In early December, Carlton Lewis, a former Ph.D. student was sentenced to 70 months in prison for his role in an identity theft and credit card fraud conspiracy.

Throughout the conspiracy, Lewis, who was enrolled as a Ph.D. student at the University of Georgia, provided credit and debit card skimming devices to waitresses working in restaurants across the southeastern United States.

The waitresses used those skimming devices to unlawfully obtain the credit and debit card account information of customers who provided their credit or debit cards as payment for their food and drink orders. After the waitresses had filled the skimming devices with unlawfully obtained credit and debit card account information, they returned the devices to Lewis.

The waitresses were paid by Lewis based on the volume of account information that they unlawfully obtained using the skimming devices. Lewis then uploaded the unlawfully obtained credit and debit card account information to his computer and used a re-encoding device to transform Walmart prepaid money cards into counterfeit credit and debit cards.

Lewis and others then used the counterfeit credit and debit cards to purchase merchandise at retail stores. Lewis’s criminal conduct was uncovered when counterfeit credit and debit cards, a credit and debit card re-encoding device, and a credit and debit card skimming device were found in his vehicle following a traffic stop performed by the Tennessee Highway Patrol.

“This sentence highlights the commitment of the United States to prosecute identity theft cases, whose innocent victims suffer needlessly due to this criminal conduct,” said U.S. Attorney Bill Killian – Source.

If you have been scammed and would like to file a scam report, please click here.

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Read the full article at GetOutOfDebt.org, click here: University of Georgia Ph.D. Student Sentenced For Fraud And Identity Theft

An identity thief was sentenced earlier this month to 12 years in prison for managing and east coast credit card fraud ring.

Jonathan Oliveras, used counterfeit credit cards encoded with stolen account information up and down the East Coast of the United States and has been sentenced for this crime. In addition to his 12 year prison term, Oliveras must also serve three years supervised release and has been ordered to forfeit $770,646.

Back in August Oliveras plead guilty to one count of wire fraud and one count of aggravated identity theft. In his plea, Oliveras admitted that he managed a ring of co-conspirators who used stolen credit card account information in New York, New Jersey and the Washington, D.C., area.

According to court documents, Oliveras sent payments to individuals he believed to be in Russia for the stolen account information. Oliveras then distributed the stolen account information, which was re-encoded onto plastic cards and used to purchase gift cards. The gift cards were used to buy merchandise that ultimately was returned for cash.

Federal and local law enforcement executing a search warrant in July 2010 at Oliveras’ apartment found, among other things, credit card encoding equipment and more than 2,300 stolen credit card numbers. According to court documents, credit card companies have identified thousands of fraudulent transactions using the account numbers found in Oliveras’ possession, totaling more than $750,000 – Source.

If you have been scammed and would like to file a scam report, please click here.

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Read the full article at GetOutOfDebt.org, click here: East Coast Credit Card Fraud Ringleader Gets 12 Years In Prison

“Would you like to save 10 percent on your purchase today by applying for a retail store credit card?”

Does that sound familiar? Just about every major clothing and electronics store has promotion aimed at getting people to sign up for a store-specific credit card. But what you don’t know about retail store credit cards could hurt your wallet and your credit score.

In 7 Steps to a 720 Credit Score, I talk about the importance of revolving credit cards in building your credit score. Indeed, a large portion of your credit score is determined by your credit card behavior. One of the best ways to earn a high credit score is to responsibly manage three to five revolving lines of credit, which include your major credit cards (Visa, MasterCard, and the like) as well as retail store credit cards, which are credit cards affiliated with a store like Gap or Chevron.

Before we talk specifically about how retail store credit cards can hurt your credit score, let’s take a look at the method credit-scoring bureaus use to gauge your creditworthiness. The credit-scoring bureaus want to see that you can responsibly handle a number of credit accounts at the same time. Having three to five credit cards allows them to tell whether you can make regular payments and determine whether you are a responsible person. If you do not have at least three cards, they do not have enough information about you to tell whether you are reliable or not. On the other hand, if you have fifteen credit cards, they know that you could quickly get in over your head by racking up huge credit card bills you are unable to pay.

In the words of Goldilocks, three to five is “just right.”

Of course, you must also show a record of timely payments. Doing so will cause your score to increase whereas failing to make payments on time will cause your score to drop.

You must also keep a card active. Inactive cards don’t tell the credit-scoring bureaus anything about your ability to manage debt.

