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| Debt Anything to do with debt including debt reduction, debt concerns, debt consolidation and how to get out of debt |
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05-12-2010, 06:36 PM
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Need advice 40k in debt...
Hi everyone i hope this forum can point me in the right direction.
I currently have about 40-45k in credit card debt. I been living check to check and feel like im never going to dig my self out of this hole. I currently still have good credit because i have never missed any payments. The problem is that i own a home and between the mortgage, utilities and credit card debt im not getting anywhere. I keep getting these debt mediation letters in the mail but not sure if they can be trusted. Even though my credit is good right now i have gotten to a point that i dont mind messing up my credit for the next 5 or 7 years as long as one of the debt services can really help by settling debt for a lower amount. I am not willing to sell my home or would do anything that would risk losing it. The latest company that sent me a letter was diamond financial group which claims that they can settle my unsecured debts. What do you guys reccomend? Also i should mention that going bankrupt is not an option for me i have already spoken to a bankruptcy lawyer. 
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05-12-2010, 07:26 PM
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Show us your budget, no one can tell you what exactly to do without seeing the entire picture. Debt consolidation companies can be a mixed bag, and why mess your credit up if you don't have to? List your debts and monthly budget, maybe there's a few things you can switch around to get rid of some of that debt.
Also do a little research on debt consolidation companies, and if you do go with one make certain that they're certified.
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05-12-2010, 07:50 PM
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Actually the letters that i been getting are for debt mediation they claim to be different from a debt consolidation company. I must want to make sure that its not some kind of scam. Any idea on how to research these companys? I have the 40-45k in debt and if i can cut the balance down that would be great. I understand that my credit could be ruined for the next 7 years but that doesnt matter to me. Since i already have the home and car that i want i could easily live without needing my credit for the next 7 years. I been paying all my credit cards on time but now that they all decided to triple the interest about 6 months ago, im looking for another solution.
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05-12-2010, 07:58 PM
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Focus on 3 areas
don't worry about consolidation- that is a solution to a specific problem and I still don't know the root cause of the problem 1) income- gross and net, and identify tax return status (large refund, small refund, self employed or other) 2) expenses- monthly and annual- list all expenses per month- this is your budget compare 1 and 2- do you spend 80% or less of what you gross? 3) debt- list all debt, interest rates, minimum payments, what you owe, when it will be paid off, and did you purchase a thing (like furniture or clothes), a service (like food or an oil change) or something else?
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05-12-2010, 08:25 PM
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My monthly income is 4,600.
Mortgage payment is 2400 45,000 credit card debt at a 29% interest rate. I been making payments of about 1200. Any reason why i shouldnt consider debt consolidation or mediation? Why pay the entire 45k if i dont have to. If i didnt have that debt i know that i wouldnt have a problem falling in to debt again. In fact i would never use another credit card ever again. If the downside of using any of the debt consolidation programs is that it would mess up my credit, thats not an issue for me. I dont see my self needing to borrow money in the next 10 years, as long as i can get rid of the credit card debt.
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05-12-2010, 08:29 PM
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The debt that i accumilated was over the pas 10 years. I was young and made alot of stupid decisions. Now im really looking for advice for another form of debt remediation since i dont qualify for bankruptcy. I hear of alot of people that just stop making payments on their credit cards and end up getting sent to collection agencys. Once the collection agency has it they basically settle for an amount less that what i actually owe. If i do this i just want to make sure that im not missing something or that some how the credit card company will garnish my wages or put a lean on my home.
Last edited by john2010 : 05-12-2010 at 08:47 PM.
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05-12-2010, 10:19 PM
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You say you won't ever need to borrow again, but as long as you have to pay over half your income towards that house - you likely will. It'd be hard, but the best thing you could do for your financial health is to sell the house and move in somewhere with all housing related costs (rent or mortgage, insurance, taxes) less than 28% (in your case - less than $1,288). That would give you at least another $1200 a month to pay towards eliminating the debt. Could be gone in less than 3 years. And morally you should pay the whole amount because you owe it. Did you not get $45,000 worth of products/services? Why should you not have to pay for them?
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05-13-2010, 05:44 AM
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If you are not willing to sell the house, you're pretty much stuck. The house is half of your income. If you live in a HCOLA, like I do, I understand that you might not be able to get a house for cheaper, but you might be able to rent a nice place, or buy a condo. You do not make enough in a month to have a house that expensive. Until you accept this, you won't get ahead.
