house back. Do you plan on sacrificing more of your savings for that as well?

I think the two of you should find a local bankruptcy attorney you like and go in and discuss this matter together. Then go home, mull it over, and see if it makes sense to the both of you. If you want to make an investment to bail her out, pay for her bankruptcy.

Bottom line, this is her financial cesspool and it should be her responsibility to clean it up without dragging you in. That’s just not fair.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I’m Getting Married and Discovered She Has a Mountain of Debt. – Sammy

Any Suggestions for Good Budgeting Tools to Dig Out of Debt? – Scott

Steve Rhode — Fri, 06 Nov 2009 20:48:04 +0000

“Dear Steve,

My wife and I currently have credit card debt of about $60,000. In addition to that we have 2 mortgages and 1 car payment with about 1 year remaining. We both have incomes, and are barely able to make the minimum payments.

We aren’t behind on any of our debts, but continue to live a lifestyle where we are putting groceries and gas on a credit card and not cutting down to the bare minimum on expenses. We are not friviolously spending money all the time, but probably spend at least 100 bucks a month on stuff we don’t need (daily purchases) and probably about 200-250 bucks a month on monthly things that we feel we need to maintain a certain lifestyle (maid/cable, etc). I am just overwhelmed with our debt number.

I have been a little more worried than my wife has been, and she manages paying the bills. Should we seek credit counseling or debt management before we start falling behind? Any ideas for good budgeting tools to help us look at how much money we waste monthly? I don’t want to file for bankrupcy, but with the amount of debt we have, and no real emergency fund right now, I know that we are just a blink away from having to consider it. We can’t even start a family because of the situation we have put ourselves in.

Scott”

Dear Scott,

It seems like I’m always suggesting bankruptcy, but here is a new one, not in your case.

First, let’s look at what is driving your concern, financial panic. It’s totally normal and natural. But before we wheel out the big legal cannon to deal with your debt, let’s take some baby steps.

Right now you are earning good money but operating in a fog. I seriously doubt you are tracking all your expenses and totally aware where the money is going. The first thing we need in your situation is clarity. And how do we get that? Tracking.

There are a couple of ways to track and budget. They range from traditional approaches like writing down when you spend any money on a pad a paper and what it was for. Or you can use more modern tools like the online service Mvelopes. The best solution is going to be the one that works for both of you. The Mvelopes approach may work better for you if you both have access to the web during the day and can quickly login and enter what you spent.

Simply tracking your cash will cut your spending by about 20%. This is because once you start tracking spending you become more aware what you are spending on and then make decisions to alter your spending habits.

Now tracking the cash can sound like a painful and boring exercise. Personally, I hate doing it but you don’t have to do it for ever if you don’t want to. Just promise me you’ll do it for at least three months.

Now the benefit of the tracking is awareness but it is also clarity. Once you know where you money is going you can then make conscious and educated decisions based on facts about what you might want to cut back or cut out.

This approach works so much better than the traditional budget approach. A budget is a wish list on how you’d like to spend your money and tracking the cash is a measurement of where you actually spend your money.

Try this approach first and build in some immediate savings. Just open a savings account at your local bank and transfer $25 a week into ti. You should be able to easily do this once you start handling your cash with clarity.

After you track the cash for three months, if you are still in trouble, come back and we can talk about the path forward. Does this sound like a reasonable and responsible path forward to you?

Oh yes, to reduce your debt with the most motivation, use the debt snowball approach. Trust me, it works.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Any Suggestions for Good Budgeting Tools to Dig Out of Debt? – Scott

Should We Take Money From Our IRA to Buy a Car? – Brenda

Steve Rhode — Fri, 06 Nov 2009 20:30:59 +0000

“Dear Steve,

Retired – husband 69 and I am 65

Husband worked for a now defunct airline for 28 years so pension is minimal from PBGC. I have an IRA worth about $210K (withdrawing $10K lump sum annually). We are both currently collecting social security. My husband has two part-time jobs and I have one part-time job producing an insignificant income. Our house payment is $1575 per month and we have two aging automobiles…1998 with 186K miles and 2004 with 110K miles. We need to buy another car and wondered if I should take the money from my IRA to buy a used car. We are currently very tight with out monthly expenses and having a car payment would really be confining for us. I know we are looking at approx. 10% taxes if we take the money from the IRA vs. a lower interest rate for monthly payments but it would really be tight to add more debt per month.

Your thoughts please.

Should I take the money from my IRA to purchase a used car knowing I will be paying more in interest than on a conventional car loan???

Brenda”

Dear Brenda,

My gut reaction is don’t do that. Not only will you pay a penalty but you will lose whatever growth that money will make if you leave it in as long as possible.

There are enough good car loans out there right now for you to examine those first. For example, eLoan.com offers used car financing for people with good credit, which it sounds like you have, for 5.69%. If you see what eLoan.com will qualify you for you can then go into the used car dealer, like CarMax and ask them to beat that offer. If they can’t then you’ve got a good deal. They’ve always beat it for me.

I think the goal here is to not set your sights too high for a luxury car. You need reliable transportation. I’d look at a car that was about three years old so you can get the maximum depreciation but still get a relatively new car.

So I took a look on CarMax.com for a car that looks like it would meet your needs. I found a 2006 Mitsubishi Lancer ES with 34,000 miles for $9,849. The monthly payment on that car would be about $188 a month.

I realize that your issue is one of monthly cash flow but do you think that $188 a month is doable for you? If it makes it too tight then consider upping your annual withdrawal to $12,500. The extra money will cover the car payment and you can leave the maximum amount in the IRA to grow.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Should We Take Money From Our IRA to Buy a Car? – Brenda

I Live in Canada. I Go to School. My Debt Gets Worse Each Day. – Glanda

Steve Rhode — Fri, 06 Nov 2009 20:08:27 +0000

“Dear Steve,

Hi my name is Glanda, i go to school. i got myself in a debt that i cant even pay back. how can i try to pay back slowly? i really need help with that. i dont even work anymore. iam really confuesed with this pls help me. iam willin to listen to any advise you give me just to get out because this not gettin any better but worst everyday. pls reply me back as soon as possible pls bye

Glanda”

Dear Glanda,

So you want to know the magic answer for breaking out of debt without any pain. I’ll tell you the honest truth, there is no way to do that.

Digging your way out of debt will involve the pain of legal intervention like a petition for bankruptcy in Canada with the help of a bankruptcy trustee or for you to work harder and earn more to repay your debt.

If you want to avoid bankruptcy then you may have to make the difficult decision that you will need to put aside whatever it is that you are doing now that occupies your days, like school. That might mean dropping out of school in order to get a full-time job to make more money.

As you can see the options are really between two polar opposite choices but that’s the way life goes sometimes. Sometimes the choices we have to make are between the lesser of two evils rather than two perfect options.

So how much debt do you owe and what kind of debt is it?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I Live in Canada. I Go to School. My Debt Gets Worse Each Day. – Glanda

Is It Better to Go Bankrupt or Settle My Debt With 401(k) Money? – Lynn

Steve Rhode — Fri, 06 Nov 2009 19:55:56 +0000

“Dear Steve,

Hi Steve, first let me tell you what agreat comfort you are to many people. Honest advice is hard to find. I have written you before and value your opinion.

