Items in collection

[skylovessea]

My husband and I have acquired quite a bit of debt through unpaid negative bank balances, bounced checks, and credit cards. Not to mention my school loans and current tuition that is becoming a debt.

We are both unemployed and seeking jobs (hopefully I will hear something by the end of the week) and I don't want to start getting paychecks and forget about my debt. I want to start in the right direction.

I need some realistic suggestions on how to deal with the debt we have ended up in. I am not at home right now but I will update this with an exact amount once I can look through my files.

Regardless the amount, I need to know where to start. It is building up faster than I can handle and we can't pay much to stop it. I am becoming very overwhelmed.

[minnie1928]

I think this will be easier to address once you've given us some numbers to work with, such as balances, interest rates, and minimum monthly payments.

[skylovessea]

I think this will be easier to address once you've given us some numbers to work with, such as balances, interest rates, and minimum monthly payments.

The only thing is, they have gone to collection's agencies so they no longer have set interest (just late fees) and the minimum monthly payments have turned into pay the full balance now or else, basically.

I will definitely post the amount when I get my files.

[skylovessea]

I have added up all of our debt and it is as follows...

Total debt: $14,582


I have divided it up into the following categories...

Credit cards only: $2089
Current tuition: 639
Unpaid taxes: 158
Payday loans: 400
Student loans: 9816

[minnie1928]

I know that you are hoping to hear about employment later in the week, but how much money will you have to go towards paying these bills every month? Which bills have payments and which bills want their payment in full (collection accounts?)? For those that have set monthly payment amounts, will you have enough to cover those payments? Monthly payment amounts for those not demanding payment in full would be helpful too.

[skylovessea]

I know that you are hoping to hear about employment later in the week, but how much money will you have to go towards paying these bills every month? Which bills have payments and which bills want their payment in full (collection accounts?)? For those that have set monthly payment amounts, will you have enough to cover those payments? Monthly payment amounts for those not demanding payment in full would be helpful too.

(Hypothetically speaking, if I got this job)

After monthly expenses such as rent, utilities, savings, etc., we will have about $300 to put towards debt. Most of this is in collections and they are asking that we pay in full, but I plan on making monthly payments either way. I'm just not sure how to go about it without losing all my money at once.

[maat55]

The first thing you worry about is food, rent and utilities. Once you are working and are on top of your immediate needs you can go back to paying debt.

If possible, put your SL in deferment.

[minnie1928]

I agree, defer the student loan. As for the rest of the $300, I would probably save $100-150 each month as an emergency fund (try to get $1000). The remaining $150-200 I would divide up to the various accounts. I would lean toward paying the back taxes first, then the payday loan, then the tuition (is that bill still at the school or is it on a credit card?), then the credit cards. Here's my rationale:
1. The back taxes due is relatively small, get it off your back.
2. Same thing with the payday loan, pay it off and never go back!
3. Tuition - this is the tricky one, assuming that you are currently taking the class what will happen if you don't pay this right away?
4. Credit cards - send them either the minimum payment or some token amount. Once you've knocked the other items out then send all your money to them until it's paid off.

So it would look something like this:
Month 1 - $142 savings, $158 back taxes (paid off)
Month 2 - $125 savings, $150 payday loan, $25 CC
Month 3 - $125 savings, $150 payday loan, $25 CC
Month 4 - $125 savings, $100 payday loan (paid off), $50 tuition,$25 CC
Month 5 - $125 savings, $150 tuition, $25 CC
Month 6 - $125 savings, $150 tuition, $25 CC
Month 7 - $125 savings, $150 tuition, $25 CC
Month 8 - $108 savings (balance =$1000), $167 tuition, $25 CC
Month 9 - $22 tuition (paid off), $178 CC
Month 10 - $300 CC
Month 11 - $300 CC
Month 12 - $300 CC
Month 13 - $300 CC
Month 14 - $300 CC
Month 15 - $256 CC

If my math is right (I didn't put this in Excel, all off the top of my head) you are out from under these in 15 months and you have a $1000 emergency fund. This also assumes that they won't assess any further fees or interest, which is unlikely.

[skylovessea]

The first thing you worry about is food, rent and utilities. Once you are working and are on top of your immediate needs you can go back to paying debt.

If possible, put your SL in deferment.

Food is taken care of (we have Food Stamps). Our other monthly expenses RIGHT NOW include rent and utilities, plus gas and baby items.

Once we have jobs, we will have cable, childcare, and savings to consider as well. I am hoping we can tackle our debts without sacrificing our savings. That is my first priority at this point because of our lack of savings in the past. I've learned that it is essential.

