Debt Advice Desperately Needed....Please!

[robinb]

Although I agree with the cause and effect - and I can rant with the best of them on "irresponsible behavior that led to our current economic crisis by banks, the government, and individuals," you can't get blood from a stone. If they have seen two good incomes go down to one barely above Florida's low unemployment compensation check and are, as seems likely - upside down in their mortgage - they may not have a lot of options.

I'd try hard to avoid bankruptcy and foreclosure, but I suspect that at least one or the other is on the horizon for them if things are as tough as she portrays them - possibly (and probably) both if a job for her doesn't appear quickly. She's decided to try and keep the foreclosure wolf at bay by inviting in the spectre of bankruptcy - not an unreasonable decision for someone with a family.

Great post! Even the sainted Dave Ramsey says that credit card payments should come last when you're in real trouble. You don't pay the CC companies when you can't feed your kids.

 

[surfgirl]

The fault for this really goes back to Greenspan who was very anti-regulation and never properly regulated the mortgage market, allowing the big real estate boom, but also allowing this mess to happen. Its not solely his fault... the;s just the lynchpin.

ummm... if you're going to start throwing out names, how about Clinton and the repeal of the Glass Steagall ?

let's not get into a debate of how it was caused since there are many experts out there arguing about it, but many factors were involved.

 

[PinkRhombus]

I agree that saying she shouldn't pay is unbelievable to me. I can't believe the number of people who think it is just fine to file bankruptcy. As long as she has a 401k and DVC - I think she should be responsible for that debt!

Just because one may file for bankruptcy does not mean that the judge will allow it.

 

[crisi]

Its clear you and blondietink are under some huge misconceptions on the credit market actually works. I say this because of the simplistic black and white explanation offered by blondietink and you seem to agree with. This is a complex matter with shades of gray... not some simple black and white issue.

No, I understand all that pretty well (have you read House of Cards?, its fascinating). I don't think anything I stated about "irresponsible behavior by banks, the government or individuals" contradicts anything you said.

 

[yitbos96bb]

ummm... if you're going to start throwing out names, how about Clinton and the repeal of the Glass Steagall ?

let's not get into a debate of how it was caused since there are many experts out there arguing about it, but many factors were involved.

First of all CONGRESS repealed Glass Steagall voting along Party lines. Clinton signed it into law. So posting that a particular President was responsible for repealing a specific bill is disingenous at best. Part of the responsibility yes, but not as much as congress.

Second, most experts point a big part of the blame and the guy responsible for getting the ball rolling at GREENSPAN. That is not a shot at anyone's political party or beliefs, its not a shot at a particular President as you seem to want to do...In fact I will remind you that Greenspan served under Republican and Democratic Presidents. This is pointing the finger at the chairman of the fed (really not that political of a position) who was tasked by congress to regulate mortgage rules and DID NOT DO IT. His decisions helped get the ball rolling and is a big root of the problem. NOT the only culprit, but a big one.

 

[yitbos96bb]

No, I understand all that pretty well (have you read House of Cards?, its fascinating). I don't think anything I stated about "irresponsible behavior by banks, the government or individuals" contradicts anything you said.

Fair enough.. It was more geared toward the other person... however, your statements seemed to place a simplistic blame of the situation... if I misread, then my apologies.

 

[crisi]

Fair enough.. It was more geared toward the other person... however, your statements seemed to place a simplistic blame of the situation... if I misread, then my apologies.

I think that the whole situation is far too complex to be adequately discussed here - and that this is one of those cases of "why bother to assign blame - there is plenty to go around - and we'll have some left over we can save for later!"

 

[yitbos96bb]

Just because one may file for bankruptcy does not mean that the judge will allow it.

That's not correct.

Anyone can file at any time. Its the TYPE that is subjected to various stipulations. The only time a chapter 13 bankruptcy is dismissed is if there is fraud and even then you can refile. Chapter 7 is the stickler that can be converted to chapter 13 and is dependent on average income for the previous 6 months or year (can't remember which). Chapter 7 is where they dismiss the debts, Chapter 13 creates a repayment plan for 3-5 years. Chapter 7 can only be filed once every 10 years.

 

[TheRustyScupper]

What is the *law* about who's responsible for CC debt that is left by deceased family? That might be scary for alot of people!

1) Creditors cannot go further than the estate.
2) THEY CANNOT COME AFTER YOU OR OTHER BENEFICIARIES.
3) All they can do is clean out the estate.
4) That is, as long as the executor or others have not raided the estate.