I used to wonder how all these people in my state (MA) afforded all these houses that cost $1800 - $2400 a month. I mean, I make almost $50K a year, and I can't afford one. And then I realized, all of these people CAN'T really afford these houses. Most of them are drowning in debt and living paycheck to paycheck with no savings. Yikes. I'll keep my rented apartment, thanks. What are your other bills? You only listed your mortgage and income and cc debt. Do you have a car payment? Car insurance? Phone bill? Grocery budget? Entertainment budget? What is the exact break down of the cc debt? Is it all on one card? What can you cut out? What have you cut out? What kind of emergency fund and savings do you have? Why should you pay it all? Because unless it's a matter of life or death, you should feel obligated to pay back debts you owe, that's why. Surely, you have things to show for $45K in cc debt? Sell them. And tear up the cards. Have you sold any of your belongings yet? You make a very good income. The only way to get out of debt is to make some serious lifestyle changes.
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05-13-2010, 07:39 AM
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And if what is moral is not enough for you, then the morality police in the form of the credit reporters will let everyonje know that you do not make good on your debts. You need restructure your life to pay of these debts. Your home is way too expensive for your budget as others have said. Sell the house to restructure that loan then as you start that call the credit card companies and explain your plan. Ask nicely if they will lower your interest rate.
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05-13-2010, 07:44 AM
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Guys i really appreciate your help trying to set me up with a budget. But i have already cut back on any things that i was willing to get rid of. What i really need is information on these debt consolidation/mediation companys. Is this stuff legit? Are there any cons to it? The debts i accumalated are from when i was 18yrs old. If these companys can really settle my debts for a lower amount i would prefer to do that. Yes i know its not the moral thing to do and i'm not here to talk about morals. I have worked in a financial company for the past 10yrs and one thing that i have learned is that the people that are very well off didnt get there by doing the right thing 100% of the time. For the past 10yrs i been paying all my bills on time and have payed a ton of interest to all these cards. So if there is a way that i can legally lower my debts with a debt consolidation company i would rather do that. I just want to be aware of any negative affects that this may have on me.
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05-13-2010, 09:11 AM
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paid off 10k+ of cc debt when my income was barely 24k annually 2 different times. Paid off different 10k of cc debt 3 other times which much higher income. I never needed any credit consolidation, I just needed to cut back on spending. Each time I have had debt that high, it was paid off sooner than the time before. Your situation IMO is no different than my own. The most important thing is you need to decide to man up and solve your problems without help of other agencies. Some agencies are legit, some are scams, some hurt your credit, some damage your credit, and you have not cared about credit up to this point, so why let that stop you?
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05-13-2010, 09:36 AM
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Have you looked into transferring the balance of the cards to a lower interest or possible 0% card?
You say that you have made all of the cuts in your budget that you can think of. Please post your entire budget, and I bet a lot of people here will think of a few more things that can be cut. Your mortgage is half your income. It's killing you financially. Can you refinance, sell the home, move and rent it out, etc.? I would stay away from debt consolidation companies and other financial companies. They are not going to do anything or tell you anything that you can't do on your own if you are willing to make some sacrifices and stay dedicated to the cause of getting out of debt.
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MODERATOR Brian
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05-13-2010, 09:56 AM
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He is really not willing to sell the house (the #1 problem) and, tbh, it doesn't sound like he's sold all of the stuff he could sell. Essentially, he took borrowed money to buy things and doesn't want to pay it all back. Taking a loan costs money. That is why one should always think hard about what they charge because chances are, you're going to end up with interest and pay more than the item is worth. I am disturbed that the OP works for a financial company. Not so much because it's weird that someone who works in finance would be okay with owning a house they couldn't really afford and trying to walk away from debt they racked up… …but because he knows this could kill his credit score (yes, using a debt consolidation company will mark your account "settled" in most cases and that will hurt your score) and credit checks are common for people seeking finance jobs. If the OP were to lose his job (possible for anyone in this economy) he might not be able to get another one if his credit report is bad. OP, as others have said, these companies can not do anything you can't do yourself. They also don't guarantee that they will work. Often, if you can make the payments and you aren't missing payments the cc company will have no real reason to negotiate with you OR with a mediation type company. From what I have been told, these companies will even sometimes withhold your payments so you go into default because until that happens, the cc company isn't going to care. You can call them yourself and see if they will lower your rate. If not, you can look into taking out a consolidation loan and transferring the balances to a lower interest. If that doesn't work out, you can stop paying the cc and then try to settle but I would not recommend doing this since you work in finance and any future employer is going to review your credit when you apply for a job. I had almost 27K worth of debt a year ago. Today I am down to about $12K which amounts to a low interest payment of $287 a month. While I was paying this off, I managed to put away almost $6500 in savings as well (did the savings thing over the last 6 months). My credit score has continued to rise. When I last checked a few weeks ago, my FICO reported scores in the upper 780s on both major reports. And I only make half of what you do. I transferred some balances to lower interest rates. I started selling crap that I had charged (cds, movies, collectibles, some nicer clothing, etc.), I started eating cheaper food and I stopped wasting money on going out and doing expensive stuff with friends. Any windfalls of cash I came into went straight to paying off debts. This works.