[skylovessea]

Also, I have tried talking to Citi about my loans and they won't work with me at this point because I have past due payments.

[maat55]

Food is taken care of (we have Food Stamps). Our other monthly expenses RIGHT NOW include rent and utilities, plus gas and baby items.

Once we have jobs, we will have cable, childcare, and savings to consider as well. I am hoping we can tackle our debts without sacrificing our savings. That is my first priority at this point because of our lack of savings in the past. I've learned that it is essential.

You seem to be very young, as a Dave Ramsey fan, I recommend that you save up 1k for an EF, then focus on getting out of debt before further saving. You have plenty of time to build wealth after quickly getting out of debt.

[skylovessea]

I agree, defer the student loan. As for the rest of the $300, I would probably save $100-150 each month as an emergency fund (try to get $1000). The remaining $150-200 I would divide up to the various accounts. I would lean toward paying the back taxes first, then the payday loan, then the tuition (is that bill still at the school or is it on a credit card?), then the credit cards. Here's my rationale:
1. The back taxes due is relatively small, get it off your back.
2. Same thing with the payday loan, pay it off and never go back!
3. Tuition - this is the tricky one, assuming that you are currently taking the class what will happen if you don't pay this right away?
4. Credit cards - send them either the minimum payment or some token amount. Once you've knocked the other items out then send all your money to them until it's paid off.

So it would look something like this:
Month 1 - $142 savings, $158 back taxes (paid off)
Month 2 - $125 savings, $150 payday loan, $25 CC
Month 3 - $125 savings, $150 payday loan, $25 CC
Month 4 - $125 savings, $100 payday loan (paid off), $50 tuition,$25 CC
Month 5 - $125 savings, $150 tuition, $25 CC
Month 6 - $125 savings, $150 tuition, $25 CC
Month 7 - $125 savings, $150 tuition, $25 CC
Month 8 - $108 savings (balance =$1000), $167 tuition, $25 CC
Month 9 - $22 tuition (paid off), $178 CC
Month 10 - $300 CC
Month 11 - $300 CC
Month 12 - $300 CC
Month 13 - $300 CC
Month 14 - $300 CC
Month 15 - $256 CC

If my math is right (I didn't put this in Excel, all off the top of my head) you are out from under these in 15 months and you have a $1000 emergency fund. This also assumes that they won't assess any further fees or interest, which is unlikely.

As far as the student loans go, they are through CitiBank and they have become VERY strict. They are basically harassing me. Not to mention I didn't receive anything at the school that the loans were for. They actually made my GPA worse because it was distance learning and the teachers were not responsive during classes. Very long story. (My unsatisfactory experience is the main reason why I am hesitant to pay them.)

1. I will definitely get the taxes taken care of first. That has been worrying me to the core, haha.
2. I agree, the payday loan was a very bad idea and it has been on our back for about a year now. We are ready to be rid of it!
3. The tuition is very lenient. They don't add many late fees and they don't discontinue my studies. They are very understanding (thank goodness!).
4. The credit cards have all been sent to collections so when trying to reason a minimum monthly payment out of them, they just fuss and tell me to pay in full. Not that it is stopping me from just sending them little by little. The way I see it, as long as they get their money, they shouldn't complain.

Thank you SO SO SO much for mapping it out for me. It puts it in so much more perspective and makes it a lot easier to see it in a realistic light! You are an inspiration, to say the least!!!

[minnie1928]

Not to sound paranoid, but when you pay your payday loan and your CC (collection accounts) try and use a money order. I've heard horror stories where they will pull your bank information off the bottom of your check and draft further debits to your checking account to pay off the balance you owe them. The last thing you need is overdraft fees because they pulled money out that you weren't expecting. Also, stop talking to your collectors. Put EVERY communication in writing in case things get ugly down the road.

[skylovessea]

Not to sound paranoid, but when you pay your payday loan and your CC (collection accounts) try and use a money order. I've heard horror stories where they will pull your bank information off the bottom of your check and draft further debits to your checking account to pay off the balance you owe them. The last thing you need is overdraft fees because they pulled money out that you weren't expecting. Also, stop talking to your collectors. Put EVERY communication in writing in case things get ugly down the road.

Thank you. That is great advice. I try to pay everything with money orders anyway, because then I don't have to worry about fees if anything isn't covered.

And I definitely have learned to ignore collectors who call. I keep the letters and ignore the phone because they get very rude.

[SacredFaerie]

I agree with Minnie. Also you might want to hold off on that cable. Oftentimes if you have poor credit they will require a huge honking deposit.