If there is a way to settle debt with the creditor for a decent amount, is it not better to do that than go bankrubt? I will have to take a loan from my 401k but all the debts will be settled. However, I understand tht the IRS will come knocking from the 1099’s.Is this always the case? If this is true I will be back in debt again. Is there a way around this,Is it the best route to take? 65,000 in debt with offers to settle for half

Lynn”

Dear Lynn,

Thank you very much for the compliment. I do try very hard to give impartial and honest advice.

Your scenario is one of the prime examples of debt repayment that I’d hate to see happen. Your 401(k) might feel like a savings account you can rob, but it’s not. In fact the 401(k) is protected from your creditors in case you did go bankrupt. Why? Because that’s the money you are saving to retire on. If you drain that account then it will be impossible to get back into the same position again to have as much money to grow and compound. Taping that account will cost you dearly.

Which would you rather be, someone that had once gone bankrupt or someone that is now 70 years old, ill, and does not have enough money to retire on after social security went broke.

Not to be too extreme but the bet comes down to which you’d rather deal with, some intermediate pain from bankruptcy or living in a crappy place and eating dog food when you are elderly. Ultimately the choice is yours but you can see why I always look at the 401(k) as being untouchable.

The thing that makes bankruptcy the most unpalatable to you is not the reality of it, but your fear and assumptions about it. If you settle the debt you’ll have bad credit reported about you for seven years. If you go bankrupt you’ll have the bankruptcy reported about you for seven to ten years.

So Lynn, just based on those cold hard facts, which option looks better for your future safety and protection?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Is It Better to Go Bankrupt or Settle My Debt With 401(k) Money? – Lynn

Bankruptcy Attorney Said I’m Judgment Proof and Should Not Bother With Bankruptcy. – John

Steve Rhode — Fri, 06 Nov 2009 14:50:09 +0000

“Dear Steve,

I have $39,000 in credit card and unsecured loan debt due to becoming disabled with Parkinson’s in 2007. Unfortunately, I used credit lines to make ends meet, and now I am at the point of no return. Of the $39,000, $30,000 is to 2 companies (HSBC and Chase). One will not work with me to get interest rates and payments to where I can pay off all debts in 5 years.

I am on Social Security Disability. A local bankruptcy attorney states that I am “judgement proof” in the extent that if sued and a judgement is rendered, I have no attachable assets. He recommended that I not even bother with bankruptcy. Do you agree?

John”

Dear John,

Actually, I would not be quite so quick to dismiss it. Here’s why.

I’m sure that you are being pursued for these debts. And if not by the original creditors, then by subsequent companies that may buy and trade the debt for years in hopes of collecting. This means that collection activity, calls and letters will continue indefinitely.

For some the constant confrontations with collectors can be stressful and depressing. And while you may be judgment proof that still does not mean that you can’t be sued along the way.

So for me it really all comes down to not if you are judgment proof but if you just want to close the door on these debts and never have to worry about them again since there is no expectation you will be able to dig yourself out of this mess. The best reason for bankruptcy simply might be for peace of mind and that’s not a casual reason to dismiss.

I can’t say I’m a big fan of paying one of the creditors for five years. While I agree in principle that people should honor their debts I think you have a greater responsibility to make sure you are using what money you have coming in or available to protect yourself for the future since you are disabled. I’d rather see you save $15,000 and use it in the future for your care than spend $15,000 and eat dog food latter. But that’s just me.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Bankruptcy Attorney Said I’m Judgment Proof and Should Not Bother With Bankruptcy. – John

I’m Disabled and Falling Into Debt But the Bankruptcy Lawyer Said Bankruptcy is Not for Me. – Dorothy

Steve Rhode — Thu, 05 Nov 2009 20:00:25 +0000

“Hi Steve,

I am in a situation that I need good sound advice about. I am 39 years old and permanently disabled, having become so in 2002. I receive Social Security benefits monthly. I have a caregiver who permanently lives with and cares for me. His only income is from the state for providing my care. We both have unsecured debt only totalling together about $57,000.00. His is at $21,000. and mine is at $36,000.00. We have accrued this debt over a 4 year period of time. My monthly income is $1025.00 and his is $1024.00.

We applied for a home equity loan this March with our bank since it was the place we could afford. The house is clear and free and has been so for years. We both had very good credit. We just received our third denial letter a few weeks ago. The bank and their financial institution were both unable to get us approved for a loan. We were applying for a home equity loan for a $550.00 a month. We were using all of our checks just to pay our bills each month. Every letter says we don’t have enough income and have too much debt accrued over a short period of time.

We have been taking cash advances from our bank on our joint checking account and from a check cashing place to make it through the month waiting on the loan process and to also keep our bills paid. That was a huge mistake. It only made our situation worse and deepened how short we are each month. Last month my whole check didn’t cover advance repayments.

Starting in August we began missing payments. We have spoken to some of our creditors. We set up payment plans with some but that has been difficult and we have been late. Others suggest going online to helpwithmycredit.org. I read your article about that. We don’t really know whether to trust debt management programs or not.

We contacted a bankruptcy lawyer and that is not an option because I added my caregiver onto my house deed within the last two years not knowing that would be a problem in bankruptcy court. We did not expect to be unable to pay our bills like millions of other folks out there. We didn’t even pay our utilities last month.

We have no family or friends to borrow from. I’m the only one with a car and it is 13 years old. It has had more work done on it than it should have and is below Blue Book value. Our furniture is at least 20 years old and we have no valuables to sell. The house is below the value I alone am allowed for an excemption I believe. I don’t know what joint tenancy does in the State of CA. The bankruptcy attorney said to try to work with the credit card companies and if that didn’t work we would probably have liens on the house that would have to be dealt with when the deed was changed or the house sold.

We do not like owing anyone. We are trying as best as we can. We realize we have a problem and are not hiding from it or any of our creditors. We did not go on a good time spending spree. This is making physically sick, more than usual. My caregiver cannot leave me alone to find work. That is the point of him being here – without him I would have to live in a nursing home since I cannot cook, clean, bathe or do other necesseties for myself. It has made him feel miserable as well. We are trying, we are. I had to pay $550. in cash advances this month so at least I had some of my check. What is your advice? Thank you.

Dorothy”

Dear Dorothy,

Your situation sounded a bit odd to me so I ran it past an attorney friend, FBC, who you see commenting here on the site.

On face value it looked like the addition to the deed of your caregiver was the issue but that can certainly be explained.

Here is what FBC had to offer:

It sounds to me like the bankruptcy attorney was concerned about the transfer of the property interest in the home to a potential insider.

HOWEVER, I can’t see how that could be a problem, UNLESS the debtor lives in a state where the state has opted out of the federal exemptions and are so low that the home would not be fully exempt. (For example, Missouri springs to mind — I believe their homestead exemption is limited to $7.500. By contrast, in Oklahoma where I practice, just across the state line, homesteads are 100% exempt in most circumstances.)

The writer says that his home was free and clear of all liens; that’s what makes me think that the value of the equity in the home is such and the state exemption is such, that the debtor stands to lose his property. See link to state’s that have opted out of the federal exemptions. In some cases (like Oklahoma, where the state law exemptions are more generous than the federal ones) this is a good thing. In others like Missouri, quite a bad one for debtors.

Either way, I would strongly advise Dorothy to seek a second opinion. It could be that the first attorney did not understand some key fact. Or it could be that he misunderstood something. Attorneys sometimes disagree about the application of the law. I argue constantly with one of my good friends and colleagues in my own firm. Lay people often mistakenly believe the law is cut-and-dried, and often enough it simply isn’t.