5) Simply, here is what happens
. . . someone in family disposes of body (buried, cremated, etc)
. . . they either pay for service or guarantee the estate will pay
. . . the court appoints an executor from will or names one itself
. . . the estate is legally "opened"
. . . the executor values the estate and starts to collect bills
. . . the executor tells creditors of the death
. . . creditors are in a holding pattern until executor "closes" the estate
. . . the estate is closed when all bills are paid or money/property is gone
. . . after 6-months, no further claims/bills can be assessed against the estate
. . . if a house sale isn't completed, estate time can be extended 6-months
. . . left over money/property goes to the heirs
. . . left over bills after money/property is gone are voided
. . . bills don't go down to the heirs under normal circumstances
. . . times where bills do go down to heirs
. . . . . . heir assumes house, car, etc and agrees to pay bills
. . . . . . heir assumes personal property, jewels, etc and agrees to pay bills
. . . . . . the married spouse may or may not be responsible for estate bills

NOTE: In many estates, there is not enough cash to keep up house payments or utility bills or pay funeral bills. Usually the executor or a family member kicks in money, then is paid back out of the proceeds of the estate. If necessary, the executor can dispose of property, cars, etc to pay back cash paid into the estate.

 

[dvcgirl]

I think that the whole situation is far too complex to be adequately discussed here - and that this is one of those cases of "why bother to assign blame - there is plenty to go around - and we'll have some left over we can save for later!"

Oh absolutely. There's so much blame, on both sides of the political aisle, the Fed, the mortgage industry, the mega-banks, individuals. I read Krugman, Stiglitz.....enjoy Roubini and like Morgan Stanley's Roach as well. Of course, they're all more than a little bearish so that shows where I think we are these days with respect to our global economy.

It is amazing though to watch this unfold. For a nerd like me who actually enjoys reading about the economy and personal finance it's really interesting. Mark Zandi of Moody's was saying on Bloomberg the other day that he doesn't see a return to "normal full employment" (which he puts at about 5.0%) until 2013. And he's been more optimistic than some others. We need to get to GDP growth of 2.0% on an annual basis before we even stop *losing* jobs. We need 2.5% at a minimum to gain jobs.

Things are going to feel pretty bad for quite awhile in our country....

 

[blondietink]

No, I am not a financial genius or accountant. I'm just a regular person who believes in paying your bills and not living higher than your means, or pretending you earn more than you do. I also believe in saving money. I know that's a novel idea to some people who just want to buy, buy, buy, but our family has gone without all the new extras in life and we are no worse off because we didn't have new things all of the time. I understand the current credit mess is not just because of unpaid credit card bills, but the blame goes from the consumers all the way up to the top levels of the banking and financial industries. I will be looking to borrow House of Cards from my local library to read. It actually sounds interesting.

 

[crisi]

No, I am not a financial genius or accountant. I'm just a regular person who believes in paying your bills and not living higher than your means, or pretending you earn more than you do. I also believe in saving money. I know that's a novel idea to some people who just want to buy, buy, buy, but our family has gone without all the new extras in life and we are no worse off because we didn't have new things all of the time. I understand the current credit mess is not just because of unpaid credit card bills, but the blame goes from the consumers all the way up to the top levels of the banking and financial industries. I will be looking to borrow House of Cards from my local library to read. It actually sounds interesting.

I'm the same, but the harsh reality for the OP is that she very likely has a negative net worth - and has obligations that exceed her currently ability to pay them off unless her circumstances change quickly. She can sell a lot of her stuff, and I suspect she will still be in debt. And there are five kids to feed and try and keep a roof over their heads. She can no longer sell her kids into indentured servitude or check her family into a debtors prison (gruel wouldn't have been very good for them anyway). Her options may end up either pay her debts - but she can't do that AND keep a roof over her kids' heads, or declare bankruptcy.

It may be that she does not yet wish for a time machine to undo some of the purchasing decisions she made, but she is showing that she is at least open to considering them ill advised. But they are in the past - there is no way to go back and not buy DVC or not furnish her house anew or cut their expenses so they can set aside money for savings. All of those would have been wise, but its too late.

 

[wall*e2008]

I'm the same, but the harsh reality for the OP is that she very likely has a negative net worth - and has obligations that exceed her currently ability to pay them off unless her circumstances change quickly. She can sell a lot of her stuff, and I suspect she will still be in debt. And there are five kids to feed and try and keep a roof over their heads. She can no longer sell her kids into indentured servitude or check her family into a debtors prison (gruel wouldn't have been very good for them anyway). Her options may end up either pay her debts - but she can't do that AND keep a roof over her kids' heads, or declare bankruptcy.

It may be that she does not yet wish for a time machine to undo some of the purchasing decisions she made, but she is showing that she is at least open to considering them ill advised. But they are in the past - there is no way to go back and not buy DVC or not furnish her house anew or cut their expenses so they can set aside money for savings. All of those would have been wise, but its too late.

