Need some debt advice

Hey guys.

I recently signed up for a debt counseling service and they are in negotiations with my credit cards. I am 26 and make about 35000/annually. I am roughly 10000 in CC debt. I'd like to stick with the counseling, but I'm kind of freaking. I keep getting calls from my creditors. The statements are now showing I am delinquent, and 2 of my 6 cards are declining to enter the program. Is there anything else I can do? Is it possible to get a loan from the bank to pay off the cards, and re-pay the bank doing monthly payments at lower interest? I REALLY don't want to file bankruptcy, but this credit program doesn't seem like its that much better, considering I can't have a card for the next 5 years of the program. I really have no idea about finances (obviously) and would like some type of guidance. Thanks, guys.

Good question. I'd like to know what to do about CC debt as well. My credit is pretty bad at the moment. I'll have all my debt paid off in the next 3 weeks but that won't change the fact that I've got a poor credit report. I'd like some advice as to what I can do to help me get a mortgage without paying some crazy interest rate... that and how long could it take for my credit to repair itself?

Quik, a friend of mine got himself into some big trouble bailing out family etc. a couple of years ago and went with one of those companies. As far as I know he hasn't had any problems, but there are a lot of those companies out there and I'm sure some are better than others. Maybe someone else on the board has some first hand info.

Gip, I guess pretty bad is a bit of a subjective term, but in general if you are considered a credit risk it will be very hard for you to qualify for a mortgage and get the best available rates. Give a reputable mortgage broker a call and let him run a credit check to obtain you credit score. He could then tell you where you would fit in. Then maybe check into some government programs and see if they can be of any help.

"I recently signed up for a debt counseling service and they are in negotiations with my credit cards. I am 26 and make about 35000/annually. I am roughly 10000 in CC debt."

Can u access US a budget of your rent, electricity, car pay, car ins etc...??? I personally don't think u needed the DEBT COUNSELING. U could have done that on your own.

"I'd like to stick with the counseling, but I'm kind of freaking. I keep getting calls from my creditors. The statements are now showing I am delinquent, and 2 of my 6 cards are declining to enter the program. Is there anything else I can do?"

Fuck the creditors. It is a SCARE TACTIC. Simply tell them u will not correspond with them over the phone...get their COLLECTION fax no and send them a letter stating not to receive anymore phone calls. U will then be receiving letters. Watchout for BULLSHIT COLLECTION tactics. NEVER DEAL WITH THEM OVER THE PHONE!!!

"Is it possible to get a loan from the bank to pay off the cards, and re-pay the bank doing monthly payments at lower interest?"

With a CO SIGNER YES. MOM or DAD will do. However...10000 in the whole is not bad. U can pay that off within a 2 year period.

You need to ask yourself a few questions, before you decide what path to take.

First of all, what is your cash flow per month and what are your fixed expenses without the debt? Secondly, what can you do to bring your fixed expenses down? If you bring your fixed costs down, will it leave you enough money to make payments AND put money in the bank? How did you get into the trouble? Was it from overspending or did unforeseen circumstances arise and you were unprepared for them? How secure is your job?

10k in debt should be manageable if you aren't already squeezed with high fixed costs. Even at 24% interest, the interest is only 200 dollars a month and the principal is a fraction of that. If you're behind that much on the cards, you must be having problems with cost of daily living.

If your cash flow isn't sufficient to cover your fixed costs and the debt service, then BK is probably the way to go. You'll only go further into debt and since your credit is already fucked, it will be harder to find someone to loan you the money to bail you out.

But I would evaluate very carefully my living expenses first. If you can cut costs by lifestyle changes, (smaller apt. or roommates, get rid of cable tv, eat at home, 7-11 coffee instead of Starbucks, coupon shop, cheaper clothing etc.) and cash flow enough to pay the creditors and put money in the bank for the rainy day, you should work it out with your creditors, because its the right thing to do.

The creditor who says that they won't work with you is full of shit. They don't want you to declare BK. If for some reason they decide to try and take you to court, then BK would be a method of defense.

