Personal Debt Issue...What Can Be Done?

[nickaluch]

Bankruptcy attorney will clean up this mess so they can move forward with there life.

 

[Pew]

Other than the great advice on this thread, what helped me a lot with bad habits was concentrating on paying off at least one credit card first vs tackling all at once. That showed me that "I can do it" and "it feels great to be out of debt."

 

[Bottom_Feeder]

Being in debt is such a huge dead weight hanging off your neck. I was about $25k in credit card debt caused by years of poor spending habits (obviously) but also poorly-timed life events like losing my job then my wife losing hers (she being in $80k+ debt from college loans at the time herself). I seriously thought it was going to follow me to my grave. But spending habits were changed, some luck came our way as far as better jobs with more income, and things eventually turned around. Due to our age and the lateness in which were able to start saving, retirement will be difficult but at least it might be possible someday.

There are a few trains of thought when paying down debt and it really depends on how you're wired. Logically you should pay off the ones with the highest interest rates first, but if that's also your largest debt, then it'll feel like you're never making any progress. I suggest paying off your smallest debts first regardless of interest because those small victories give you hope that it's possible and it'll keep you on track to getting back in the black someday.

Best of luck to your friend.

 

[miden851]

Pull your credit report and see what are your debts first; also, you need to realize there is a problem before you can tackle one down which you apparently doing; there is no magic bullet of getting rid of debt, you got to scarify now in order to get better down the road

Getting rid of debt is not a rocket science, try do it on your own first before look for help elsewhere

 

[Deamos]

Pay for a couple hours of a bankruptcy attorney's time.

This. A reasonable bankruptcy attorney will likely do a free consultation and run some quick calculations to make suggestions.

 

[JTK]

Other than the great advice on this thread, what helped me a lot with bad habits was concentrating on paying off at least one credit card first vs tackling all at once. That showed me that "I can do it" and "it feels great to be out of debt."

Like a few others have mentioned above, this is sort of a Dave Ramsey approach, if his methods mean anything to you. Tackle the easiest (lowest balance) first and work your way up for the reasons you mentioned.

 

[borgward]

That's a tough one. I can't believe all the credit that is being offered to people that can't pay it off. And the interest rates. Who is running these banks and what are they thinking? How about those get paid before your pay check comes out. Very hard to pay off just for one occurrence.

 

[borgward]

This. A reasonable bankruptcy attorney will likely do a free consultation and run some quick calculations to make suggestions.

Good advice. In Texas no one can take your home, musical instruments, work car for bankruptcy except for unpaid taxes, some student loans. After that just learn to do without. Pay off cards every month. I have taken 3 months to pay off big ticket items. No Longer

 

[JC1]

Not recommending this but both of my ahem relatives just quit paying their credit cards. 7 years later he got a car loan on his own. Card all gone. Me, I've got an 800 credit score but can't get a walmart card because I don't owe anybody. Go figure.....

That's because Walmart wants their card holders to make minimum payments, so they can make a killing on interest payments.

Don't be offended!!!

 

[Fla]

Pay for a couple hours of a bankruptcy attorney's time.

That's because Walmart wants their card holders to make minimum payments, so they can make a killing on interest payments.

Don't be offended!!!

Not just Walmart but every credit card company. They're like any parasite, they don't want to kill you but just slowly suck the (economic) life out of you.

OP, my advice is that if you ever get an offer for one of those "switch your credit card balance over to us at 0% for a year" offers, then take advantage of it. Switch your highest interest rate debts over them and get it paid off within a year. If you don't pay it off within a year, then bad things can are going to happen. But it will give you a chance to get out from under the self perpetuating debt cycle caused by high CC interest rates. Also ALWAYS make at least the minimum payment of each CC and be sure that they're paid on time or ahead of time. That will help your credit score and it will prevent the CC companies from adding the ridiculous and insanely excessive "late fees" to your debts.

 

[KS-Ryan]

I was in your shoes several years back. I think we had about $50k in debt, including cars. What worked for us was to pay the lowest balance off first and then apply that extra payment to the next smallest. The quicker you pay off those smaller debts, the more "extra" money you'll be able to apply to the next debt. It takes time and you need to be realistic about how long it will take.

 

[Fla]

Just as a suggestion, a lot of companies will give you "90 days interest free" financing on some purchases. If you absolutely must buy something then try to buy from one of those companies instead of using your regular CC there or somewhere else. At least with the 90 day free financing, it will save you from paying 3 months of interest at whatever your loan-shark CC company is now charging you. Pay off the 90 day financing on-time and it will help add to your credit score.

 

[CKN]

Cut expenses, increase income, pay it off using the "snowball" method. It requires great discipline and balancing of interests.

