Mel
“Dear Steve,
I have a charged-off bank account, a charged-off cell phone bill, a charged-off credit card, and have not paid anything on another credit card for almost 6 months. The bank account received several overdraft charges that were a result of a cab company charging me $70 instead of $10, but I didn’t keep track of the receipt.
The cell phone bill was over $800 due to hours of international calls that a “friend” made without my permission. I tried to explain this to both the bank and the cell phone company, but they didn’t remove any charges. I started defaulting about a year ago, and within the last year I have: lost my job; become homeless/bounced back and forth between friends/relatives homes; failed out of graduate school; and have started exhibiting signs of serious mental illness.
I am now seeking psychological care and am arranging to move into a rehabilitation facility. I am not sure how much I owe total, but I believe it is between $8-10K. I want to close the accounts and negotiate some sort of debt settlement to sort this out. My credit score is horrific, and I couldn’t even see the score online when I requested it.
What do you suggest I say to the credit card companies, bank, and cell phone company to reduce my debt and stop being charged these 27% interest rates? Is there anything you suggest I do about the charge-offs?
Does my documented mental health deterioration have any bearing on my situation? I am brand new with the whole credit card and debt process, so any suggestions or guidance would be greatly appreciated!
Mel”
The Answer:
Dear Mel,
It sounds like you’ve had a real rough time in the recent past. I’m so sorry to hear all that you’ve been through.
Let me cover some basic issues up-front.
Your mental illness is not a factor unless you can show that you were mentally incompetent at the time you entered the contracts that you owe on. Doubtful.
As for the steep interest rates, the reason they are charging you those is because they can. They will.
Even though your wonderful friend made the calls on your phone, you are totally responsible for the charges. A cell phone is a liability like letting someone use a credit card in your name to buy whatever they want. If you let someone use your cell phone, you are on the hook for the charges.
Getting out of debt is best accomplished in a holistic manner, taking your current life into account. Based upon your growing mental illness and the need to focus on getting better and overcoming that, I would suggest that bankruptcy is the best solution for you, even with only $8,000 to $10,000 of debt.
Here’s why. Significant financial problems impact our mental health. More than 40% of people with money problems are clinically depressed and I have seen case after case of people that have been slowly slipping under mental health issues of all types while struggling with the debt and related stress. It doesn’t need to be that way.
Your life and recovery are not going to be better, faster or easier by remaining obligated for this debt you can’t pay while you are moving into a rehabilitation facility to try and get better.
If you feel like you need to repay your creditors latter for personal reasons, do it. But if you go bankrupt now you can do that on your terms and not operating in fear by being pressured by the creditors while you are trying to get better.
I would urge you to call a local bankruptcy attorney and go in and talk about what bankruptcy would mean for you. Take a friend with you to help you remember everything and to ask questions.
I don’t see bankruptcy for you as a sign of failure, but as a first and necessary step to help you have a better chance and opportunity to focus on your mental health issues and worries and have a better chance to recover from those.
