How to get out of debt?

[1ke]

I don’t think this would be an answer from a priest or the Church but here is what I suggest.

1. Take a look at your debt and deciede which debt you still need. (ie: car loan and mortagage would still be needed)
2. Then take all the other debt, such has unsecured credit cards, and don’t pay them. Nothing zero do not pay.
3. Start saving money, as much as you can possibly afford and still maintain your family’s health. You’ll have money because you are no longer paying your debts.
4. After a while the credit card companies will discharge your debt to a collection agency. The agency will buy your debt for pennies on the dollar.
5. After you have a little nest egg saved start negotiating with the collection agencies to pay off your debt.

Example, you have a $1,000 credit balance. You stop paying and over the next 6 months you save $700. The collection agency calls and demands $1,200 to be paid in full. You tell them you will send in a check for $700 today if they agree to mark the debt “paid in full”. They will agree every time.

This is terrible advice, and could result in:

• legal action by the creditors with a garnishment or judgment against her
• ruined credit rating/report due to delinquent status of accounts
• large fees and high interest accruing on credit cards
• inability to obtain credit in the future and/or paying a higher interest rate due to poor credit rating
• adverse impact on employment, insurance, housing due to the change in credit bureau reporting status as the accounts go delinquent

 

[Cory]

This is terrible advice, and could result in:

• legal action by the creditors with a garnishment or judgment against her
• ruined credit rating/report due to delinquent status of accounts
• large fees and high interest accruing on credit cards
• inability to obtain credit in the future and/or paying a higher interest rate due to poor credit rating
• adverse impact on employment, insurance, housing due to the change in credit bureau reporting status as the accounts go delinquent

Responses

1. Credit card companies don’t take you to court over small amounts. Only scared sheepish people think this way. You’ll never see the inside of a courtroom.
2. Credit rating will suffer, duh!
3. No large fees or other high interest will accrue, it’s like you didn’t even read my post. Another sheepish answer. See below for an example about how it works in the real world.
4. Credit rating again, duh!

Bottom line if your credit cards are maxed and your debt to income ratio is horrible you have a low score anyway. It’ll go a little lower, but you won’t be in any more trouble than if you hadn’t done what I said.

Anyway, it’s an option. Bankruptcy will look a lot worse on your credit report than a few collections.

Example:
The creditors will sell your $12,000 debt for $6,000 to collection agencies and then you will pay the collectors something in between, say $9,000.

 

[maria29]

Responses

1. Credit card companies don’t take you to court over small amounts. Only scared sheepish people think this way. You’ll never see the inside of a courtroom.
2. Credit rating will suffer, duh!
3. No large fees or other high interest will accrue, it’s like you didn’t even read my post. Another sheepish answer. See below for an example about how it works in the real world.
4. Credit rating again, duh!

Bottom line if your credit cards are maxed and your debt to income ratio is horrible you have a low score anyway. It’ll go a little lower, but you won’t be in any more trouble than if you hadn’t done what I said.

Anyway, it’s an option. Bankruptcy will look a lot worse on your credit report than a few collections.

Example:
The creditors will sell your $12,000 debt for $6,000 to collection agencies and then you will pay the collectors something in between, say $9,000.

I had a discharge on my account from 7 years ago and I am just now able to get a credit card that doesn’t have 25% + APR. My parents who filed bankruptcy actually had an easier time getting a low interest card before I ever did.

Again I highly recommend dealing with the credit card companies to negioate your account versus letting it go into collections. Also if you think they’ll ignore $12,000 worth of debt and not file claim then your sorely mistaken. My friend owed $7,000 and got taken to court!

At least a bankruptcy will fall off in 10 years, depending on the state where it occured you could have it on your record for up to 15 years.

 

[1ke]

1. Credit card companies don’t take you to court over small amounts. Only scared sheepish people think this way. You’ll never see the inside of a courtroom.

You cannot know what a creditor will do. They can, and they do, take people to court and obtain judgment and garnishment. So do collection agencies

1. No large fees or other high interest will accrue, it’s like you didn’t even read my post. Another sheepish answer. See below for an example about how it works in the real world.

The day the credit card is late, fees apply and interest rates are taken to the default level. Those fees and interest become part of the debt owed and continue to accrue throughout the collection phase, until paid. This can and does escalate rapidly, especially if the balance is high to start with and goes over the limit as a result of penalties and interest.

Bottom line if your credit cards are maxed and your debt to income ratio is horrible you have a low score anyway. It’ll go a little lower, but you won’t be in any more trouble than if you hadn’t done what I said.

The OP indicates they are not currently late on their credit cards. They do not indicate they are at the maximum on their cards. You do not know what their current credit score is, but since they state they are not delinquent the picture you paint of a rock-bottom credit rating is highly unlikely.

At best, you are irresponsible and uniformed. At worst, you are purposely trying to give the OP advice that could adversely impact her in numerous ways for a decade or more.

If advice such as this continues to be given out on this forum I hope the moderators shut it down or remove it.

 

[HouseArrest]

Here’s a ridiculous idea - I am just trying to think outside the box. When we are in a pinch, I make every cent count. Can you get a paper route with your kids? You’re on number six, don’t know how old the oldest one is but at least old enough for a joint paper route? You can spend time with him/her/them and have a little extra cash. Maybe you could split with the kids - they take some - they could pay for some of their own expenses like the Christmas gift swap at school (I have no idea if you’re even incurring some of these expenses so bear with me) or a special shirt or something they want - you could use the rest to pay the credit cards…

The reason I say this is that two of our kids got a “job” that pays them about $50 each during one of the sports seasons. I didn’t think much of it, but they are in charge of all their own Christmas shopping this year. It’s lightening the load, anyway. Also - I sell some of our kids clothes that are still in decent shape when the youngest kids have outgrown them and it can add up.

