Putting Yourself In A Debt-Reduction Mode

Putting Yourself In A “Debt Reduction” Mode

Just as there are many different kinds of debt, so too are there many different varieties of debtors. Many people who carry debt can trace that back to a boatload of consumer credit card purchases, and after some time, they don’t even remember what they purchased to cause the debt.  Perpetuating the cycle of getting into debt and repaying then getting into deeper debt, is unfortunately normal for many; it was for me. But the moment that I decided to get out of debt, having a full on debt reduction frame of mind made a world of difference.   […]

debt consolidation a right choice

Tips for Choosing How to Tackle Your Debt

One of the most common questions for people seeking debt relief, is whether or not debt consolidation is the right choice, but there is no definitive answer this question.  Your financial difficulties, even though they might be the same as someone you know, might require a a different answer depending on your situation.  For some, debt consolidation might be the answer.  For others a debt repayment plan might be the best solution.  For still others, bankruptcy, yes, bankruptcy might actually be the best choice. […]

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Save on Core Expenses to Help Get Out of Debt

When we find ourselves mired in debt, we try to do all that we can to stave off those bankruptcy lawyers and rectify the situation. We take on a second job, look to consolidate, and cut all unnecessary expenses. It goes without saying that the new car, new smartphone, and Caribbean vacation are probably not the best purchases for someone trying to emerge from debt.

Few people, however, think to cut those expenses that ultimately matter most: the core expenses. These involve rent, utilities, food, and transportation costs. While all of these expenses are necessary, they also, usually, have some fat that can be cut. Here are some ideas: […]

Debt Consolidation and Debt Consolidation Companies

Debt Consolidation and Debt Consolidation Companies

Debt consolidation is by no means a big mystery. In fact, it is, at least on paper, an exceedingly simple concept. With the help of a debt consolidation company, the debt consolidation procedure essentially renegotiates and then combines all of your obligations into a lump sum handled by the company. As a result, you will have cleaned up and simplified your obligations and the structure of your debt will most likely have improved – in many cases changing from comparatively high short-term repayments to smaller amounts payable on a more long-term timeline. […]

Toni Braxton - Celebrities File For Bankruptcy Too

Celebrities File For Bankruptcy Too

We rarely discuss the big “B” word here but bankruptcy is always an option when your debt is far above your ability to repay it. While the average Joe might be afraid to file bankruptcy, celebrities don’t have that problem. Not only have well-known celebrities filed bankruptcy, but some have done it more than once. Here are some of the most famous celebrity bankruptcies of 2011. […]

Do-It-Yourself Negotiation of Credit Card Debt?

Do-It-Yourself Negotiation of Credit Card Debt?

On a somewhat regular basis, posters on my forum ask questions like “Company XYZ will negotiate my settlement for 15% of my current debt, is this a good price?” or “The debt settlement company is non-profit so they must be legit, right?” The answer is a big fat “NO!” for both. The truth of the matter is that with a bit of research, debt negotiation is something you can do on your own without paying a dime. […]

Debt Consolidation companies

My Debt Consolidation Experience and Rules

Did I ever tell you guys that I had previously paid off over $20K in debt way back in my early 20’s? No? Well that’s another story for me to put up here some day, but that experience taught me loads about debt consolidation services. If you find yourself in debt and are considering a debt consolidation or their services, please read this article before picking up the phone. […]

What Are My Goals for 2011?

Real Life: Foreclosure Easier Than Loan Modification?

I have a friend that has fallen on hard times. Well, it’s not so much that she has fallen on hard times, but her that her husband’s business is failing and he refuses to let it go. Instead of letting the business close he has taken money from his wife’s 401K, advances off her credit card, and bill payment money to prop up his business. They have a 12 and 24 year old. The responsibilities of the running the household has fallen onto my friend. She pays all of the household bills including the mortgage, utilities and credit cards; has loans to put the older child through school; and is attempting to finish a certificate course to improve her income. I applaud her, but I know that the stress is weighing heavily on her.

A few months ago she confided her financial information to me. I didn’t judge because I thought that as a friend it was my responsibility to listen, then if she needed advice to offer her my opinion when she asked. Her situation was this:money house - Real Life: Foreclosure Easier Than Loan Modification?

