Doesn’t irony just suck? The collections manager in trouble. No worries though, you are not the first person I’ve helped in a similar position. One of my favorite comments was from a woman I was helping and she got a call from a collection agent. She told the collector I was helping her and the collector said “I’m working with him to, isn’t he wonderful!” LOL. Small world.

Anyway, here is my take on what you’ve shared. It seems that your current approach of “playing the game” is more of a strategy than a solution. It does not solve anything and just pushes the same problem further into the future. It’s a bit like saying you don’t want to amputate an infected leg and instead wait and see if it gets better all by itself. Guess what happens. It doesn’t.

I think your situation requires manual intervention. Your equation has changed. The underlying property value has dropped, you no longer have equity to tap and your income is down. No trick or strategy is going to fix that.

The dangerous thing that has happened is that you’ve run through your cash and savings trying to keep everything as is. But as I said, it really isn’t as it was. Tapping cash to stay current and supplement income is a patch, like a strategy or game, not a solution.

You don’t need to decide anything right now by reading this. But consider this possibility. If you explore a Chapter 13 bankruptcy you may be able to reduce the value of your second mortgage down to the current market level of your house. You would also get a binding repayment plan for all your creditors based on what you can afford, not what they want. And ultimately isn’t that the best possible outcome from an impossible financial solution? Well, outside of me locating that damn magic wand that makes all problems vanish instantly.

Is this all ugly and depressing? Hell yes, but it is only because we allow ourselves to get stuck in the rut of misfortune. As of today you are not on fire and nobody has a knife to your back. What I’m trying to say is that this moment sucks but it could be so much worse. Let’s step back and look at the fact that you have some great kids, a loving husband, good friends and a family that cares about you. Take a few minutes and read through my sections on gratitude in my book “The Path to Happiness and Wealth.” The link is for a free ebook copy you can download.

This is just a phase in your life that you will have to live through and in retrospect it will seem much smaller than it feels right now.

Now for the guilt trip, enter into a real solution like bankruptcy, not for you, but for the kids. They need you to step-up and take action that will make their lives safer moving forward. This is it.

Steve

I searched your site for a story like this one (Mingus)that reflects closely to our own situation. We too, bought a new home on 2005 during the bubble. Our income had been stable for 20+ years, and increasing, and we had moderate savings and 401k. We thought it was the right home at the right time and had owned 2 other homes before this one; each time fixing, selling and trading up a little. This house was perfect and we thought it would be our springboard into retirement after we sold it when the kids were gone.

We couldn’t have been more wrong…

A year later, the bottom dropped out of everything including wage freezes for me with no bonuses, and no commision or bonuses for my husband. With 3 kids, we decided to take a chance and hold out for things to improve. We ran through or savings and used our healthy store of credit lines to suppliment our income until we could refi/consolidate or see a change in our income again. Now, a refi is out of the question (we’re underwater on our 2nd.) However, things are not changing that fast, we are maxed out and running negative. We have an appt with the BK attorney in a couple of weeks to talk about options. I, like Mingus, don’t want to go that route but would rather push the creditors of choice to the edge to buy time, then throw them a bone and stay out of court until we run out of options and have to file and lose everyting potentially. It’s ugly no matter which way we see it and it’s very depressing.

Ironically enough, I have been in finance at a local bank for 25 years and am currently a Collection Manager. I know the game but am reluctant to play it. Maybe BK is the cleanest way to go. I have worked out a budget to pay the mortgage and living/housing expenses based on our lower income plus 20% to the creditors but have no idea if that will be a consideration with the BK court.

Oh, and your advice to be nice to collectors is good advice. They are just people doing their job and most will work with you as long as you stay in contact and be realistic.

Jenn

Think about it from a creditor point of view. If someone was to start hiding, wouldn’t that cause you to alter your course or take specific action?

Just drift through collections. You want to be part of the herd, not a stand out.

Steve

Appreciated… look forward to seeing you on the other side

Once you make it out the other side, then let’s talk about the right professional to use.

I’m here for you. Keep me posted.

Steve

But watch out, you fit the profile of the classic advance fee debt loan scam target. Desperate and confident.

Steve

You can always contact your credit card companies and ask for special consideration or a payment holiday but that’s really not going to happen.

Grin and bear the collection pressure and the hit to your credit report and you might just make it through to your target date.

Steve

I have been building a good business that was sidetracked temporarily by the market crash/recession that started last fall. The cash flow from the business will actually put me into breakeven (around August-Oct) and beyond because my monthly income continues to grow. The problem is the classic “can I get to breakeven in time before it gets me?” I’ve always been confident of the business, I have been as frugal as possible but did build a huge credit card balance. Now I see breakeven happening in 6 months, but am very worried now that the credit card companies will turn against me because of the consolidation of previous c/c’s into Chase and others. I’m worried they will just close the accounts and force me to pay up.

I have a very short window to turn my financial situation around, and can confidently say if I had enough financial resources just to pay all these credit cards until October, I will be safely in positive cash flow situation. I don’t want to have it unravel before I get to that point.

It’s walking a tightrope. Why do I need your advice? Can I get to my breakeven October without sacrificing everything?