Though retail store credit cards will help you boost your score, they cause unnecessary problems:

1. How will you keep your retail store credit cards active? If you do not need to buy a new washing machine each month, you might have a hard time keeping your Sears card active.
2. If you are limited to no more than five revolving credit cards, why waste one on a card that will only be accepted by one merchant? You cannot book a plane ticket using your Old Navy credit card (but you can purchase an Old Navy shirt using a MasterCard).

Retail store credit cards have limited use. If you apply for too many of these cards on top of the Visa, American Express, MasterCard, and Discover cards that you use for traveling, meals, and other expenses, you will soon find yourself with more than five credit cards.

And there is another downside to consider. Many stores promote their store-specific credit cards by offering a 10 or 15 percent discount on same-day purchases if you open an account.

Let’s do the math and see how this adds up. Imagine that you are buying a pair of $60 jeans from the Gap when the cashier tells you that you will get 10 percent off your entire purchase—$6—if you open a Gap credit card. You figure it is a wise move, so you sign up on the spot.

Consider all the downsides:

• I should take advantage of this offer, you might think, piling a few more items in your shopping cart. Sure, you “saved” 10 percent, but you also just made a rash decision to splurge on things you probably do not need.
• You have added a credit inquiry to your credit report. Credit inquiries count for 10 percent of your credit score, so your score drops a few points. This might not be a big deal, unless you plan to open another credit card, apply for a home loan, or get a car loan in the next few months. If you do, you might pay higher interest rates, which means that $6 “savings” just cost you a bundle.
• If you do not pay this and subsequent bills immediately, you will have to pay interest
• Ever heard of retail therapy? Having credit cards in your wallet strengthens your ability to make emotional buying decisions by creating opportunities for you to charge things you do not need.
• Especially during the holidays, you will be more likely to make purchases you cannot afford.

My point is that you most certainly do not save a single dollar by opening retail store credit cards.

Still not convinced? Think of it this way: Why would retail stores promote these cards with discounts unless they know they can eventually make money off the retail store credit cards?

A final note: Upon reading this article, you might be inclined to close those retail store credit cards. Resist this temptation as closing credit card accounts could damage your credit score by lowering the average age of your credit cards. Instead, pay off your retail credit cards so the credit-scoring bureaus know you are being a responsible borrower. Then make a commitment to say good-bye to retail accounts.

This guest post was submitted by Philip Tirone, a credit expert who teaches people how to build credit and avoid pitfalls.

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• American Express – Scam, Complaint, Review, or Praise?
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Read the full article at GetOutOfDebt.org, click here: Retail Store Credit Cards: How Many = Too Many?

Kara Singleton Adams, from Georgia, was found guilty last week on charges of wire fraud, conspiracy, and structuring financial transactions, relating to a $25 million nationwide telemarketing fraud scheme. Already convicted in this scheme are three co-defendants including Adams’ husband, Jason James Eyer, James Adolph Schoenholz, and Brittany Dunphy. All three pleaded guilty to related charges before Adams’ trial and Schoenholz and Dunphy testified at the trial.

United States Attorney Sally Quillian Yates said, “This multi-million dollar fraud scheme used simple tactics. It started out with automated phone calls to consumers in almost every state in the United States, and the scheme quickly escalated to high-pressure telemarketing sales pitches. Many citizens are struggling in this economy and have incurred significant credit card and other debt. This case demonstrates that people need to carefully research any person or firm who makes promises to reduce or eliminate debt in a way that seems too good to be true, because fraudsters are out there seeking to prey on their economic situation.”

“The U.S. Postal Inspection Service is continuing to investigate and will pursue such criminal activity which centers on consumers and tries to take advantage of them. These are complex schemes and they have the potential to take millions of dollars from victims, and we will continue to track them down,” said Shelley Binkowski, Acting Postal Inspector in Charge of the Atlanta Division.

John Sours, Administrator, Governor’s Office of Consumer Protection, said, “This has been a long, involved case. We are gratified by the jury’s decision, and we would be remiss if we did not thank our partners in this effort, the United States Postal Inspectors and the United States Attorney’s Office.”

Adams was found guilty on 9 counts of wire fraud, 7 counts of structuring financial transactions and 2 counts of conspiracy, after a two-week-long trial. The jury found her not guilty on two additional counts of structuring financial transactions. The jury reached their verdicts after approximately 4 hours of deliberation.

