Same Old Story II

[timetosave]

Hello all. Just wanted to update all of you on my progress.

I have contacted Sallie Mae and have been granted a 4 month deferment which has brought me current, and an additional 5 month deferment which will take me into January before I start paying that again.

I am three payments away from bringing my car current. I thought I only had two more to go but after speaking with GMAC and looking over my payment history I actually have three I will be making one tomorrow and then another once I receive my GHI refund for dd's braces (by the end of the month hopefully).

I just plugged in ALL of my debt, total is 72,610.00!!!!! OMG. I had no idea until I finally got up the nerve to actually sit down and look at it all my mistakes and take ownership of it all. Not as bad this time because I'm not looking at it to just shrug it off, but to pay it off.

I have contacted two of the three companies that have Judgments against me. I actually had my pay garnished this past week (which I think is the best thing because it assures that debt is paid on a bi-weekly basis and will be done much quicker) I know this is the worst thing that can possibly happen to my credit but I will survive this. I will pay off whatever is left on that when I receive my taxes this upcoming year (last year I got over 6,000.00) back which will more than cover this debt. So one of the companies has moved forward with the garnishment, a second is working with me to do direct deposit - 50.00 bi-weekly and the third will just have to wait for now.

I will have all of my credit cards paid off tomorrow. The balances were really low (I believe the largest one was about 300.00). So I am well on my way to being current on all accounts. I was hoping on being current by the 1st of October (would have been a great birthday gift to myself) but the car payment situation has made that impossible. By the end of October I should be current on ALL my accounts. Then I will be able to sit down and actually do a budget and look at all the outstanding debt I have and really begin to tackle it.

Question: I have several accounts on my credit that are well over 7 years old. Why is that, I thought credit only remained on file for 7 years. I have challenged it twice and the credit bureau will not take it off (I realize it still has to be paid, I just want it off my record). What do I do?

I also just filed for a consolidate loan to tackle $15,000.00 of that debt. I hope I get it but as bad as my credit is I doubt it.

G

[vsjhoc]

Congrats, sounds like you have really made some progress!

A few comments:

Originally Posted by timetosave

I had no idea until I finally got up the nerve to actually sit down and look at it all my mistakes and take ownership of it all. Not as bad this time because I'm not looking at it to just shrug it off, but to pay it off.

You've taken that very first important step -- facing the facts. So many people have debt problems because they bury their heads in the sand, don't open the envelopes, which makes the problem worse because the outstanding amounts keep growing ... it's a vicious cycle.

Originally Posted by timetosave

I actually had my pay garnished this past week (which I think is the best thing because it assures that debt is paid on a bi-weekly basis and will be done much quicker) I know this is the worst thing that can possibly happen to my credit but I will survive this.

Yes, you will!

Originally Posted by timetosave

I will pay off whatever is left on that when I receive my taxes this upcoming year (last year I got over 6,000.00) back which will more than cover this debt.

I suggest you adjust your withholdings so that you get more money in your take home pay each month, rather than letting the debt pile up and waiting until next year to deal with it.

Originally Posted by timetosave

So one of the companies has moved forward with the garnishment, a second is working with me to do direct deposit - 50.00 bi-weekly and the third will just have to wait for now.

Can you get the first and third companies to do direct deposit also, instead of garnishment?

Originally Posted by timetosave

I will have all of my credit cards paid off tomorrow.

Fantastic. Now cut them up!

Originally Posted by timetosave

Question: I have several accounts on my credit that are well over 7 years old. Why is that, I thought credit only remained on file for 7 years. I have challenged it twice and the credit bureau will not take it off (I realize it still has to be paid, I just want it off my record). What do I do?

If it's a judgment, the seven-year clock starts ticking from the date the judgment was entered -- not the date that the accounts originally went bad (= the date of first delinquency). If they were accounts associated with a prior bankruptcy, I think they stay until the bankruptcy is wiped (10 years from filing date). Otherwise, accounts that are in default or collections should drop off. Figure out (from your credit reports, statements, etc.) when you made your very last payment, and the next month (the first missed payment) starts the 7-year clock.