IIRC she said they are $80K upside down on the house. I never heard any reference to a 401K. She owns a 2007 T&C Limited Minivan and a second very new minivan that both have loans on them. So you are correct she probably has a negative net worth. That is sad to realize when you are in your mid-30s or older.

Having a negative net worth is normal for a new college grad but by the time your kids are starting college it is not suppose to be normal.

Even if she gets top $ for all of her DVC the reality is that she will not have enough money to pay the CCs, cars and get caught up on those utilities.

 

[blondietink]

IIRC she said they are $80K upside down on the house. I never heard any reference to a 401K. She owns a 2007 T&C Limited Minivan and a second very new minivan that both have loans on them. So you are correct she probably has a negative net worth. That is sad to realize when you are in your mid-30s or older.

I knew she had a couple of cars, but didn't realize that they were both fairly new, and minivans to boot. We had a Chrysler T & C once .... those are might expensive vehicles! The OP really does need to change her lifestyle, not just for the immediate future to get out of this mess, but at least until her kids are out of college. Just MHO.

 

[friskykitten]

By Wall*e2008--IIRC she said they are $80K upside down on the house. I never heard any reference to a 401K. She owns a 2007 T&C Limited Minivan and a second very new minivan that both have loans on them. So you are correct she probably has a negative net worth. That is sad to realize when you are in your mid-30s or older.

Having a negative net worth is normal for a new college grad but by the time your kids are starting college it is not suppose to be normal.

Even if she gets top $ for all of her DVC the reality is that she will not have enough money to pay the CCs, cars and get caught up on those utilities.

I knew she had a couple of cars, but didn't realize that they were both fairly new, and minivans to boot. We had a Chrysler T & C once .... those are might expensive vehicles! The OP really does need to change her lifestyle, not just for the immediate future to get out of this mess, but at least until her kids are out of college. Just MHO.

Correction: as this thread has continued our debt has seemed to grow with different people adding on to what my debt really is and with assumptions made. (I am not picking on you wall*e2008 nor blondietink I am just using your post for an example of how the story has grown). For example;

1. We do have 401k's although there is not a lot in them as the market has declined so much. We also have some other investments that most advisors would tell you not to tap into due to penalties but we will have to make that decision ourselves depending on how the next few months go.
2. We have one 2007 T&C mini-van, not two, and one very old truck that we paid $1 for. So there is not a loan on two high-dollar minivans but I am sure that helps to make me an even better example of how not to do things so let's add on another mini-van or maybe we can make it a 2010 model for an extra shock value.
3. We are not behind in any payments yet. At this time there is not utilities to 'catch up on'. Nor are there any missed or late credit card payments yet.
4. The mortgage is not behind or late. We will be making the next month's payment right on schedule so the rumor of foreclosure and being behind on the mortgage is also wrong. We were given a 3 month extension on the mortgage and they added the payments to the end of the mortgage. Foreclosure will be the main thing we will avoid.
5. My first post I said "We are a family with five children and have always had just enough money to get by from month to month. Not enough to put into savings but enough to pay all of the bills and anything that might pop up as a 'surprise'." But I never mentioned the savings we already have from tax refunds from the past few years. We did not have enough monthly income to put extra into savings but those tax refunds always went into a special account and we only touched them if we needed to. This money is there to help feed my children when it gets to the $50/week level. I did not want to touch it for the debt as it was there for emergencies. It is not enough to pay all our bills for an extended period of time.
6. What I did say was that we are going to be in trouble very very soon as the grace period on the mortgage was over and we would soon be dependent on the much lower monthly income we are bringing in with DH job and my unemployment. We are now going to have to start missing payments was the statement I made. I was looking for advice on what payments to miss vs. what was the most important to make. Mortgage was already first on my list.
7. Due to the fact that payments were going to start suffering I came here to get ADVICE, not sympathy and not demoralization. I got all three which is fine as I publically posted so I should have expected it. I was wanting to know what payments SHOULD be priority, what was going to happen when we miss some payments and in general what should we do to make things better.
8. Because of the help I got here I have been able to make several hard decisions including putting our DVC on the market which has now been listed since Tuesday.
9. I have publically admitted that we have been living above our means and have also publically stated that this "OP really does need to change her lifestyle, not just for the immediate future to get out of this mess". I also stated that I will do whatever it takes to pay all of my debt and will avoid bankruptcy at all costs. Selling the DVC, canceling our cable and phone, stepping up the amount of resumes I send out daily, etc. are all examples of what I have put into motion immediately upon getting this advice. So yeah, I think this OP is changing her lifestyle dramatically to get what needs to be done going. Will there be even more changes as time progresses? You betcha. All but one of the charge cards are going to be closed, which will make a hit on our credit but that isn't my main problem right now and I know it. It will also keep me from using them again and racking up more debt.
10. I will not be able to make everyone happy with how we are going about this but I believe that we are on well our way to making the right decisions to dig ourselves out. Will all my decisions be the right ones? No, but I never even hinted that I was perfect. Quite the opposite in fact. The debt will not disappear overnight but we will chip at it until it is gone. There really isn't anything else I can say to impress anyone that we are working on doing the right thing. But as others have told me about how the things that I owe money on are getting bigger and bigger in different posts I wanted to at least set some of it straight. We have already been over the fact that I am a big loser but do we have to make it an even bigger and bigger story?
11. The advice given here should go a long way to helping myself and others who may be in the same or similar situation but who may not be as eager to ask for advice. For that I have been willing to take the hits as I really believe the advice given can be used by more than myself but when extra mini-vans and talk that I am determined to go through bankruptcy started to pop up I had to make another appearance.