So Dorothy, there you go. I agree with FCB that a second opinion is the best next step for you to take.

What we know for certain is that without the protection of bankruptcy you may be forced to sell the house to take care of these debts that are building each month. If you are now piling on cash advance or payday loan debts then we have real problems brewing.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I’m Disabled and Falling Into Debt But the Bankruptcy Lawyer Said Bankruptcy is Not for Me. – Dorothy

Citibank in Dubai Wants Blank Cheques From Me to Repay Debt. – James

Steve Rhode — Thu, 05 Nov 2009 15:26:04 +0000

“Dear Steve,

Having left the country due to losing my job in the early part of the year (a common occurance in Dubai!). However I had left about 40,000 AED of debt on my Citi Bank credit card. I managed to make payments till July but had not paid for 3 months. Fortunately I have kept constant contact with them and they seem to be quite willing to give me an option to make these payments back without sending me to jail!

This I hope I can sort out but they do want this in the form of 12 cheques. However I spoke to my bank and they appear to have cancelled my bank account. I came back to this country with the intention of first getting my debt in order as well as my life. It just is so complicated I fell like giving a two finger salute and getting back on a plane.

Really want to understand what happens if my bank account is cancelled. Lloyds have a policy of 25k AED minimum per month salary to open an account. Is this a common thing with all the banks now? If they do close my acount and I need to get another one any advice who is easy to get sorted quicky? As I need to have cheques to make an arrangement with Citi Bank it presents a problem with me paying it back.

Thanks in advance for your advice. I realise it is not only me going through this and I wish all those luck who may be going through a similar situation.

James”

Dear James,

Based on your spelling of Cheques and realise I assume you are somewhere back home in Europe and probably the UK.

If your attempt is to repay this debt but you are not returning to the UAE at this time, to avoid arrest or because you don’t have a job, then I think alternative arrangements can be made.

If you can afford to make the first twelve payments of about £546 then I would send the first payment to Citibank UAE via an international wire transfer from you bank back home. This will show your intent on promptly repaying the debt and you can then explain the bank situation to them. If you are unable to get an account opened soon then just keep making the payments to them from the account back home.

There is no requirement that any bank open any account for anyone.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Citibank in Dubai Wants Blank Cheques From Me to Repay Debt. – James

Is It True My Creditor Might Take Less Than The Full Balance as Payment in Full? – Larry

Steve Rhode — Thu, 05 Nov 2009 15:07:31 +0000

“Dear Steve,

I have credit card debt, can afford more than the minimum payments but not the entire balance. Is there truth to the fact that issuers will accept a lower amount as a balance payoff? And is there any formula to this? e.g., would Chase take 2k in one payment to settle a 5k balance that’s been on time for years? is there any strategy to negotiating e.g., should one automatically ask for a supervisor, should I write a letter of understanding re the terms if i can negotiate a payoff deal? please advise. Larry

Larry”

Dear Larry,

It is true that creditors often do accept less than the full balance as payment-in-full but before you start to jump at the chance you need to understand some key issues here.

In order to be in the right department in the bank to get a settlement offer you traditionally need to be 90 to 120 days delinquent on your bill. People who are current or only a bit late do not get settlement offers. The bank is still holding out hope of getting the minimum payment.
Going into collection will hurt your credit and lower your credit score. That can cost you a lot more over time than you might save with a settlement offer. A lower credit score or recent collection activity can raise the interest rates on your other cards or lower you credit score which can lead to the higher cost of future credit and insurance.
Banks like Chase may only agree to reduce your debt by 40%. On a $5,000 debt you’d still need to have a lump-sum payment of $3,000 to pay if they agree.
The part of your debt that would be forgiven will appear as a bad and uncollected debt on your credit report and the account will be closed.
The forgiven debt will be reported to the IRS on a 1099-C and you if you are not insolvent you will have to pay income tax on the forgiven amount at your normal tax rate.

So after reading all of that is it something you still want to pursue?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Is It True My Creditor Might Take Less Than The Full Balance as Payment in Full? – Larry

Should We Stop Paying Our Mortgage. We Are So Stressed. – Beth

Steve Rhode — Thu, 05 Nov 2009 14:55:19 +0000

“Dear Steve,

A little over a year ago my husband lost his job. He got a new job two hours from our home. We were approved for and bought a home in the new town with the idea that we would be able to sell our first home. Of course, at that time, the economy took a total dive and we are left with a home that we do not live in but owe a first mortgage of approximately 98000 and a second mortgage of 28000. We owe approximately 100000 on our second home. We have enough credit card debt that with both our our jobs we are 900 short per month and have been robbing peter to pay paul. We have no savings and four kids. To say we’re stressed out is an understatement.

Would we be smart to let the house in our hometown go into forclosure and stop paying both the first and second mortage and then work hard and diligently to pay off the other debt? I so don’t want to file bankruptcy because where I work I will most likely be let go. Please help?!?!

Beth”

Dear Beth,

I think the situation is dictating the answer for you. It appears you have no choice other than to let the old house go and deal with the ramifications. And what will happen is after the old house is foreclosed on the lenders on the old house will come after you for a huge bill you probably won’t be able to pay.

But I’m curious what kind of job you have were bankruptcy would be a problem. If you have a security clearance than bankruptcy is less of an issue these days.

Regardless if you elect to seek protection from creditors under the bankruptcy laws, the reality already exists that being maxed out and soon to be behind on the old house your credit will be shot anyway.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Should We Stop Paying Our Mortgage. We Are So Stressed. – Beth

We Got Scammed By a Company That Promised to Eliminate Our Debt. – Sdmom

Steve Rhode — Thu, 05 Nov 2009 14:45:53 +0000

“Dear Steve,

We got scammed and now we are in deep trouble with debt. We used a company that promised to help us eliminate our debt. We paid them double digit thousands of dollars for their help and now they do not exist. They told us to stop paying out debt and gave us tips on going to court. We have been sued by one credit company and they won and got lawyer fees also. Now we have 5 other companies we owe total little over 100,000 not including student loan and car loans. We are not worried about our credit because it is already shot we just want to be able to start paying without wage garnishing?

What should be our steps in order to start paying these companies since we got scammed so badly? Is there a way to stop having wages garnished?

Sdmom”

Dear Sdmom,

You can stop the garnishment and suits with bankruptcy. You really need to go talk to a local bankruptcy attorney. Bankruptcy will offer you protection and as you said your credit is already shot so bankruptcy will be a route up and out of the current mess.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: We Got Scammed By a Company That Promised to Eliminate Our Debt. – Sdmom

Can a Collection Company Charge Us For a Letter Saying We Paid? – Meyam

Steve Rhode — Thu, 05 Nov 2009 14:36:51 +0000

“Dear Steve,

My husband and I are saddled with credit card debts including unpaid utilities from 3 foreclosed properties. We are looking to rent in an income restricted community which is the only one we can afford. However, to qualify, we were told to pay off our utilities as the first step to clear our credit.

We called one of the utility companies, and they said our account is now handled by a collection agency. We called the collection agency to try and settle the account ($414.00 plus interest totalling around $440). My husband asked them to send us a bill or anything in writing before we send our check payment. However, the credit rep said they can’t do that. They want us to pay by phone or by credit card right on the spot. We refused because it didn’t seem right to pay upfront without any written agreement or billing statement.