Little known fact: Under the law, the credit bureaus can keep adverse info on your file for 7.5 years, but their policy is usually 7 years.

Originally Posted by timetosave

I also just filed for a consolidate loan to tackle $15,000.00 of that debt. I hope I get it but as bad as my credit is I doubt it.

We've got to get you off the debt diet! Even if you got a consolidation loan, you are just trading one debt for another. It's also unlikely that you would qualify for a loan with lower interest rates than the rates on your outstanding debt. And by applying, you just added another inquiry to your credit file which lowers your credit score again.

Anyway, I'm confused. If the $6,000 tax refund check pays the three garnishments, you've paid off the credit cards and the car is almost yours, what's the $15,000 debt?

Kudos again on facing this head on. I know it isn't easy but there is light at the end of the tunnel!

[creditcardfree]

I'm worried for you on the direct deposit issue on one of those garnishments. I would never give a creditor my bank account information. From listening to Dave Ramsey, he would highly discourage this since the creditors often take more than you agree to...after all you do owe them the money...they could wipe out your account.

If you do give them a bank account to withdraw a payment from make it a new seperate checking account and only put the monthly agreed payment in that seperate checking account so they can't take more than you have agreed to.

I am so proud of you to have totaled up your debt. It is a great start to be honest with yourself on this. Just take it one step at a time.

[disneysteve]

Congratulations on moving forward and taking definitive steps to rid yourself of debt. Just adding it all up is a step that so many people don't do. That alone can be very motivating.

I totally agree about the tax refund. No way you should be having so much extra money withheld from your check when you are so far in debt. You need that money NOW, not next April. A $6,000 refund means you are overpaying your taxes by $500 every month. You need to change your withholding right away so that extra $500 comes home in your paycheck, and, of course, you need to use it to pay your debts. That will help a lot.

Good luck. Thanks for the update. Keep us informed of your progress.

[timetosave]

Hi guys.

vsjhoc - I've actually looked into the withholding situation. The only problem I have is the fear of owing at the end of the year. But I am working on figuring out what my cap is.

Unfortunately the garnishment has already been locked in. I've been notified both by the Sheriff dept as well as payroll. I'm ok with it, it hurts and I was really trying to keep up on the payments and not get this far but I was not able to so this is my punishment...but it is my debt and I am not trying to get out of it...

Credit cards have already been cut up...I did that the second day I was here

We've got to get you off the debt diet! Even if you got a consolidation loan, you are just trading one debt for another. It's also unlikely that you would qualify for a loan with lower interest rates than the rates on your outstanding debt. And by applying, you just added another inquiry to your credit file which lowers your credit score again.

Anyway, I'm confused. If the $6,000 tax refund check pays the three garnishments, you've paid off the credit cards and the car is almost yours, what's the $15,000 debt?

I realize I'm just trading one bad debt for another but it will wipe my credit almost clean. I guess that is what I'm saying...if I get the loan I can pay off all the charge offs and other neg. debt bringing it current and then pay down the loan. Increasing my credit score in one swipe. I want to be out of debt totally but we are talking about a lot of money, I won't be able to do it quickly (I did not rack it up quickly either...) The 6,000.00 does not pay off all three judgments it pays of the one that the garnishment is attached to. The other two I will have to pay off. The 15,000.00 debt are charge offs etc. on my credit report.

Thanks so much for your reply, I am taking everything everybody is saying to heart. I can and will do this. Can you believe that one person can have that much debt!

[disneysteve]

Originally Posted by timetosave

I've actually looked into the withholding situation. The only problem I have is the fear of owing at the end of the year. But I am working on figuring out what my cap is.

http://www.irs.gov/pub/irs-pdf/p919.pdf
This is the IRS publication all about figuring out proper witholding. You can use the info in there to figure out how many exemptions you should be claiming. Keep in mind that it is already late September, so if this year is like last year, you have already overpaid at least $4,000 in taxes. You should be able to decrease your witholding pretty drastically for the remainder of the year and still come out okay. But you might have to readjust after the first of the year.