  1. Her husband had taken an 8K advance from her credit card and never made a payment. The account was now overdue and the bank was calling her. I asked her if there was any that she could pay it or set up a payment plan. She said no.
  2. She was about 1.5 months behind on her mortgage and could not catch up. She had an adjustable rate mortgage that she paid late every month.
  3. Her son was no longer in school full time, but she had over 20K in student loans that she was responsible for paying. Her son was not working.
  4. Her husband was not contributing financially to the household
  5. She had filed bankruptcy roughly 8 years earlier from bills that her husband had accrued.
  6. She had loans on her 401K that would not expire until October.

It was a tough situation but I gave her the following advice.

Since she could not pay the credit card and it was already over 6 months late the account had already been charged off. At this point since there was no way for her to pay the full balance, she should not worry about the cards but tell their collections department that they could not call her at work. I told her to ask them to close the account and agree to a settlement. They agreed to a total that was 1/4 of the card balance. Keep in mind that the husband had taken the full amount as a cash advance very shortly after she received the card.
THE RESULT: She was put on a payment plan for the agreed on amount and the credit card company sent her a 1099 for the balance that she did not pay. Thus, this was counted as income that she had to include on her taxes.

For the house I asked her how much her mortgage payment was. She also had taxes and utilities to pay and she was often one to two months behind on those bills as well. When we did the math on selling the home and renting, her mortgage was actually less than or about the same as if she rented a 3 bedroom apartment and paid utilities. Part of the issue was that the value of the home had fallen since she had purchased it, and they had taken additional mortgages on the home than the original one. I asked her to call the bank and see if she was eligible to refinance the loan at a fixed rate or if she qualified for a modification.
THE RESULT: She was not eligible for either since her credit rating was low and she was not behind enough to qualify for a modification.

Regarding her husband’s business I told her that he should sell it if he could and hire himself as an expert to the following owner or to another business. If not he needed to close the business. If he was not able to do either she needed to separate all of her finances from his to protect herself and the children.
THE RESULT: Her husband would not entertain the thought of closing or selling the business. This can happen when someone becomes too emotionally attached to something that could bankrupt his family and leave them all out on the street. Unfortunately his priority has not shifted to his family yet. On the other hand had never filed joint taxes with her husband and after their bankruptcy did not have joint accounts with her husband.

Regarding her son, I thought that it was time for him to grow up. He needed to contribute to the home. She spoke to him about this and he began contributing $100 every two weeks to the home.


When Bankruptcy Is An Option

I typically don’t take myself too seriously on this blog but this is probably the one time that I will. We haven’t discussed the pink elephant in the room. I like to call her Bankruptcy. Yes, I know that she’s a little fat and has bad acne, but big girls need love too!

I’m inspired by this post from a comment that I received from someone who is over 500K in debt. Yes, let’s all inhale that number together. I did just say half a million dollars. I can’t even wrap my brain around a number that huge but I realized that there are many people out there faced with astronomical numbers who have no idea how to even begin tackling it. So let’s all face this number together and see what our options are.

As you might know, not all debt is created equal. I like to use four different categories that may overlap. I call them government debt (aka The Man Owns You) and non-governmental debt; secured debt and unsecured debt. Let’s talk about each for a second. When you owe The Man money it won’t go away. This means IRS, judgments, liens, etc. We supposedly don’t have such a thing as debtor’s prison but you might want to ask Wesley Snipes about that. When you owe The Man, The Man owns you. Mind you, they might be willing to settle, but for the most part you will have to pay. Non-governmental debt just means that you owe someone, but it’s not The Man. Non-governmental debt can be either secured or unsecured.

Snowflakes Are Falling

Have you heard of the snowflake method of debt repayment? It’s basically a a variation of the snowball debt repayment method. Jaime over at I’ve Paid for This Twice Already says that it is “small amounts of money saved or earned that are applied directly to debt or into savings before they melt away into who knows where”. For me that works out to every $20 that doesn’t get spent paying someone or the Chinese food takeout guy. Do you know how much that stuff adds up?!