How to Get Out of Debt With the Get Out of Debt Guy » credit card payment

Is CCCS Right for Us or is There a Better Alternative? – Shawn

Steve Rhode — Thu, 14 Jan 2010 14:46:41 +0000

Shawn

“Dear Steve,

I have about $100k of unsecured consumer credit card debt spread out amongst several (about 15) cards. My wife and I are both in very stable jobs, and combined we make about $110k a year (about $6000-$6500/mo take-home after tax, health insurance, etc). We “own” our house, in other words, we pay $2k a month mortgage on it. We had initially planned to consolidate our revolving debt into a home equity line, and right about that time banks tightened up big time.

We were able to manage our credit card payments, and are still current, but creditors are jacking up the interest rates…and thus our minimum payment. Our minimum monthly credit card payment is now $2,000-$2,200/mo, which is beginning to push us to the brink of not being able to make our payments. I never imagined we would be making 6 figures and living paycheck-to-paycheck.

We’re strongly considering a debt management plan with CCCS or another company called ClearPoint. I’ve heard mixed reviews on DMPs, about 80% very positive but 20% very negative. Basically we’re just looking for more reasonable interest rates and consolidation…so we don’t miss that due date by a day thus incurring late fees and higher interest rates which equal higher minimum payments.

We don’t want to declare bankruptcy because we love our house and don’t want to lose it in a settlement. Since housing values have dropped, we have very little equity in the house…but it has a lot of sentimental value to us.

Is a Debt Management Plan such as CCCS right for us? Or is there a better alternative (aside from bankruptcy)?

Shawn”

The Answer:

Dear Shawn,

While a credit counseling program might be able to get you some lower interest rates, your monthly minimum payment will remain about the same as it is right now.

I think the primary reason you are worried about bankruptcy is because you don’t want to lose the house. But the truth is that you’d be able to keep the house.

I am not convinced that a credit counseling program with CCCS or anyone else is a smart move for you right now. And before you decide to commit yourself to a credit counseling or debt management program I think you owe it to yourself to go and meet with a local bankruptcy attorney and get the facts. You can click here to get a free bankruptcy consultation.

Rather than make a very important life decision about which path to follow to get out of this mess, based on assumptions, I think you need to gather all the facts by meeting with the bankruptcy attorney.

If you are living month-to-month and enroll with CCCS or a credit counseling program and a year from now you find it impossible to keep up with the payments, then all you’ve done is tossed a year worth of payments down the drain without accomplishing anything.

Big Hug!

@GetOutOfDebtGuy

Diana Is Struggling to Make Credit Card Payments And Afraid

Steve Rhode — Wed, 16 Dec 2009 21:43:42 +0000

From How to Get Out of Debt

Diana

“Dear Steve,

I have approximately $25,000 in credit card debt, drained my savings and struggling to meet my payments. I can pay my mortgage and normal billing but not the cards

I am so confused about wha is available out there and frankly scared that I may not do the right thing with a repuable company. Can you help.

Diana”

The Answer:

Dear Diana,

It is normal to feel scared and afraid but I don’t want you to feel that way anymore. Consider yourself protected from this point on.

I wish you had found me before you started draining your savings account to get by and pay bills. I would have pulled you away from the checkbook, lovingly tossed cold water on you and said, “Diana dearest, what are you doing?”

Savings is there to be used in case of an emergency but not to continue living a life you can’t afford. Unless you can face the underlying issues that are leaving you financial abandoned, then dribbling cash from a savings account will only leave it bone dry and you, without further financial transportation. It is not a solution.

You should give yourself a real pat on the back that you reached a point and found the courage to reach out for help. That’s a huge step. And now that you’ve done that, you are absolutely right, who can you trust?

Now that you are tapped out there are really only a few logical options so let’s talk about them.

One of those options would be to explore entering a debt management program where you would make one monthly payment to the debt management company and they would divide it up amongst your creditors and pay them a new amount that might eliminate interest and fees.

But that’s not really a good solution for you at this point since you really don’t sound like you have the spare cash to be able to pay anything on a continual basis. I surely don’t want to see you enter a payment arrangement in a debt management program just because you are scared of your creditors. If you can’t make all the payments in the debt management program and eliminate your debt over five to seven years then you are throwing good money after bad.

You could immediately run and go bankrupt and discharge, get rid, of all your unsecured debt. Bankruptcy would eliminate the credit card debt but you could probably keep the house and car. I would suggest that if you consider bankruptcy as an option that you contact a bankruptcy attorney and ask for a free bankruptcy review to discuss your specific situation.

Another option, that will sound silly, but it’s not, is to do nothing at this time. You see the reason you have found yourself in this situation is either because your debt suddenly increased or your income dropped.