We also requested that they report to the 3 credit bureaus, but they said it would 4 months for it to show up in our credit report. Finally, the rep said she would fax the letter. However, our fax machine could not receive the fax. The rep said we should just go to their office to make the payment. When we asked if they could just mail out the letter, she said that we have to pay them $10.00 for them to give us something in writing that we indeed paid in full. This is the first time I’ve heard of this. Is this legal?

Are the credit collection agencies allowed to charge extra for a letter indicating that we fully paid the account? Should we go to their office to pay?

Meyam”

Dear Meyam,

I’d not heard that before. Interesting.

It seems this could be easily taken care of if it is relatively easy to visit their office, make your payment and get your receipt.

Armed with a receipt that says the account is paid in full and it has the account number on it that should be sufficient to show to anyone to see the account has been satisfied.

It is true that it might not show up on the credit report quickly. It really depends on how frequently they dump information to the credit bureaus. They might only do it quarterly.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Can a Collection Company Charge Us For a Letter Saying We Paid? – Meyam

If We Stop Paying Our Credit Cards Will it Affect Applying for a Loan Modification? – Wong

Steve Rhode — Thu, 05 Nov 2009 13:44:36 +0000

“Dear Steve,

My husband and I owned a small business, the harsh economy has make our income lower than we expected. We purchased our house 4 years ago, the value has gone down a bit but I don;t think we are up-side-down on our mortage. Our credit used to be really good but because we have maxed out all the credit cards so our credit is not too good now. We are 130K in debt. We are expecting a few deals to go through with good profit but I can not make my next month’s credit card payment (which I have always paid on time).

If I stopped paying my credit cards payment will it utimately affect my mortage or loan modification which I am thinking of getting?? Our house has personal meaning to us and we really do not want to jeopardize it.

Wong”

Dear Wong,

I don’t know if it will hurt your chances of getting a loan modification. You should check with your lender or a HUD housing counselor now and find out what the modification requirements are for your lender. But that’s not really the issue here.

As you said, your cards are maxed out, your income is down and you can’t make your payment next month. I’m afraid it is what it is.

I also get the sense you are struggling with the current mortgage payment and that’s why you want to seek a loan modification. The bad news is that loan modifications take forever and even once granted the benefit is not sufficient for most people to make a substantial difference.

One course of action at this point, if you want to keep the house, is for you to immediately find a local bankruptcy attorney you like, make an appointment, and go in and talk face-to-face. You’ll probably discover that a Chapter 13 bankruptcy will allow you to keep the house and you will enter into a reduced payment plan for the other debts based on what you can afford. The bankruptcy will give you protection from your creditors that no other solution can give you.

Otherwise, if you can’t make the credit card payments next month, don’t make them. You’ll wind up in collections but if the deals are going to close really soon and you will be able to get current on your debt and not have any more problems than you’ll just have a late payment on your credit report.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: If We Stop Paying Our Credit Cards Will it Affect Applying for a Loan Modification? – Wong

So What Would You Do? I Felt Awkward and Uncomfortable.

Steve Rhode — Thu, 05 Nov 2009 13:17:35 +0000

The other day a casual friend of ours took Pam and I out for lunch. She was returning the favor since we took her out last time to help her feel better after being laid off. During the lunch it came out that she is having some money troubles, we already knew she was in the middle of a divorce. She also said she has been taking cash advances on credit cards to make ends meet and she and her ex-husband also have a giant house that won’t sell in this market. Yikes! Actually what I said to myself was “Oh crap, this isn’t going to end well.”

So after giving her some loving advice and enjoying a delicious lunch, the bill came. I grabbed the bill. After all that was said during lunch I didn’t want her to use her cash advance money to pay for the lunch. I had just advised her to stop taking cash advances.

But she insisted on paying and said she had invited us to lunch and this was her treat. I eventually let her pay even though I felt bad about it. I made a split second decision to hand her the bill so she didn’t feel worse about her situation than it already was. I didn’t want her self-esteem to take another hit right then. I thought she’d reveled a lot during lunch and I’d given her a lot to think about and deal with.

What would you have done? Would you have handed over the bill or insisted in paying it yourself and told her she could not afford it?

Steve

My Father Passed Away. Is My Mother Responsible For His Credit Card Debt? – Richard

Steve Rhode — Thu, 05 Nov 2009 13:02:19 +0000

“Dear Steve,

My father passed away with credit card debt. In the state of Texas is my mom responsible for the creit card debt. She ws not a co applicant on the card. She was only a autorized user.It is going to be hard for her to make since she was a stay at home wife.All she has is a little life ins policy and apaid off house thanks for your help

Richard”

Dear Richard,

What you should do is obtain some additional original certified death certificates. Once you get those you should write a letter to each credit card company your father owe and explain that he has passed away and include a copy of the death certificate. That should end the issue as long as your mother has not continued to use the card after his death. Make sure she does not use any of those cards she was only an authorized user of.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: My Father Passed Away. Is My Mother Responsible For His Credit Card Debt? – Richard

They Are Coming to Take My Husbands Car Today. – Renee

Steve Rhode — Wed, 04 Nov 2009 20:36:08 +0000

“Dear Steve,

My husbands car, that is in his name is about to get repossessed. Like today. There is nothing we can do about it, we simply cannot pay for it. There is no option- either eat or pay that car payment. He got it before he was married and before we had a baby.

So when they repossess it I know there will be around a $15,000 deficiency when it is auctioned. It is a dodge an its value is so low now! And of course we will not be able to pay a $15,000 deficiency or we would be able to pay the car payment.

Is our only option bankruptcy? If so, would it be better to do it before they come and get it? And since it is in my husbands name would it only be him that needs to or do both of us have to? We don’t want to get out of paying things we owe.

The whole situation is totally uncharacteristic for both of us but our income is $2,000 less that what it was 4 months ago and we have no options. I have two cars in my name so if it is taken then we will not be left without something to drive.

Renee”

Dear Renee,

It is probably best to meet with a bankruptcy attorney now and get the ball rolling. It is not going to save the car but you can prepare for the big deficiency bill that will be heading your way.

I understand about the willingness to pay and wanting to honor your debts. I never suggest bankruptcy as an easy way for people to get out of their obligations. It just so happens that bankruptcy is the only legal consumer protection you have against creditors that will allow you to repay what you can afford or discharge the debt.

There is nothing that prevents anyone from repaying their creditors after bankruptcy to meet their convictions about their debts. You can do that also. But in your current situation you certainly don’t need continued collection activity and pressure from a situation that has slid beyond your ability to meet the minimum payments and obligations.

Your husband can file as an individual and as long as you don’t have any joint debts it will not impact you or your credit report.

So right now, find a local bankruptcy attorney you like and make an appointment to go in an ask all the questions you can. It might not be a fairly tale ending but it is the right thing to do in the situation.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: They Are Coming to Take My Husbands Car Today. – Renee

We Are Drowning in Debt And Can’t Take Another Collection Call. – Shannon

Steve Rhode — Wed, 04 Nov 2009 20:24:59 +0000

“Dear Steve,

We are drowning in debt. Our son needed braces, our house needed repairs, our credit cards and loans are out of control. We have recently refinanced our house. My husband is facing a layoff in the next couple months. We are having difficulty making the monthly minimum payments. Our debt including our mortgage is about $160,000.00.