For some, bankruptcy is the answer. Large medical debt and small income, for instance.

Stay away from debt consolidation companies, they don't have any magic wand.

You are right-they don't. But there are those who use reputable consolidation companies that with their help get out of debt. Many-if they had the discipline to do it themselves-wouldn't be in debt in the first place.

 

[earlyre]

my 2 cents, so far working out well for me, and I don't feel like I have the Giant weight over my head any more....

I work retail, and take home in the low $30k's.. and I'm dumping 15% into my 401k right off the top.

I was only $15-16k in Debt, between 2 CC, both with interest in the low 20% range....
I'm a Credit Karma user, and they ALWAYS have consolidation loan offers linked, with "high approval chances"
i'd take a look every once in a while, they'd always hit me with an offer for a short term (36month) offer, but with payments higher than the just over minimums I was already struggling to pay each month.

earlier this year, I checked one through LendingClub.com
they gave me a 5 year offer, at "ONLY" 15%, with a monthly payment lower than what I was already paying to "keep my head above water"

in fact they approved me for around $18k, but I only took a little over $16k(just enough to pay off the CC's). in the Processing time, I had made some extra payments to both cards with Tax refund money, so once they paid the 2 cards directly, i had $800-$1000 left in the loan amount, which they just deposited into my checking.
at that point I only owed a little over $900 on my car loan ( it never concerned me, it was a 4-5 yr $10k loan, worked out to about $175/mo, and i was always a month or 2 ahead on it..) but I took that "overage" money and paid off the car.

so now, instead of paying a bit over $500/mo between the two cards( just over minimums), and $175/mo for the car note, (granted i only had like 6 more payments for the car note)
For a total of $675/mo, I now only pay $456/mo. and that will disappear in 5 years.

that's a bit over $220 "extra" per month in my pocket.

it doesn't seem like much, but it makes a difference..

so far it's working for me, but of course, YMMV, and I'm sure at least a dozen folks will tell me i did it all wrong, i'm scamming myself, etc... this is an internet forum after all...

 

[bunnspecial]

Other than the great advice on this thread, what helped me a lot with bad habits was concentrating on paying off at least one credit card first vs tackling all at once. That showed me that "I can do it" and "it feels great to be out of debt."

I'm far from a Dave Ramsey evangelist, but I think he does have some good ideas/principles and this is a lot of the reason why he advocates for the so-called debt snowball.

Paying off highest interest will get you out of debt faster, but his argument is that starting with the smallest balances allows you to see results faster. I think there's a lot to be said about the psychology of attacking a $500 credit card and seeing it get paid off in 3-4 months or whatever rather than attacking a $5000 one that might take 3+ years to pay off. Once you're seen the first go away, you have the confidence that you can actually do it.

 

[Blueshound]

You are right-they don't. But there are those who use reputable consolidation companies that with their help get out of debt. Many-if they had the discipline to do it themselves-wouldn't be in debt in the first place.

I'll grant you, there may be some good ones.

 

[CKN]

I'm far from a Dave Ramsey evangelist, but I think he does have some good ideas/principles and this is a lot of the reason why he advocates for the so-called debt snowball.

Paying off highest interest will get you out of debt faster, but his argument is that starting with the smallest balances allows you to see results faster. I think there's a lot to be said about the psychology of attacking a $500 credit card and seeing it get paid off in 3-4 months or whatever rather than attacking a $5000 one that might take 3+ years to pay off. Once you're seen the first go away, you have the confidence that you can actually do it.

I have no issue with Mr. Ramsey methods of getting out of debt. His zero tolerance credit cards policy is another matter.......

As I mentioned earlier-I got a $1,000.00 rebate check from my Costco credit card this past February. Balances paid in full every month.

 

[Torrid]

I have no issue with Mr. Ramsey methods of getting out of debt. His zero tolerance credit cards policy is another matter.......

As I mentioned earlier-I got a $1,000.00 rebate check from my Costco credit card this past February. Balances paid in full every month.

While I don't agree with no credit cards, some have benefit of cash back which is why I use the Apple card, but I think that's for those that don't have self control with cards.

 

[Marrk]

Everyone says that, if you are having trouble paying your debts, you should communicate with your lender. Call your credit card company. Evidently, they will work with you. If you have a mortgage, call your bank. Banks don't want your house, and they hate taking possession of collateral assets.

As stated by several above, seek professional advise. You may have to spend some money on it. Like a lot of things, advice is worth what you pay for it.

Good luck.

Note: I'm not an expert on anything, including finances.

 

[Pew]

I'm far from a Dave Ramsey evangelist, but I think he does have some good ideas/principles and this is a lot of the reason why he advocates for the so-called debt snowball.

I never realized that was from him. I know of him but I've never seen his videos.