According to United States Attorney Yates, the indictment, the charges, and evidence at trial:

Starting in 2008 and continuing through December of 2009, Adams, Eyer, Schoenholz, and Dunphy conspired to defraud consumers with credit card interest rate reduction programs through a variety of schemes and companies. Using various company names, the defendants initiated automated telephone calls to consumers throughout the United States to promote the sale of the defendants’ credit card interest rate reduction program. Consumers were either greeted by a prerecorded message instructing them to “press 1 now” if they would like to have their credit card interest rates lowered or directly solicited by a live telemarketer offering to lower the consumers’ credit card interest rates. Consumers who pressed “1″ were connected to a live telemarketer, who used a script promising to substantially lower the consumers’ credit card interest rates and save the consumers thousands of dollars in interest payments. The telemarketers claimed they had a special relationship with the creditors which would allow them to negotiate lower rates on the consumers’ behalf.

The consumers were told they would become debt-free much faster, typically three to five times faster, than they would without the program. Consumers were also guaranteed that their monthly payments would be no higher than their current monthly payments on their credit card accounts. The consumers were assured there was no out-of-pocket cost associated with the interest rate reduction program. They were promised that the savings of the program would cover the cost of the program, which was between $749 and $1,495. Consumers were also told that this savings would be realized within 30-45 days and were promised a full refund of their purchase price if they did not achieve $4,000 in savings.

According to the evidence, the victims did not in fact receive what they were promised. The defendants had no special relationships with any creditors. In many instances, no attempt was made to negotiate a lower interest rate for consumers’ credit cards. Even when the telemarketers actually cold-called a victim’s credit card company, the rates were rarely lowered and the victims did not save the thousands of dollars promised in the sales pitch.

Adams, Eyer, Schoenholz, and Dunphy then took additional steps to mail those victims a fake “financial analysis” payment plan with figures which had been purposefully manipulated to show a savings of at least $4,000, when, in fact, no savings had been realized. The defendants used this falsified payment plan “savings” to claim that they had satisfied the program’s guarantee and deny the victims who sought refunds of the $749 to $1,495 in fees that they had paid.

The companies involved in the scheme included “Economic Relief Technologies,” (ERT), formerly at 1820 Water Place, Suite 250, Atlanta; “SafeRide Warranty,” formerly at 1820 Water Place, Suite 255, Atlanta; and “VP Marketing,” (VPM), formerly at 1820 Water Place, Suite 195, Atlanta, Georgia.

The group also used many other names, such as “Clear Breeze Solutions;” “Money Works;” “Client Services;” “Financial Protection Center;” “Life Change Solutions;” “Express Debt Elimination;” “Capital Resources;” Express Corp Advisor;” “Express Corp;” “Card Services;”"Credit Services;” “Americare Software Solutions;” “A Better Tomorrow;” “Helping Hand Resources;” “Auto Protection Center;” “Warranty Services;” “Auto War;” “Assured Warranty;” “Debt Suite, Inc.;” “Total Curb Appeal, LLC;” “Debtworks Software, LLC;” “DM Associates, LLC;” “VersaDebt Corp;” and “FYI Tech, Inc.”

The victims were located in a total of 46 states with the losses totaling over $25 million. Adams and Eyer spent millions of dollars from the proceeds from operating the scheme in a little over a year at a variety of luxury hotels, high-end retailers, jewelers, casinos, exotic automobiles, as well as payments to private tutors for their children.

On November 30, 2009, the Federal Trade Commission obtained a temporary restraining order against Adams, Eyer, and Schoenholz and a federal judge appointed a receiver to take over the companies and find any and all assets derived from the fraud. Evidence at trial showed that at that same time, the three were in the Philippines, attempting to start up an identical business. While in the Philippines, Adams contacted her family members, Leiah Watson and Roger Dale Watson, instructing them to remove company documents and computers from her Marietta residence and hide them, in violation of the federal judge’s order, in an attempt to obstruct the FTC receiver’s investigation. Dunphy later obtained the computers and documents, sold the computers and wired the proceeds to Eyer in the Philippines.

Eyer has already agreed to a binding plea agreement in which he will serve 10 years, 6 months in prison. Leiah Watson and Roger Dale Watson pleaded guilty to charges of violating a court order on October 6, 2011, and will be sentenced in December of this year.