How do we get to be debt free and be able to start living without the stress of “is that payment going to go through”,” are we going to get another call from a creditor”?

Shannon”

Dear Shannon,

Ironically just this morning I wrote about the three keys to deal with debt issues. They seem to fit your situation perfectly.

Acceptance – To accept the situation is what it is and rather than be in denial and wishing for something different. See it clearly and deal with it.
Action – Make the difficult decisions necessary to eliminate your debt that will lead to a better future.
Kindness – Even in times of pain we need to give and receive hugs, kindness, and love. We need to lean on each other and remember there is always something to be grateful for every single day.

So Shannon it sounds like your situation has been building for some time and that it is not going to get better with an impending layoff and significant income loss.

The time has come to stop ducking the situation and deal with it. This means that everything needs to be on the table for consideration. The two biggest expenses that can be changed are housing and transportation. It might be that you simply can’t afford the house any more. You might need to give it back to the bank and go rent some place. You might have to give the car back to the lender if you have a car loan and buy a crappy cheap car to get around for right now.

Regardless, the place you need to start right now is to work this problem backwards. You need to first identify what income you do have coming in and if you had a clean slate, how could you get by on that income. Knowing your husband will be laid off you should probably estimate living on 75% of current income in case he can’t find a job paying as much as he is earning now.

Once you know how much a suitable place to live will cost and add in utilities, food, insurance, etc you can see if you have enough leftover to deal with the debt. My bet is you won’t. In that case you’ll need to look towards a more permanent solution. I assume from your email address you are in Canada.

In Canada you need to find a local bankruptcy trustee to handle your case. Once you file your bankruptcy petition you should receive a final discharge in nine months. It is a fairly straightforward process.

While bankruptcy is painful it is a beneficial process to severing the ties to old debts chained around you that you are no longer able to service due to a change in life or your circumstances.

Here is one website you can use to locate a bankruptcy trustee in your area.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: We Are Drowning in Debt And Can’t Take Another Collection Call. – Shannon

How Do I File Bankruptcy When My Spouse Refuses to Cooperate. – Cole

Steve Rhode — Wed, 04 Nov 2009 20:04:52 +0000

“Dear Steve,

I have a lot of debt built up from trying to save my house and lack of income when the real estate went sour ( I was a real estate agent). Needless to say, I spent more trying to keep my business going than my husband approved of and as a result put us in a world of financial distress. It is not just finances that are our problem, obviously, but my husband has refused to share any information about finances with me and refused to discuss finances when we were in trouble.

It is not just my job that cause us to lose our home to foreclosure, there are many variables. Right now I am being sued by a credit card company, I have answered their complaint and they have requested discovery/interrogatories. They will get a judgment soon and I have run out of time. So far I have waited 2 years for my husband to talk to me about it but nothing ever gets accomplished. My husband refuses to provide me with the information necessary to file bankruptcy on my own. He says it is not his problem and that I am the sole reason for all “my” problems.

All of our accounts are still in separate names after 7 years so any debt I have is from me alone. I don’t even know how many accounts he has, where they are at, what balances are… he won’t tell me. (I do not go out and spend all his money). We meet the means test for Chapter 7 as he has been laid off recently.

How do I file Chapter 7 when my spouse refuses to cooperate?

Cole”

Dear Cole,

I hope you recognize that the underlying problem here is not the debt, but a tumbling dysfunctional relationship.

It seems to me if the debt is held in separate names then you should just throw in the towel and go file for yourself. This will discharge your responsibility for all the debt you are on the hook for.

It sounds like your husband is trying to punish you rather than work together to overcome this most unfortunate situation. And you can’t fix both of those issues with a technical and legal solution. Bankruptcy is not marriage counseling.

If you are filing jointly then the only hurdle you needed him for was to get through the means test, which it sounds like you have done.

Here is what I would do.

Call your bankruptcy attorney and ask if there is anything missing that would you prevent you from filing as an individual.
Sit down one last time with your spouse, fall on the sword again, and this time let your husband know you are sorry he is not willing or ready to deal with this unfortunate situation together, but you need to deal with it. Explain that the attorney is ready to move ahead with your filing individually and that is your intention.
This course of action on your part will only leave him with his own debts to deal with. You can elect to either help him out on making those payments or be a sympathetic and compassionate shoulder to lean on when he hits the financial wall.

This is all coming to a head for him. Not only will he need to deal with his anger over the past, his defiance in helping you move forward, but the mess that will descend on him from being unemployed and having his own bills.

Get yourself right and prepare to leave him, for him to leave, or for him to fall apart and need you to help pick up the pieces. In this case, it’s like being on an airplane, you need to put your mask on before the child.

What do you think? Make sense?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: How Do I File Bankruptcy When My Spouse Refuses to Cooperate. – Cole

Was My Wells Fargo Private Student Loan Really Discharged in My Bankruptcy? – Linda

Steve Rhode — Wed, 04 Nov 2009 19:37:55 +0000

“Dear Steve,

In 2007, I filed Ch 7 bankruptcy and I was told my private student loan w/ Wells Fargo was not discharged.

Move ahead to Sept 2009. I was served papers from a local debt collection lawyer in CO about collecting this debt. I negotiated a settlement and am awaiting to see the final paperwork concerning the settlement prior to giving the collection lawyer any money.

Well, I decided to check my credit report last night to see how this debt was listed, and to my surprise, both Experian and Equifax stated the debt was discharged in bankruptcy and the balance due was zero. My question is, is the collection from the lawyer legit? How do I know if this was really discharged in Ch 7? Should I proceed w/ the settlement (which is about 50% of the original balance)?

Thank you,

Linda.”

Dear Linda,

Interesting situation and I can see how it could be very confusing.

Private student loans can’t be discharged in bankruptcy but that doesn’t mean it wasn’t listed in the bankruptcy and then ended up being reported as included in a bankruptcy.

I seriously doubt the loan was discharged but it is easy enough for you to check. All you need to do is contact your bankruptcy attorney and discuss the situation with them. Maybe they will tell you by some technical miracle it was actually discharged. Don’t bet on that lucky outcome yet.

If the bankruptcy attorney confirms that the loan was not discharged, regardless of what the credit report says, then the settlement offer sounds like a good offer.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Was My Wells Fargo Private Student Loan Really Discharged in My Bankruptcy? – Linda

How Can We Get an Answer From Wells Fargo About Our Loan Modification? – Cheryl

Steve Rhode — Wed, 04 Nov 2009 17:27:16 +0000

“Dear Steve,

I have a rental unit (tri-plex) that went into foreclose in February of 2009 due to a death in the family, economic tragedies with tenants and loss of jobs and incomes. Our property went into foreclosure and since we could not sell if for the loan amount we started a short sale in June 2009.

On Sept 28th a tenant who was being evicted from one of the units retailiated and burned one whole unit and 1/2 of another unit down. The short sale was to close on Sept. 30th.

On Sept. 30th Wells Fargo sent out notices of denial stating that we were unable to retain a buyer and foreclosure proceedings were started again. On Oct. 6th they posted foreclosure notices on the two remaining tenants doors…who have now withheld their payments because they were told to look for elsewhere to live and that we were being foreclosed on and that they did not need to make payments to us anymore.