It seems to me that your credit score shouldn't be your primary concern at this point. Your focus needs to be on repaying debt, staying current with all your obligations and living below your means from this day forward. If you do those things, the better credit score will just naturally follow.

[timetosave]

Hi Steve - I will be making twice as much as I made last year (my taxes were only for 1/2 the year) so I have no idea where that leaves me. I will use your link now.

I guess I don't understand the repaying debt/credit score information. I am concerned with repaying my debt, the benefit of doing it in one quick swipe is that it will improve my credit score. I have so MANY accounts that it will take me forever to increase my credit score even a little. I'd just like to see all those accounts be reduce to only 3 manageable ones.

[vsjhoc]

I agree with creditcardfree re the direct deposit issue -- set up a separate account for paying that debt only. Don't give them your everyday account details.

I totally understand your wanting to pay off the debt in one fell swoop. Actually, it would not improve your credit score that dramatically. The score measures performance over time, and my understanding is that it is designed so that big payoffs don't improve your payment history. The theory is that you could get the money from anywhere once (a consolidation loan, a friend, a tax refund, lottery win) but it doesn't prove that you can pay consistently on time, on a regular basis -- which is what credit scoring is (almost) all about.

Anyway, best of luck and keep us informed!

[vsjhoc]

Originally Posted by disneysteve

It seems to me that your credit score shouldn't be your primary concern at this point. Your focus needs to be on repaying debt, staying current with all your obligations and living below your means from this day forward. If you do those things, the better credit score will just naturally follow.

Totally agree with Steve on this one also.

To calculate withholdings and net pay, etc., try also http://www.paycheckcity.com.

[LuxLiving]

...AND if you get your life back on track where you are paying with cash, timetosave, then the creditscore becomes more of a moot point, doesn't it?

[timetosave]

I guess I'm not advanced enough in my thoughts concerning money for me to understand the 'no need for credit' concept.

I just can't imagine not having credit. I hope to get there, believe me, but I'm still green. We need credit for just about everything we do...buying a car, buying a house, college...

I pay for everything right now with cash - have not used a credit card since coming to this board. But I don't see how that translates into not needing credit...please help me understand this.

thanks

G

[LuxLiving]

Well, you may need a better credit score in the future, but as I understand from your prior posts, you've got a car and a home to live in, so the big two are covered for now. Just seemed you were placing a larger priority on getting the SCORE up instead of getting your head above the water. Head up first, then later you can work on rebuilding the credit score.

By getting current and keeping current, and getting some ahead of needs as in building up your emergency fund, then, the credit score will follow Over Time.

And will become less of a priority.

I don't think another loan is what's going to take you to the promised land is all. Seems like you're looking for salvation from the lenders instead of knowing that keeping up with it yourself is an inside job. Just my two cents.

I do know you are trying very hard and have already made a lot of headway. Kudos for making that call to GMAC. Never easy!

[MonkeyMama]

Originally Posted by timetosave

I guess I'm not advanced enough in my thoughts concerning money for me to understand the 'no need for credit' concept.

I just can't imagine not having credit. I hope to get there, believe me, but I'm still green. We need credit for just about everything we do...buying a car, buying a house, college...

I pay for everything right now with cash - have not used a credit card since coming to this board. But I don't see how that translates into not needing credit...please help me understand this.

thanks

G

First, good luck - you are making a tremendous first step!

& 2 - no one can tell you in one post how to live without credit. I did discuss it in my blog a day or 2 ago. BUT just stick around here and you will slowly learn over time. All I can say is - baby steps. IT certainly will not happen over night. For me it has been a lifelong philosphy, and I Can't imagine taking the leap from using credit to not. & even so have had my own stumbles.

Keep your chin up... You can do it!