Judo Guy got the correct....Do you have stuff you can sell? Can you work a second job? Cut down your lifestyle to a minimum for a year. Are you making car payments? Maybe you can sell your car? I find it soemhow ironic that in your post you arent happy with the debt service because you cant get another Credit Card...did it ever occur to you thats what got you in this mess to begin with? You might be one of those people who need to stay away from Credit Cards.


Heman is correct...everybody else is too :)

Every1 here has the CORRECT. JUDOGUY has the best advices. LIFESTYLE cut is the key. If u're use to buying DIESEL shoes( 100 a pop )...cut down to GBX shoes( 50 a pop )...if u shop at FCUK...u betta start shopping at H and M or the GAP. Food wise...eat out once inawhile...the other times at COSTCO/HOME. U have a 20000 car...sell it and get a 10000 used car. Remember this is all temporary to get u out of DEBT. Drink before u go out=save TONs of money...go to more HOUSEPARTIES instead of the clubs...save tons of money. etc...

I am curious why no one suggested filing for bankruptcy..

How bad does it have to be to file for bankruptcy.. plus what is the
outcome that one can expect in 1 year, 5 years and 10 years? Would it
be impossible to get a home loan?


Threaten to file for bankruptcy. Tell them that is your only choice if they don't drop or eliminate your interest rates.

Don't be scared to play a little hardball with them. They want their money, first and foremost. If you file for bankruptcy, they get nothing.

Make sure you call them and communicate with them. Don't ignore their calls.

Mark

Thanks guys. I really appreciate the feedback, and I'm weighing my options after reading the posts. I don't know much about bankruptcy. What would happen? My credit will basically be shit until I'm out of the debt management program (5 years), and I won't be able to have an emergency credit card, or maybe even a debit card. How would this be different from bankruptcy?

anyone have any success stories?

The reason I didnt suggest filing for Bankruptcy is because quik isnt bankrupt...with his income and the debt owed I dont even know if a judge would sign off on it.

parklife asked,

"I am curious why no one suggested filing for bankruptcy.."

Well, I mentioned that might be his best option if he couldn't cash flow enough to pay his bills and put money in the bank.

But there's a more important lesson here.

Debt/Leverage can be your best friend or your worst nightmare. It depends on how you use it. Too many people use debt to finance a lifestyle that their incomes don't justify. The only time anyone should use debt is if they think their rate of return will far exceed their debt service or for large purchases that are necessities in life (car, etc).

Large debt service puts too much control of your life in your creditor's hands. Worse, if you have a large debt service already, and shit really hits the fan, it just makes it less likely that you'll get someone to loan you money when you need it the most. Wanna know why most companies go under? They used leverage at the most inopportune time. Same thing with people.

If you're buying things with the credit card and your saving less than 5-10% of your income or your savings account is virtually zilch; brother, you are making a mistake.

Pay yourself first, before you start thinking about paying someone else. There is peace of mind, when the bank account gives you cushion for those unexpected events that happen in everyone's life. Not only that, but all business and investments are cyclical in nature. There will be a time when cash is king and great financial opportunities will abound for those with cash. Be one of the people with cash. Be able to keep your head, while those around you are losing their's.

What quik should do is figure out his net income on a monthly basis. Try to live a lifestyle that takes up 80-90% or less of that income, and bank the balance of it. Time eventually runs out when you are spending more money than you make. The pleasure of spending too much is not worth the pain that comes with trying to manage the debt.

This post by judo guy should really be printed and given to every high school kid upon graduation and should be written on the back of every credit card (like a warning on cigarette packs).





quick if you have a 401k and you could get a general loan (technically from yourself)that you basically repay back into your 401k depending on the plan the max is 5 years. there are advantages and disadvantages to this but it is an option. ither than that, get a second job.

Hey Quik,

Take a look at this article and take the steps to make sure the debt counseling company you are dealing with is reputable....apparently that industry is rife with dishonest companies.

http://tinyurl.com/3xvzp

In just seeing the basics of your income and debt I would really question whether you need consolidation.  Unless you have some really significant non-negotiable monthly expenses, some hard work and discipline can delete 10 grand relatively quickly...as others have indicated it will take viewing your expenditures and the way in which you use credit differently.