On Oct. 6th I called Wells Fargo Property Loss Dept to see what they wanted us to do. They stated that they would work with us and the Loss Mitagation dept as a liason and so that we could rebuild with the insurance money and keep the property. Our financial situation had changed since the inception of the short sale…we recovered from the financial stress of the death, were able to pay off a couple of credit cards, obtain a job. They asked if we could provide any money towards the past due and we told them $2000-$2500. They said they would have to check with another dept and get back to us. They did not.

They sent us a request for information which we completed and sent back in Oct 14th. We called them daily to hear if we even qualified for a loan modification. They said they could see all the paperwork was received on the 17th but that it all takes time and that it would be 4-6 weeks befo re the paperwork would get to the workout specialist. Now my question is this…does Wells Fargo really care if we rebuild the units as they do not seem to be in any hurry to try to get the ball rolling. ON top of that a customer service rep has now stalled the process just a little longer by requesting that we submit financial statements.

I don’t know about you but we are just regular people and we do not have financial statements. We take all of our paperwork to a tax specialist (EA) but he is not an CPA. He does not do them. Here we are nearly at the end of the year and they want us to take all of our info to a CPA and get financial statements? I offered to send them our tax return but that was not good enough..they want BS and P/L statements. That could be weeks before we are able to get those done and, thereby, delaying the rebuilding and loan modification even longer.

Wells Fargo is great to holding to their deadlines for getting information in and delay tactics but they do not move in a timely manner for us. How can we get them to “get a move on” with letting us know whether or not we qualify.

We do not want to rebuild just so that they can foreclose…what would be the purpose in that? If they told us we did qualify and that we would eventually get a loan modification then we would begin the rebuilding. Please help us with how to proceed. The longer we wait the longer it will that the property is in disrepair and probably will become in worse condition considering the time of year it is.

Cheryl”

Dear Cheryl,

Boy, what a mess.

First, let me assure you that the Wells Fargo machine at large does not care about your individual situation. Every customer in their system needs to flow through a process and they are buried in so much work and bureaucracy, like they are at every bank, it is hard or downright impossible to treat people fairly and as individuals. That’s a reality, not an excuse.

That being said I do think you’ve raised so very good questions that you certainly deserve answers to. I can understand why you would be hesitant to invest in the repairs when the place might get foreclosed on anyway.

Here are some things you might want to try and investigate.

If you have private mortgage insurance on the property contact the private mortgage insurance company and ask if they can help you to bring the loan current so you can then make the necessary repairs. Sometimes these PMI companies will do this rather than have to pay out on a claim to the mortgage company.

I would also contact a HUD certified housing counselor in your state and ask for intervention help. You can find the directory of HUD housing counselors online here.

Finally, I would send a clear and detailed letter by Express Mail to:

Dick Kovacevich, CEO
Wells Fargo Bank
430 Montgomery St
San Francisco, CA 94163

It is important to send your letter by express mail so it stands out and to the CEO. The CEO will not deal with your situation but it will quickly filter down to a level that can deal with it.

Also, there is no need to be nasty or rude in the letter. Just lay out the facts like you did here and ask for help to achieve the outcome you want.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: How Can We Get an Answer From Wells Fargo About Our Loan Modification? – Cheryl

How Do I Pay For Bankruptcy? – Justin

Steve Rhode — Wed, 04 Nov 2009 16:42:59 +0000

“Dear Steve,

Hi Steve, Ive been to my second lawyer yesterday to seek advice on doing bankruptcy. He was very informative and knew his stuff. He suggested a chapter 13 that would leave me with everything and possible payments of $100 a month or less for 3 yrs. I could get rid of my now $67k in credit card debt and my second mortgage of $25k, not a bad deal. The problem is it would cost me $3500 for the whole thing.

Should I take money from my 401k to pay the lawyer? I only have $1400 I can access, and a hardship withdrawal does not allow for my situation.

Justin”

Dear Justin,

Paying for bankruptcy is a perpetual problem. Some lawyers actually offer a payment plan that allows for you to make payments for their fee.

Otherwise I think you’ll need to do what you need to do to get what cash you can to put this behind you and move on. Hopefully between what you can get your hands on and a potential payment plan from the bankruptcy attorney you can get this moving forward.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: How Do I Pay For Bankruptcy? – Justin

Key Steps to Get Out of Debt

Steve Rhode — Wed, 04 Nov 2009 15:59:05 +0000

I’m working on a potential new application you can download, in my spare time, LOL. As part of that application I wanted to create a short list of what I felt the key actions or beliefs needed to break the bonds of debt and it got me thinking. Here is what I came up with. What do you think?

Key Steps to Get Out Of Debt

Acceptance
Action
Kindness

Here is what I feel is behind those key points.

Acceptance – To accept the situation is what it is and rather than be in denial and wishing for something different. See it clearly and deal with it.
Action – Make the difficult decisions necessary to eliminate your debt that will lead to a better future.
Kindness – Even in times of pain we need to give and receive hugs, kindness, and love. We need to lean on each other and remember there is always something to be grateful for every single day.

Steve
@GetOutOfDebtGuy

Source: Key Steps to Get Out of Debt

Home Inspection People Want Us to Pay For Services After Our Real Estate Agent Died. – Ella

Steve Rhode — Tue, 03 Nov 2009 17:20:43 +0000

“Dear Steve,

We tried to sell our house 2 years ago, agent agreed to pay for virtual tour, carpet cleaning and home inspection. The house didn’t sell and our real estate agent died months later from heart attack. Now home inspection company wants us to pay for the service done then.

I think they couldn’t find the agent to pay due to her death. We may be able to find the written agreement that stated our agent would pay for this. Home inspection company insists even if we find proof we should pay for it otherwise they will sent to collection company and will affect our credit. Do we have to pay for this? I don’t think our credit will be affected since they don’t have our credit card or social, but would they sue us and what would happen at court?

Ella”

Dear Ella,

Wow, that’s a new one for me.

I suppose the issue here is who contracted for the services. If the agent contracted for the service as part of her business services for you then you would not be responsible for the debt. If you contracted for the service on behalf of the agent and she agreed to pay for the service, you are responsible for the debt.

How much do they say you owe?

Their argument is going to be that you are the ones that received and benefited from the service but outside of maybe getting your carpets cleaned, if the agent is the one that ordered the services in order to assist her in her business, of selling your house, it does not seem you got a benefit out of it.

I think this is one of those issues that can be easily resolved by finding a local attorney and have them write a letter for you and represent you. I doubt that representation would be more than a few hundred dollars. So if the amount claimed is much higher, investing in a local attorney would be a smart investment.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Home Inspection People Want Us to Pay For Services After Our Real Estate Agent Died. – Ella

I Just Started Working With Take Charge America But Chase is Suing Me. – Mae

Steve Rhode — Tue, 03 Nov 2009 16:43:14 +0000

“Dear Steve,

Just received a summons from Chase to sue me for a debt that I owed. I notified them on last week about a hardship program that I just recently joined. I am unemployed. TakeCharge America has combined all my debts and will be making one payment from the unemployment benefits that I received. I will answer this court summons but what else can I do? I only have unemployment for income.

I thought I was being proactive by trying to pay them thru this company. If this doesn’t work, should I just file for bankruptcy? I’m at a lost.

Mae”

Dear Mae,

I took a look at the Take Charge America website and can see they look like a traditional credit counseling group. So I am assuming they placed you in debt management program.