I suspect it is either a combination of those issues or primarily caused by a reduction in income. If that is truly the case then an option is to ignore the credit card bills that you can’t pay for right now and focus on trying to increase your income or get a second job. You might want to take a look at the America’s Job Bank page I created to help people find jobs.

This is a reasonable course to follow if you don’t want to go bankrupt right now, for your own reasons, and want to take a stab at repairing the situation. You’ll always have bankruptcy to fall back on in case a credit card company sues you or you just can’t increase your income to meet the financial demands.

If you do this the collection calls and letters will continue to come. Don’t let them rattle you, bankruptcy will be your fallback plan in case nothing else works out.

As far as being scared about working with a reputable company, that is less of an issue. Most every bankruptcy lawyer and debt management company does what they say they will do. Just watch out for a company that wants to sell you credit repair services as a solution or says if you pay them they will give you a debt consolidation loan.

While your situation feels dire, the reality is that it is a fairly common scenario that millions and millions of people are facing and suffering in silence with every single day.

If you need more help or advice, don’t hesitate to contact me.

Big Hug!

@GetOutOfDebtGuy

The Answer:

The Good Side of Check Cashing and Payday Loans

Steve Rhode — Wed, 12 Nov 2008 20:21:11 +0000

From How to Get Out of Debt

I’ve got to be honest with you. While the righteous scream out about check cashing and payday loan stores, I’m not sure I understand all the fuss. Sure I get the fact about fees and I will admit that I’ve seem some sleazy payday loan stores and outfits. But you know what, I’ve seen my fair share of sleazy banks and credit card companies as well.

Being a big name bank does not make it less egregious to charge someone $35 for overdrawing their account by $1. Don’t even get me started about the unit driven treatment of individual people by large Main Street banks. $3 to use a teller, please!

Banks do a good job of doing what banks do but they don’t offer all a user friendly or customer friendly service that people want and need. Check cashing stores like Mix check-cashing in Los Angles, do serve a particular market segment.

Nix Check Cashing Lobby

Nix and other similar check cashing businesses offer their customers something that most banks don’t personal attention, clear fees and choice.

Rather than be sneaky about changing interest rates, terms and magical fees; customers that use places like Nix Check Cashing know exactly how much services are going to cost. They are good and loyal customers that come back time and time again because they are treated well and the check cashing store does not force their financial products on the customer like a bank does.

Sure, a payday loan can be expensive, but so can overdrawing your bank account and going into overdraft, paying to get your utilities reconnected for a late payment or paying a steep fee and ruining your credit by making a credit card payment one hour late.

He told Lagomarsino why. A bounced check, a fee to reconnect a utility, a late-payment fee on your credit card, or an underground loan, any of those things can cost more than a payday loan. And then there are overdraft charges. “Banks, credit unions, we’ve been doing payday loans, we just call it something different,” Lagomarsino says. “When it starts to get used like a payday loan, it’s worse.”

I think we need to get off our moral horse and look at check cashing stores in a different way. These much maligned outfits are offering a service that meets the customers needs and charges a premium for risk and convenience.

If I go to a cheap neighborhood restaurant and order a steak, does that mean that I’m getting ripped off when I pay ten times the amount for a steak at an upscale restaurant? Or is that my choice?

It seems to me that the issue isn’t that payday loan stores and check cashing outfits exist. The real issue is that these companies fill a need that is not being met or unable to be met by any other business.

It might be that Nix Check Cashing might be making changes in that old paradigm. Kinecta Federal Credit Union is purchasing the Nix Check Cashing business and will continue the services it offers and introduce it’s credit union services to the check cashing customers.

Then Kinecta Federal Credit Union called with its offer. “We were trying to understand why check cashers have been successful in underserved areas where banks haven’t,” Kinecta’s president and C.E.O., Simone Lagomarsino, told me. What they concluded was that most banks simply didn’t know low-income neighborhoods or understand them. “We go in with this cookie-cutter approach: This is our branch, this is our way we do business,” she says.

And that is an excellent point, why is it that banks chastise payday loan outfits on one hand but then don’t serve or offer services to the market segment that the payday loan stores serve? You also have to ask yourself how much difference is there between a payday loan outfit that charges $22.50 for someone to borrow $150 for two weeks and a gaggle of banks that flood a nearly anonymous person with five empty credit cards with 30% penalty rates.

If you would like to read more about Nix Check Cashing and the check cashing business in Los Angles, I strongly suggest that you read the recent New York Times Magazine article that I quoted from, “Check Cashers, Redeemed.”

How to Get Out of Debt With the Get Out of Debt Guy » credit card payment

Is CCCS Right for Us or is There a Better Alternative? – Shawn

The Answer:

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Diana Is Struggling to Make Credit Card Payments And Afraid

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