I know this is not a solution - and does not take the place of the other wonderful advice you’ve gotten on this thread about debt consolidation and all - but sometimes it helps to think you’re “doing” something rather than “waiting” to “not spend money” for long periods of time. In combo with all the other ideas, it might get you somewhere.

 

[daeve]

Here’s how I got out of debt.

1. For a week, write down every single penny you spend. If you get a soda from a machine, write it down. You pick up a package of diapers on the way home, write it down.
2. Look for things you can do without. You may not be throwing away $4 a day on Starbucks, but there’s probably something you don’t realize you do. I was amazed at how much I spent on books, even buying them at a half-price store.
3. Call the creditors. If you have a good history with them, they may be willing to lower your interest rate. Sometimes this works, sometimes it doesn’t. It’s pretty much what credit counselling does, and you may be able to do it yourself.
4. Look at the balances and rates on your credit cards. If the balances are about the same, start working on the one with the highest rate first. Pay as much as you can on that one, and make at least the minimum payment on the others. If the balances vary, pay off the smallest one first, then when it’s paid off, add that payment to the next smallest one. Keep doing this.
5. Don’t use those credit cards. I know, this is the hardest part. Do you have a washing machine? Maybe it’s time for cloth diapers. Again, I know, yuck. But you use them over and over, one time expense and better for the environment. My mother had 2 dozen diapers and no machine when I was a baby (obviously a really long time ago). She boiled them on the stove in a pot she bought at a second hand store. If you continue to use the credit cards, you will not get out of debt. I do use a gas card so I never have to worry about running out of gas, but nothing else gets charged unless I have the money to pay for it when I get home.
6. Make up a weekly menu plan. Substitute beans for meat a couple times a week. We have a store named Aldi here. I don’t know if it’s national or local, but the prices are so much cheaper I couldn’t believe it. The peaches I was buying for $1.99 a pound were 19 CENTS each there. Bread is 39 cents. The lettuce in a bag – same brand as the grocery store where it’s $2.79 – 79 cents. Base your menus on sale items. I still make soup every week and take it for lunch almost every day. Here’s my big splurge: I pay a little bit more for whole wheat pasta and brown rice. I’m diabetic and they make a big difference in my glucose levels. Avoid most convenience food. Real food is so much better, and with a little planning it can be less expensive.
7. Got Cable? If you have HBO or Showtime, dump them. Basic cable is pretty cheap. But even then, do you really need it? There’s not much I’d want my kids to watch these days. You could get movies from Netflix for a lot less each month than cable. Call forwarding/waiting, call notes…all that stuff is expendable.

Now, about credit counselling…it’s not as bad for your credit as people think. On your credit report, there’ll be a notation of MCC (managed by credit counselling) by the accounts they handle. Do NOT NOT NOT get involved with a profit making company. Many cities has an actual office of Consumer Credit Counselling. This is a non-profit company, and they will not rip you off. Bankruptcy isn’t nearly as bad for your credit as people think either. I’ve been in the mortgage business for 12 years. Some lender will never consider you credit worthy again if you ever declare BK. Others barely notice it. The company where I used to work processed loans for other banks. One well respected bank considers it to be on facet of your credit. As long as it’s 2 years from the date of filing (not discharge, filing…it could have been discharged 20 minutes before you called them) and your credit now is ok, they don’t care. The BIG bank where I work now auto declines any application with a BK on the credit report. To get an underwriter to look at it, a personal banker has to call us. Then during the manual evaluation (loans are decisioned by desktop underwriting now, unless there’s something wrong an underwriter doesn’t even see it) looks at the reason for the BK, 0 slow pays since the discharge which has to be at least 2 years ago, our bank didn’t lose any money and a current score over 700. It really depends.

The most important thing for you to do is figure out where your money goes, how to plug any holes, and pay off those credit cards. Try putting them in a zip lock bag, sticking that in a big tupperware type container of water and freezing them. You can’t use them on the spur of the moment. You have to plan to use it, and give yourself time to change your mind.

I’ll be praying for you. You’ll find a solution, but it won’t be easy. It’s easy to get into debt, but hard work to get out of it.

 

[masondoggy]

It’s my understanding that the OP is supporting his family with public assistance income. When it gets to the point where you’re using your welfare check to pay credit card bills, it’s well past time to file bankruptcy. That’s what bankruptcy is for!!!

The OP should be using every cent of that $$ to provide for his family, not put it in the pockets of the credit card companies.

My advice…call a lawyer, get the process started, gain some peace, sign up for night school and get on with your life. God bless.

 

[fellowChristian]

I have aunts and uncles and even my sisters have filed bankruptcy.I know alot of people who have had to file. I have never heard of any problems. Although we have never had to. There where times I wanted to.

My husband’s aunt filed twice! After the second time she waited 10 years and was able to to get a homeloan for 400,000.00 ! She has had no problems.

My sister just bought a car and I think its only been 7 years since.

I think they just scare you from filing.

I agree if you can pay off your debt, great!
If you need help Consumer Credit Counseling Service can help lower interest rates on most of your debts. Also you might want to call your debtors and tell them whats going on.Keep in touch with all of them. Call and make arrangements maybe they’ll lower their rates for you if you tell them your considering bankruptcy?

 

[LJN21]

I highly recommend that you go to www.daveramsey.com and find out if there if a Financial Peace University class near you that you can attend. It’s 13 weeks and teaches you how to get out of debt and stay out of it. It’s a VERY successful program run by a Christian man.

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