What strikes me first is that you are enrolling in a debt management plan on only unemployment benefits. Do you have any other income that you think will be steady past the unemployment benefits? I’m concerned that launching into a long-term debt repayment strategy based on short-term only income is simply setting yourself up for failure with the DMP.

I suspect the debt situation had been brewing for a while. Chase doesn’t suddenly sue people just because they enrolled in a credit counseling program. You probably also have other debts you’ve accumulated as well and Chase is just the most pressing one at the moment since they are suing you.

What we need to focus on now is to readjust your priorities and not get freaked out about the debt situation. I know, easier to say than do. The priority right now is to make sure you can meet your necessary monthly obligations on what little income you have coming in. Next, if you have any money leftover after that you’ll need to save at least $50 a month in a savings account to start to build an emergency fund. Then, and only then, you need to look at how much money you have leftover to use for debt repayment.

In any debt repayment strategy we also need to consider the likelihood that it will achieve the goal of actually reducing the debt and accomplishing the goal of eliminating this pain for you.

So how much debt do you have in total?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I Just Started Working With Take Charge America But Chase is Suing Me. – Mae

We’ve Talked to Two Bankruptcy Attorneys But What Do We Do Next? – Brittany

Steve Rhode — Tue, 03 Nov 2009 16:21:54 +0000

“Hi Steve,

I have talked to two different bankruptcy lawyers about my situation. I would love your advice. My husband makes around 1200 biweekly and I am a server that is not doing so well in this economy. I have gone from making at least 100 a night to maybe 30-75 sometimes 0.

My finances are a mess and I can’t breathe anymore. We have a first mortgage of 99,000 and a HELOC of 101,400 that is completely used and closed. My house is at 213,000 on Zillow which is no where near what it was when we took out the HELOC.

We have two car payments, two little boys, and I have about 19,000 in credit card debt that I can barely pay and am behind. With that debt gone I could have a lot of breathing room, start saving money, paying everything in cash, and have peaceful nights.

Is this amount too low for bankruptcy? They suggested it, but of course any lawyer would, that’s how they make their money. What do you suggest. I would also like to file alone and not include my husband. These debts are in my name. Is it possible that they would take our house/ cars?

Brittany”

Dear Brittany,

The amount of debt really isn’t the hurdle, it is the impact the debt has on you.

I guess what concerns me the most here is that by eliminating the $19,000 will it make enough of an impact in your obligations that you can find some breathing room?

If the debt is in your name alone you can go bankrupt individually. Your husbands income will be used in the means test to determine if you can do a Chapter 7 bankruptcy or must go with a Chapter 13 bankruptcy.

I applaud your efforts to seek an opinion from two different attorneys. That’s a smart move.

The house is probably safe but I’m not clear on if one or both cars are in your name?

So what did the bankruptcy attorneys say when you asked them these questions?

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: We’ve Talked to Two Bankruptcy Attorneys But What Do We Do Next? – Brittany

What is Going On With Debt Relief USA and Its Bankruptcy? – James

Steve Rhode — Tue, 03 Nov 2009 15:10:11 +0000

“Dear Steve,

Im another victim of debtrelief USA and would just like some positive reinforcement regarding this situation please!! i am a 24 year old collge student with 2 jobs and this couldn’t have happend at a worse time for me! i got all my up dates from http://www.drusabankruptcy.com/ however they ceased to give updates as of 10/08/2009 and i would just like to know whats going on! i am so stressed that i wonder what this world has to offer me anymore! all i want is someone to help me by atleast keeping me updated on where i can find information etc! IM broke and cant afford an attorney also so that not a choice!

Where can i get current information of the debtrelief USA bankruptcy case??? is there a number i can call? do you have any advise that i can use???

James”

Dear James,

I can appreciate your frustration. You were a client of Debt Relief USA and they got shut down. But they also held money you had paid them. Unfortunately the money you paid that was allocated towards fees for their service is most likely lost forever. Funds that were held for settling debts may be returned but don’t expect all of those back. The receiver or trustee will have to take their fee for dealing with this mess from those remaining monies held.

Due to the 12,000 or so people impacted by the closure of Debt Relief USA there is no number for people to call for information or updates. It would just be too overwhelming for the trustee to deal with the calls.

The Office of the Texas Attorney General, Greg Abbott, is contacting you because you are either a former or current customer of Debt Relief USA.

As you may know, on June 18, 2009, Debt Relief USA filed for bankruptcy and as a result, Debt Relief USA is no longer in business and is being liquidated by a court-appointed trustee. The business will not be settling your debts.

The Texas Attorney General has filed a lawsuit against Debt Relief USA in state court and has also filed a proof of claim (which is a right to payment) in the bankruptcy court, seeking to recover in part a refund of all monies it alleges are “set-aside” funds (money held by Debt Relief USA to be used for settlement of its clients’ debts) paid by current consumers and all fees that were paid to Debt Relief USA by current or former customers. The Texas Attorney General alleges that Debt Relief USA operated an unlawful debt management company and that all contracts entered between consumers and the Debtor are void and therefore unenforceable and that consumers are entitled to receive a refund of all fees paid and costs.

PLEASE NOTE, HOWEVER, THAT THE ATTORNEY GENERAL IS NOT YOUR PERSONAL ATTORNEY AND UNDER TEXAS STATUTES IS NOT ALLOWED TO REPRESENT YOU INDIVIDUALLY IN THIS MATTER. If you have questions regarding your individual legal rights, you would need to consult a private attorney. If you wish to file your own proof of claim, you are not required to have an attorney.

IF YOU ARE A CURRENT DEBT RELIEF USA CUSTOMER (the company was holding your “set-aside” funds in order to settle your debts): The Texas Attorney General is working with the Chapter 7 Trustee to ask the Bankruptcy Court to refund your “set-aside” funds to you as fully as possible. Because of the limited funds in the estate, it is unlikely that you will receive a refund of any fees that were paid to the company.

IF YOU ARE A FORMER CUSTOMER OF DEBT RELIEF USA: Because of the limited funds in the bankruptcy estate, it is unlikely that you will receive a refund of any fees that you paid to the company.

In the event additional funds are found or recovered, however, further refunds to current and former customers may be made.

The Chapter 7 Trustee has asked the bankruptcy court to limit the notices that have to be mailed to you in the future to save money on copying, postage and mailing. If that request is approved, you will not receive any additional mailings from the Court regarding this matter unless you file a written request for notices with the bankruptcy court clerk’s office; rather, all information will be available to you on the web site www.drusabankruptcy.com.

Many of the questions that most consumers have regarding the status of the bankruptcy will be answered at the web site: www.drusabankruptcy.com. If, after viewing that web site you have other questions, you can write to the Office of the Texas Attorney General, Consumer Protection and Public Health Division, P.O. Box 12548, Austin, TX 78711 or send an email to public.information@oag.state.tx.us.

In the meantime, you may want to contact your creditors, inform them of your situation, and of Debt Relief USA’s bankruptcy. When you contact them, tell them that the case is pending in the Northern District of Dallas, Dallas Division, Case No. 09-33836.

The most important step you can take at this point is to make sure you have filed a proof of claim form, click here, with the court in this case so you have a chance at getting some money back.

These seizures of debt settlement companies have all been problematic and the common complaint from consumers is there is too little information flowing. This has been the case with the Hess Kennedy situation in Florida and the Allegro Law mess in Alabama.