Dare I say that I am done with this thread again? I got what I came for and I would like to move on if I may, please.

OH! And no I am not related to, or even knew about, those that were mentioned in PP's. This situation is a fresh one and I am just another deadbeat to add to the list.

 

[dvcgirl]

OP,

I wouldn't let this thread get you all riled up. I think that people are frustrated in general in what's happening in our economy, and then you came along and posted this. You sort of became the "poster girl" for everything that is happening. People want to blame someone, and you were that person for the day on this board.

Ultimately, only you and your DH can pull yourselves out of the mess you're in, and I'm betting that you'll give it your best shot. You'll be much better in the long run if you can avoid bankruptcy, but if you end up there, it's not the end of the world. Think about it....the worst case scenario....you lose the house and file BK. You'll still have your family and can start over. Life will go on.

I will tell you though that there's no feeling in the world like being debt-free. With a bit of luck in the job market and a couple of years of really tight budgeting you can be there too. But it really will take a complete lifestyle change. Good luck....

 

[friskykitten]

Thank you dvcgirl. I did get riled up. Seriously, thank you. Those that have gotten out of debt on their own are an inspiration to me and I hope I can one day be able to say that we are debt free also.

 

[eyor44]

I'll be looking for that post.

and wanted to thank you. I am not currently in the same situation as you, but have been realizing for sometime that I could be...very easily. Things are changing around here and I know as you do that it will be hard. But we can make it. You, I and the others who are out there also.

 

[OceanAnnie]

OP,

I wouldn't let this thread get you all riled up. I think that people are frustrated in general in what's happening in our economy, and then you came along and posted this. You sort of became the "poster girl" for everything that is happening. People want to blame someone, and you were that person for the day on this board.

Ultimately, only you and your DH can pull yourselves out of the mess you're in, and I'm betting that you'll give it your best shot. You'll be much better in the long run if you can avoid bankruptcy, but if you end up there, it's not the end of the world. Think about it....the worst case scenario....you lose the house and file BK. You'll still have your family and can start over. Life will go on.

I will tell you though that there's no feeling in the world like being debt-free. With a bit of luck in the job market and a couple of years of really tight budgeting you can be there too. But it really will take a complete lifestyle change. Good luck....

I think that's what's happened too. It's been a lot of talk about the economy in general on this thread. It's a hot topic in the news at any given moment and on people's minds.

Friskykitten, I really think you have rolled with the punches very well. It isn't often people on these boards take the good with the bad with such grace. That's why you reminded some of us of BoxofRain. (She had different issues --- if you are out there BOR, hope things are looking up for you.)

I know you said you were closing a cc. I just wanted to share that I've read about people putting a cc in a ziplock baggie with water (ETA-) in the freezer (I left that part out!)to keep from using it. Maybe if you did something like that it would be one less hit to your credit. I don't know.

It sounds like you have a handle on everything. I'd like to hear about your successes. I know they will be forthcoming. You sound determined. I wish you all the best.

 

[friskykitten]

By OceanAnnie--I know you said you were closing a cc. I just wanted to share that I've read about people putting a cc in a ziplock baggie with water to keep from using it. Maybe if you did something like that it would be one less hit to your credit. I don't know.

I LIKE that idea. And that it wouldn't hit my credit unless I stop making payments. BUT.....I have to be honest with myself, will I be able to leave the darn thing frozen unless I need it for an emergency? I will still have a goal of only one credit card but if I keep the others frozen I can wait until they are paid off then close those accounts and hopefully not hitting the credit score quite as hard. I will think about this and try to be honest about my own ability to keep them frozen.