Getting out of debt...Update 8/7

[LJC1861]

So, For many many reasons....too many to go into here I have managed to get myself into more debt than I am comfortable with. I must also confess that I have had my head in the sand about it for way too long.

A few things have happened in my life in the past few days which are forcing me to NEED to put my big girl pants on a face this issue. I am embarassed to say that I am scared about beginning, but I know that once I do I am going to be a much better person for it.

So, here is what I have done so far.....

1. Gathered all the notices that have come in from various collection agencies. It is a pretty big pile.

2. Sorted through them into things I can make go away right now. I wrote checks to cover these few things and got them in the mail.

3. Made an appointment with the Credit Counseling Service offered through the United Way.

4. Written up a very tight budget. While tight I am trying to think of even the smallest thing that I might need to spend money on and allowed even a small amount to be set aside for that. If I don't use it, it will build up.

5. Got a small notebook to record every cent I spend throughout the week. Most weeks it is not much, but I want to see where my money is going.

6. Enlisted the help of a good friend, who is very good with money to help keep me on track.

What else should I be doing....right now to make this even less frightening? Thanks so much, in advance for helping me conquer this mountain. I think I am ready......

Linda


**Update 8/7*** I have been on the phone with various creditors all week to see what kind of arrangements could be worked out. Most were more than willing to set reasonable payment arrangements that work within my dwindling budget. There were even 2 who agreed to give me 6 months to get some other things taken care of and then start paying them. One of the reps I spoke to candidly stated..."we have waited THIS long, what is 6 more months!" I feel better already, now that the process has begun. Now it has become a bit of a puzzle to see how little I can spend....and how far I can stretch a dollar. I am stopping at Charter Cable this evening to do away with our Cable Service, which will help bring more money in. I have also put out the word through my network of friends to let them know that I am back in the pet sitting business....it is work that can be done regardless of my on call schedule, so that should help occasionally. I'll keep you all posted, and thanks for the support.

 

[EthansMom]

Think about if there is any way you can bring in some extra money. Do you have anything of value to sell? Could you get another job?

Sounds like you're on the right track.

Good Luck!

 

[LJC1861]

I have sold off most of my collectibles already. I have one piece of very valuable Disney Art that I might consider selling, but would need to get it to NYC to have it appraised and then find a buyer.

As for a second job. I already do some mystery shopping, which brings in a few dollars here and there. I also do some selling on e-bay which brings in a few dollars as well. I can't get a conventional part time job because I have some fairly time involved "on call" responsibilities with my regular job. I would hate to be scheduled to work a weekend job and then have someone call out for my regular job and not be able to cover it which would then mean that I wold have to. It is very complicated.

We have also pared down the cell phone and cable bills to the very bare basic, so that helps a bit as well.

It may take awhile, but I think this time I have the will power to make it happen.

 

[Jennifer in MI]

You can do it!!!! Congratulations on taking the first step. Think of how good you'll feel when you make your way through that entire pile of notices!!! Keep posting your progress - keep yourself accountable.

 

[momtosam]

Read the Total Money Makeover by Dave Ramsey. You are totally on track with his program right now. Reading the book will help keep you motivated! I revisit it almost every 6 - 8 months just to remind me of my goals. Good luck to you!

 

[annagirl]

Best advice is to be harsh with your wants vs needs. For example: cable tv, internet access, magazines & newspaper deliveries - all wants. You can borrow books, movies and even magazines from the library, as well as have internet access, all for free. Look into other free entertainment - summer concerts, nature walks, etc.

Borrow what you don't have from friends rather than buy, or do without.

Turn your thermostat up in the summer and down in the winter.

Budget food purchases - buy in bulk when frugal and not wasteful. Consider generic instead of name brand.

See how much you can save on car expenses - carpool, take higher deductibles for lower rates, minimize driving by doing all erands at once.

Shop second hand stores for clothes, especially young kids clothes. Yard sales too.

Stop using credit cards - 100% except for true emergencies (car broke down, unexpected illness). When you have cash in hand you are going to be more reluctant to spend it.

Coupons. Plan your weeks shopping around coupons. Get involved with coupon swap groups.

 

[Rachie]

About two years ago, my husband & I were in debt approx $40,000 dollars. I had no idea we were in so far over our heads! (this total did not include house & cars). We are now just $7,000 in debt now.

What we did was to limit spending like mentioned above and made a list of all the debts we had. I began to pay things off from the smallest amount to the largest. I feel this system helped so much b/c after one of the debts is gone, that's one less monthly minimun to make. Don't worry abt the highest finance charges b/c soon you'll get to that account.