The last update on activities in this case was:

The Meeting of Creditors took place on October 8, 2009. Under applicable bankruptcy law, this meeting was NOT attended by the Bankruptcy Judge. The meeting of creditors was presided over by the Chapter 7 Trustee, Mr. Newhouse, who placed representatives of the Debtor company, Debt Relief U.S.A. Inc., under oath and questioned them about the case. Counsel for the Trustee, Assistant Texas Attorneys General from both the Bankruptcy & Collection Division and the Consumer Protection and Public Health Division also attended and interrogated the witnesses. A transcript of the meeting is being prepared and will be posted once it is completed (anticipated within 10 days). The Chapter 7 Trustee’s accountants have been busy analyzing Debtor’s books and business records.

I have subscribed you to this page and you will receive updates from me when new information is available. I’ll post it in the comments section below. If anyone else would like to receive updates as well either subscribe to the comments or leave a comment below.

As far as what you need to do next, it’s probably bankruptcy.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: What is Going On With Debt Relief USA and Its Bankruptcy? – James

How Do We Deal With My 78 Year Old Mother and Her Chase Credit Card Debt? – Christi

Steve Rhode — Mon, 02 Nov 2009 21:32:26 +0000

“Dear Steve,

My mother is 78 years old and has one major credit card with Chase current balance is $16,575.00 . Mom is the only person on the account as our father passed away 25 years ago.

Mom has lived with me for the past 10 years. Her only income is her social security each month.

She always pays the minimum or a little more on her credit card each month so her credit is good. Unfortunately at 10.24% she is rarely reducing her balance.

My bother and I are willing to pay off her card and have her send us a check each month interest free until we are repaid. At the time of payoff we will cut up the credit card and ensure Mom only uses her debit card from her saving account for future purchases.

If my mother passes away prior to paying her credit card what happens to the balance owed?

I am not listed anywhere on her credit card but I am listed on her saving account so that if she is unable I can write checks for her. Do I have any personal risk to her credit card debt?

How do my brother and I negotiate a lower payoff amount for taking the age related risk away from Chase?

Christi”

Dear Christi,

The good news is that you have no personal responsibility for the debt. When your mother passes away the creditor can only look to her estate for payment, not you or your brother.

If you wanted to settle the debt you will probably need to let the card get 90 days behind before you can get a reasonable deal out of Chase. You should expect to have to pay about $10,000 in a lump-sum settlement and this settlement will result in bad credit for your mom.

The worst part about the process will be the collection calls and letters. They are just stressful to live through for most people.

The real question here is what kind of assets does Mom have laying around and is it a reasonable approach to spend $10,000 to settle this debt or will she potentially need that money to care for her in case you are unable to care for her?

There are options here but I just need a bit more information.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: How Do We Deal With My 78 Year Old Mother and Her Chase Credit Card Debt? – Christi

When I Came Back From the War I Went Nuts With My Credit. – Shawn

Steve Rhode — Mon, 02 Nov 2009 20:43:43 +0000

“Dear Steve,

When I came back from the war, I went “nuts”. I piled up huge debt gambling and drinking. Now I have $20,000+ in debt, most of it charged off or in collections. The creditors I owe are unrecognizable on my credit report because the debt was passed to a collection agency and/or charged off.

How do I know to whom I owe what? I have the means to pay them off over the course of a year but how do I approach them all at the same time to make arrangements? Will paying a charged off account do anything to help my credit (just courious, I will pay them anyway)?

Shawn”

Dear Shawn,

I suspect that if you did not get an official diagnosis of PTSD following your tour in the war, you probably suffered from posttraumatic stress disorder (PTSD). The reason I say that is because the appearance of both pathological gambling and problems with alcohol occur at higher rates of incidence in returning military members with PTSD than they do in the general population.

So before we embark on cleaning up this mess, are the underlying gambling and drinking issues now under control and have you been under treatment for PTSD?

If you want to pay off the accounts I would suggest getting a consolidated credit report, it’s the one I get for myself. Using this three bureau credit report you will be able to trace who owned the account originally and where it is now.

Armed with that information you can then use the debt snowball approach to best payoff your debt.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: When I Came Back From the War I Went Nuts With My Credit. – Shawn

We Were Turned Down By LendingClub.com. – Natasha

Steve Rhode — Mon, 02 Nov 2009 20:12:43 +0000

“Dear Steve,

I am married with two young children. We moved in with my mother with the hopes of purchasing a home to take advantage of the first time homebuyers credit. Once we were told that the requirements of the FHA were changed and we needed more down payment, we decided to put the house off. Now, we are doing our best to pay of our $25k credit card debt. All of our best efforts remain fruitless as once we get ahead, we have to take ten steps backwards. We considered the debt management programs, however, we do not want to destroy our credit by enrolling in one when we are hoping to purchase a home in the home coming years.

Although we cut our rent in half by moving in with my mother sharing the expenses and even paying off two credit cards. It feels like we are getting no where! We have 2 car payments which we cannot get rid of considering the miles we drive and the time limits we have (ie picking up kids, appointments). Unfortunately, we do not have health insurance and have a credit card as a back up if needed in this regard. We cannot loose this!

My husband and I make atleast $80k per year. In regards to our auto fees, it is about $1k per month, daycare at $450 per month, $750 in rent and misc expenses at about $1000- everything else goes to credit cards and still we get no where!

After reading a few of your advice columns, I decided to chack the lendingclub. However, we were declined credit. We have applied jointly at a few other places and declined. We are only able to make just a little over the minimum on the credit card payments. as we have about 5-6 cards totaling $25k,

Credit card companies are lowering our limits and increasing our fees. I know if we had one payment every month, we can pay about $1k-$1500 releaving of all worries in about 3 years.

Any suggestions on how we can get out of debt faster?

Natasha”

Dear Natasha,

Thank you for writing to me. I do know that the LendingClub.com minimum credit score is 620 or 660. If you were declined that tells me there are some problems on your credit report that might be bringing your score down.

If you have not done so recently, I would suggest you get a copy of your consolidated 3 in 1 credit report and make sure all the accounts listed are yours. If you order the report with the credit score option you can see exactly what your credit score is and why it is that score.

What concerns me about the debt management approach is that it is not your interest rates which are killing you, but the amount of your payment. In a debt management plan your monthly payments are the same or even a little higher than they once were. Who cares what the interest rate become if you can’t afford the minimum payment to begin with.

Without a loan or bankruptcy, I think the best way to repay your debt us using the debt snowball approach.

Truly I’m more concerned by the lack of health insurance than anything else. Without health insurance, just one accident or illness can wipe you out. So let’s say you do enroll in a debt management plan and for the next three years you are just making it by each month and making your payment.

Suddenly one of your children becomes ill and before you know it a ton of medical bills have piled up. Without health insurance those bills will eventually cause your debt management plan to fail and all the years of hard effort to be mostly wasted.

I’d rather see you shop around for health insurance, find out what that payment is and let me know how much it will be and how much you are currently sending in on the credit cards.

I suspect that getting health insurance but having to go bankrupt on your other debts is probably the way you’ll end up going here. Even if you go bankrupt you can rebuild your credit and buy a house in the next two to three years. A lot will depend on the size of your downpayment. Size matters. Bigger is better.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big hug.

Steve
@GetOutOfDebtGuy

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: We Were Turned Down By LendingClub.com. – Natasha

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