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05-13-2010, 09:57 AM
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Go see a credit counselor if you must. It will cost you money because you earn more than most of their limits. Check out these federal websites:
Fiscal Fitness: Choosing a Credit Counselor U.S. Department of Housing and Urban Development (HUD) But still you should know that you sound very spoiled. You're total credit card debt is 72% of your yearly income and your house is way too expensive. Still you refuse to make a change that would help you live within your means. It doesn't sound like you are "going through a tough time". Instead it sounds like you are continuing the mistakes you started to make at 18 years old! And now you want other people to forgive you for it! Sorry everyone. This guy is just incredibly frustrating to me.
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05-13-2010, 11:06 AM
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 it's like going to the doctor and saying: "Doc, I need some advice. I want to stop coughing, but I won't give up my cigarettes." Doc: "Well I can give you a cough suppressant, but you'll likely start coughing again if you don't quit smoking. Plus if you quit smoking, you'd stop coughing a lot faster than with just the medicine alone - which may not even work. Smoking has all sorts of other bad effects on your health." "The cigarrettes aren't my problem doc, the coughing is. I just want it gone" Doc: "If you weren't smoking, your cough would already be gone." It's much easier to see when someone is addicted to cigarettes as opposed to being addicted to a house they can't really afford. If the OP didn't have this house, his debt would already be gone. It should have only taken 3-4 years, but instead - he's still got the same debt after 10 years.
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05-13-2010, 01:49 PM
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OP is asking if the consolidation companies will negotiate for him to pay a lower amount than what he actually owes. As far as I know, all they do (if they're even legit) is make it so you pay them one lump sum, which they then distribute to the debtors. You still have to pay the full amount of what you owe, correct? And that's assuming the consolidation company doesn't just keep all your money, which is what the dishonest ones do.
Oh and I agree--you have the means to dig yourself out much more quickly than you're doing! Try and find lower-fixed-rate balance transfers. Take out an unsecured personal loan (I did w/Cap One and it was 8.99% fixed interest and a fixed 5-year payoff, so I knew I wouldn't stretch the payoff out to 20+ years if I just paid the minimum.) Cut out more niceties than you have already. I understand if you don't want to sell your house and move, but you should be able to do other things to speed up your debt repayment. And this is coming from someone who accumulated debt from age 23 to age 32 ... sure it would be handy to weasel my way out of the debt, but debt forgiveness is for the very desperate. I know I can pay off my debt and still come out on top--I have the earning power to do it. So can you. So should you. I sympathize with being young & naive and making money mistakes, but I don't agree with trying to get out of facing the music! This is how we learn from such childish mistakes--own up to them and then overcome them.
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05-13-2010, 01:58 PM
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It is nice that you've cut back on the things you were "willing" to get rid of. Now it is time to cut back on the things you HAVE TO get rid of. If you don't do that, you are on a sinking ship with no lifeboat in sight.
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Steve * Despite the high cost of living, it remains very popular. * Why should I pay for my daughter's education when she already knows everything? * There are no shortcuts to anywhere worth going.
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05-13-2010, 02:53 PM
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You say you work in the finance industry, so did I. You should be VERY worried about your credit score. My employer randomly pulled credit reports on its' current employees. Do you really want to risk your job? Suck it up, make the tough decisions...sell the house, get a second job, cut ALL non-essential expenses...not just the ones you are willing to cut. You ask why should you pay the $45k if you don't have to...the reason is because you agreed to pay it when you applied for the credit. It's your responsibility, so pay it.
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05-13-2010, 02:56 PM
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I know I'm not really helping OP here, but one thing I'm considering is that he says he doesn't foresee himself needing credit for the next 10 years. That to me is awfully myopic. I could maybe see if someone said the next 2 or 3 years but 10 years is a long time!
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