How to deal with lots of debt? Credit Counseling?

[Planogirl]

Oh one more thing, they can call the credit cards themselves and negotiate lower interest rates. You don't necessarily need a company to do that for you. One of my friends got 4 of her cards down to 0% just by calling and asking sweetly. One of her cards gave her a low rate for a short time period so she tackled that one first and got it paid off before the rate went up. If all else fails, if one has a high interest rate, transfer the balance to a lower rate card.

When we both lost our jobs and had medical bills that ate up our savings, Chase refused to negotiate with us. They told us that they would only work with us through a credit counseling service so that's what we did. They then lowered the interest dramatically and we paid off every penny. The counseling service fees were small particularly compared to what Chase originally wanted us to pay.

 

[*Seanaci*]

I'd at least go talk to a reputable credit counseling service. Another that I know of that is good is Consolidated but they do charge a monthly fee.

It doesn't hurt to discuss the situation. They don't have to enroll if they decide that it won't work for them.

Ditto the bolded.

DS was a surprise 4 years ago...DH and I had been living with my parents...but moved out when I was 12 weeks pregnant (hoping to make it on our own). Moved back in with my parents after crunching numbers and determining that even with me working we'd have to do some sort of debt consolodation. So, I became a stay at home mom. We initally went with consolodation...until DH's CC company kept saying we needed to pay more on his CC (we were paying the max we could toward each of the 3 CC's at the time). Ended up going with Debt Settlement in early 2008. We were instructed to put away a determined amount of money every month while the Settlement company worked on negotiating lower payoffs for our CC's. We got both my CC's paid off over the last year and a half (it's a loooooooooooooong process to do settlement). And we just got the call that they have negotiated a lower payoff for DH's CC. We will be done making payments on that by April next year (like I said...it's a loooooooooooooooooooon process).

Yes. It has been a stressful 3 years...but...it has been soooooooo worth it. We had the support of a wonderful company (the name escapes me) that we could call upon to help stop the harassing calls from the collection agencies. And I was actually represented by a law firm pro bono and got a small settlement ($500) because they violated the Fair Debt Collection Act (in the end, the collection company had to pay all court/lawyer fees).

Good luck to your friends! Debt sucks! But I know they'll come out of it on top.

 

[Beckypooh1972]

I'd recommend the Dave Ramsey path to paying off debt too. First thing that will have to happen is they will have to get serious about building their income. They may have to perform odd jobs or get a second job to get their income up, especially if they really believe they've "cut out all the extras" already.

 

[Mouseless2Long]

I was offered early retirement 4 years ago and took it knowing I had a massive amount of debt. I wanted to pay them off as quickly as possible and and also knew I would not be disciplined enough to not be tempted to use any cards I paid down, so I decided to go to Consumer Credit Counseling. I am so glad I did!! My debt will be completely paid off in 6 months, but the biggest lesson I learned in the 4.6 years (yes it took that long) it took me to pay it off was how to live using cash only. It can be done and I have zero interest in obtaining credit in the future. I have no regrets and much peace of mind.

P.S. I pay $36 a month. Look for a reputable non-profit organization.

 

[suzyrugrat]

I went thru a horrible recession in the early '90's and my husband kept losing jobs as tge companies he went to work for kept closing down, we went thru CCCS and they got the creditors to lower the interest, but still couldnt keep up with the payments and filed Chapter 13 bankruptcy, that cut out more interest and we paid all creditors off in 3 years, rebuilt our credit and got into controllable debt but didnt have much of an emergency fund, took Dave Ramsey's Financial Peace University, paid off all debt including house and cars 3 years ago and now have emergency fund, vacation, Christmas savings. After struggling for 20 years I wish I had taken FP in the beginning! Now I understand how to budget and save and my kids are pretty smart a out managing tbeir money. I was laid off for 5 months 2 years ago and DH has been laid off 2 1/4 years, went back to school and just graduated. We have managed to stay out of debt while adding to our savings and I have Dave Ramsey to thank!

 

[TnTWalter]

But the key here from folks is to avoid the for profit companies...there are many out there....and stick to a non-profit credit counseling service.

Here's Clark Howard's advice [he provides a link to find a counselor in your area].
http://www.clarkhoward.com/news/cla...settlement-outfits-make-hollow-promises/nFHz/

 

[Planogirl]

There is nothing wrong with many debt payment programs. Just read the fine print and know what you're getting into.

 

[luharvey77]

I also recommend Dave Ramsey. That is what we used to help us plan how to pay off our debt. We then went to Disney to celebrate.

 

[Adi12982]

Did they really rack up $42K in debt over an 18-month period (more than $2300/month) or was a lot of that debt already in existence when the husband lost his job?

\
Most of it was racked up in the year and a half - it included moving from DC to FL to be back with family as well as the birth of the baby, since he had no job at the time.

 

[Adi12982]

Thanks everyone for all the advice thus far. I will pass it along!

 

[Adi12982]

Did they really rack up $42K in debt over an 18-month period (more than $2300/month) or was a lot of that debt already in existence when the husband lost his job?

That would also assume that there was no interest added at all in the last 3 years or so They say at least 90% of it was during the laid off period, the rest is just charging more now that all their money is going to paying everything.

 

[labdogs42]

How does one know which credit counseling agencies are legit? I see a few different recommendations here, does that mean those are all OK?

 

[Mouseless2Long]

My credit union recommended Consumer Credit Counseling Services, a non-profit organization. Credit Unions are "not-for-profit" organizations and in the case of my credit union, they receive no compensation for recommending CCCS, so it is a recommendation I trust.

 

[brota]

I used http://www.debtsynergy.com/
They are like a cccs but not a non profit.
They cut my rates after citibank jacked my rates to 23% and double my min payment.
My citibank debt is now at 9% and my bank of america is at 1%
there is a monthly fee.

I found them very helpful and honest so far.
PM me if you have any questions

 

[palavra]

Oh one more thing, they can call the credit cards themselves and negotiate lower interest rates. You don't necessarily need a company to do that for you. One of my friends got 4 of her cards down to 0% just by calling and asking sweetly. One of her cards gave her a low rate for a short time period so she tackled that one first and got it paid off before the rate went up. If all else fails, if one has a high interest rate, transfer the balance to a lower rate card.

And I tried doing that when I had credit card debt and got nowhere with the companies because I was current on my payments. I did end up going through a credit counseling organization. I'm so thankful I did. My interest rates were significantly reduced, and debt has been paid off for two year now.

 

[dimimi]

You mentioned that they just moved to Florida to live near family. What if the mom got a job, either part time or full time and her family watched the baby....or the mom worked part time when the husband is home?