And I kept the sheet I typed up with all the places I owed money so I could feel good when I crossed them off. We both worked super hard, always accepting extra shifts. It was so much work but we did it...and now we have only an inch to go.

We would cancel the card/account after it was pain in full, or if it was to a store where we may find ourselfs needing an object in case of an emegency- washer/dryer, exc we lowered our limit to maybe $500 instead of thousands of $$$ that the store had approved credit for.

It will be a long, hard, yet rewarding road to becoming debt free! I promise myself that I will never be in debt again!

Good luck

 

[BrettS]

One other thing to consider, if you have a lot of stuff that's gone to collections is to make them offers to pay less than the full balance. Most collection companies will be willing to settle for less than what you actually owe them... often 75 or 80% of the original balance, but sometimes even as low as 40 or 50% of the original balance.

Obviously this could save you a lot of money and help your get out of debt quicker, but be aware that there are a couple of caveats. First, those debts will be listed on your credit report as "settled for less than full balance" or similar, rather than "Paid in full". Frankly, however, just having the collections account on your credit report is a pretty bad thing and adding the settled notation won't really affect your score much. If someone is manually reviewing the report then it might be a negative thing, but again, not that much more negative than having the collections account on there in the first place.

Second, if the company does agree to a settlement they will want to get paid immediately, so this will only work if you have the money to pay them off. Occasionally they'll let you go out two or maybe three months (paying an equal portion each month), but I don't think anyone would let you go out farther than that on a settlement.

Third, if you settle for less than the full balance they will report the remaining amount to the IRS as income for this year. This could cause your taxes to go up next year, and if the remaining amount is significant it could increase your taxes significantly. For example, if you're in the 25% tax bracket and they forgive $4,000 that would mean that you would owe and additional $1,000 on your taxes next year. Obviously paying the IRS $1,000 is cheaper than paying the collection agent $4,000, but be aware of it and make sure you have the money to cover it at tax time.

Lastly, you also have to consider the moral ramafications. You spent the money and agreed to the terms of the credit card in regards to interest and fees and such, so technically you really do owe that money. Some people would feel that it is your obligation to pay it back even if you are offered a settlement. One thing to consider, however, is that if your account has already been sold to a collection agency then the original credit card company has already lost most of the money.... typically the collection agencies will only pay a fraction of the full balance for the account. The credit card company may have only gotten 20 or 30% of what you originally owed and has already written off the rest. The collection agency then tries to collect as much as possible from you and anything above what they paid for the debt is profit to them.

The last thing I'll suggest is to check out the boards at http://consumers.creditnet.com/Discussions/index.php They have a lot of smart people that can help you with the collection agencies.

HTH,
Brett

 

[Goofygirl17]

You might want to check out living like noone else-

http://llnoe.com/

There are supportive people on there who have been through the process and give very good (sometimes very blunt) advice.

Good luck- you can do this!

 

[minnie1928]

I think you've taken some really great first steps!

You could also try cutting your expenses by getting more frugal. For example, try making you own cleaners, unplugging things when not in use to save electricity, line dry clothing, etc. Good luck and keep posting, we can help keep you accountable too!

 

[ameraumi]

You might want to check out living like noone else-

http://llnoe.com/

There are supportive people on there who have been through the process and give very good (sometimes very blunt) advice.

Good luck- you can do this!

I second this. I also suggest you visit www.creditboards.com for help with the collection notices.

 

[bumbershoot]

About #3...why? Do you have active cc debt? I think that's the only solid reason to do that, and I know no one who has had a great experience where all promises were met, using those services. Sounds like you're on the road to it anyway, so you just might not need that!

The credit boards have great advice. Get credit reports too, to make sure all the things listed on your report are actually yours. If any of the notices you've gotten are questionable as to whether they are yours or not, be sure to follow the creditboards advice on those.

 

[Chicago526]

I second this. I also suggest you visit www.creditboards.com for help with the collection notices.

http://www.debt-consolidation-credit-repair-service.com/forums/index.php

I also recomend this site for dealing with collection agencies. Remember, just because they say you owe them, doesn't mean you do. Mistakes happen all the time, so make sure they are contacting you about a debt that's really yours before paying anything. Also make sure you get all deals in writing, dont' trust anything they tell you over the phone. Don't ever give out your bank info, your SSN, or a copy of your signature. Send all payments by money order.

 

[LJC1861]

Things are going well.....check out the update!

Thanks for all the support.