[timetosave]

Originally Posted by LuxLiving

Well, you may need a better credit score in the future, but as I understand from your prior posts, you've got a car and a home to live in, so the big two are covered for now. Just seemed you were placing a larger priority on getting the SCORE up instead of getting your head above the water. Head up first, then later you can work on rebuilding the credit score.

By getting current and keeping current, and getting some ahead of needs as in building up your emergency fund, then, the credit score will follow Over Time.

And will become less of a priority.

I don't think another loan is what's going to take you to the promised land is all. Seems like you're looking for salvation from the lenders instead of knowing that keeping up with it yourself is an inside job. Just my two cents.

I do know you are trying very hard and have already made a lot of headway. Kudos for making that call to GMAC. Never easy!

Thank you. I'm all about getting that credit paid of. With that comes a better score, and maybe you are right...I need to re-think my motivation. Am I so motivated only because I want to go into debt again...I guess that's not very smart...

I would at some point love to own rental property, so I guess the credit score is important. The woman I am working with at GMAC has been very kind thus making it much easier to deal with...the initial call..that was hard, but I was not sleeping at night worrying that someone was going to take my car away...getting up first thing and peeking out the window, it was insane. I've learned so much here. I just love this board.

G

[timetosave]

Originally Posted by MonkeyMama

First, good luck - you are making a tremendous first step!

& 2 - no one can tell you in one post how to live without credit. I did discuss it in my blog a day or 2 ago. BUT just stick around here and you will slowly learn over time. All I can say is - baby steps. IT certainly will not happen over night. For me it has been a lifelong philosphy, and I Can't imagine taking the leap from using credit to not. & even so have had my own stumbles.

Keep your chin up... You can do it!

This is a very supportive board. I don't think I would have gotten this far without all of you.

Thank you so much

I will post more as the situation changes.

G

[boefixepa]

So glad I clicked on this post! It's wonderful to see you taking charge and starting to make a change!

I am all for see if you need to change your withholdings, but I worry that because last year was only 1/2 a year you probably will not be sitting as well this year as you will have a considerable higher taxable income. So make sure you are okay before changing your witholdings.

KEEP UP THE GOOD WORK!

[LuxLiving]

A good article:

http://www.smartaboutmoney.org/nefe/...ey%20Today.pdf

[timetosave]

Good morning all.

Hi Lux. Thanks for the article, I read the entire thing. I'm absorbing all of this like a sponge. I am even signing up for economic/finance classes at the university I work at in order to get more knowledge.

I will post more as things change...I have to call in a payment to GMAC

G

[greedy4chips]

Hi timetosave,

I am glad to see things are heading in the right direction for you!

You shouldn't worry about your credit score so much, since your eventual goal is to pay for everything with CASH! In the meantime stay current with everything and your score will go up slowly.

I agree that you should never let them have access to your checking account to do withdrawals since they can and will take more than your agreed upon amount. I think you need to get a second checking acct and have the 1st acct auto deposit whatever amount is needed monthly to cover your monthly payments to the creditors.

IMHO garnishing wages is better then letting them have access to your checking.

If you need help with your W4 witholding and feel comfortable posting your current YTD pay and YTD Fed taxes paid, along with your expected mortgage interest paid for this year someone here should be able to help you get the proper witholding. You should be able to keep $110 more per week ($220 biweekly) and be fine, but since you paid in so much already this year you could probably keep all your fed taxes and be fine for the year and still get a refund.

Keep up the good work!

[timetosave]

Hello all. Just wanted to let all of you know, with cutting back drastically (daughter and myself) on spending, by paying for everything with cash for the past what...3-4 weeks, I have managed to start my emergency fund.

I deposited 250.00 (can't believe I had that left) into my Credit Union for now (I'm doing the research on other accounts) but that is my beginning amount. Due to the fact that I have never in my entire life even contemplated having an emergency fund, this is a huge step.

I'm still not current on my car but am working closely with GMAC and will get there. The student loan is in deferment until January (allowing me to breath for a little while and get other things caught up).

Again, I will post as things change (and they are rapidly). Thank you all so much for your help. I'm sleeping so much better at night.

G