Sentencing for Adams and Eyer is set for January 5, 2012. Adams faces a maximum sentence of 25 years for each wire fraud count, 5 years for each conspiracy count, and 10 years for each structuring count. She also faces a fine of up to $500,000 for each structuring count – Source.

I hate to think about the life they’ve now made for their children since they will both more than likely be serving jail time.

Have you ever received a call like this or from one of these companies? Leave a comment below!

If you have been scammed and would like to file a scam report, please click here.

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Read the full article at GetOutOfDebt.org, click here: Couple Faces Serious Jail Time For Their $25 Million Nationwide Telemarketing Fraud Scam

“Dear Damon,

Was building a new house.. Went to close on long term loan.. The bank would not give us what it was appraised for. I had to you all saving to not lose the house.. I put the rest on credit cards. I could not keep up with card and all other expenses. I went to debt services company. They informed me to stop paying and they would handle the credit companies.. Now being sued and wages being garnished.

What advice to you have about my situation?

John”

The Answer:

Hello John,

I would need to know a lot more about your situation to help you figure out what to do.

Who was the debt relief company? How much did they charge you? What did they do for you? Where you able to get a refund? How long ago was that? How much debt do you have? How many judgments do you have? How much money do you make? How much disposable income do you have to apply toward these debts? Do you have any assets? If so, what and how much? Have you looked into filing bankruptcy?

Please answer these questions in the comments section below and I can see what we should do to move forward.

If you would prefer to have a private phone consultation where we can get into much more detail, please contact me through my website.

Damon is a talented independent debt coach that provides in-depth assistance and consultations for people struggling with debt. If you want a personal debt coach to help you through a difficult situation or want assistance to find secret discounts offered by debt settlement companies I think Damon Day is an excellent person to contact for advice and assistance. He can be reached directly at DamonDay.com

If you have a debt related question you’d like to ask, just use the online form.

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Read the full article at GetOutOfDebt.org, click here: I Was Building a New House But the Bank Won’t Give Us What it Appraised For So I Put the Rest on My Credit Cards. – John

Scott wrote to me at GetOutOfDebt.org and asked me the following question. If you have a question you can visit GetOutOfDebt.org and ask for my free help also.

“Dear Steve,

We have too many bills and not enough money. We owe $30,000 in debt besides my mortgage. We are behind about 1-2 months are most bills and are overwhelmed. We have only owned our house for 4 months and cannot do a second mortgage.

Please suggest a solution.”

Scott,

First off, I completely understand and remember what it was like living through those days. There is nothing fun about it. The motto I adopted at that time was “At least I’m not on fire.” The situation might look bad but trust me, it can always be worse.

I remember the day I had two telephone appointments to help people. The first person was 8 months pregnant, living in her car and getting beaten by her boyfriend. She worked at a top 500 company as well. I hung up the phone with her and the next appointment just a few minutes later was from a woman that wanted to beat her husband because he was unable to provide for her and buy Martha Stewart paint to redo the house. It is all relative.

Too many bills and not enough money is a guaranteed recipe for something to change in your life. It is an unfortunate lesson that just because someone will lend to you does in no way mean that you can actually afford it. Take a look at the bank lending mess that is demolishing Wall Street. It’s all because of stupid lending.

People are getting in over their heads every single day because they feel that the bank or lender would not give them credit if it wasn’t manageable for them to afford it.

What saddens me most about your question is that you’ve only been in the new house for four months and you are already running into tough times. Most commonly I see people in situations like you who just qualify, move in and then a lot of expenses land on the credit cards. Once those bills go up, they can be the tipping point into nothing good.

Since you are already behind on your bills, your credit report and credit score are already damaged. That’s a fact so let’s put that aside for now. You credit can be repaired latter once this situation is properly resolved.

You have three possible course of action. I’m listing these in no particular order.

1. Debt Management – You could go into a debt management program and see if your credit card monthly payments could be reduced enough to give you some breathing room. But you need to know that a debt management program is not binding and your creditors could change or eliminate and concessions they might give you at any point moving forward. A debt management program might be a good short term solution if you want to try that first.
2. Bankruptcy – Your debts are overwhelming and the good news is that you probably have little equity in your home. If legally eliminating your credit card debt would be enough to make a difference in your financial life and allow you to better make it from month to month then I urge you to speak to a bankruptcy attorney and have a free bankruptcy review about your situation. Before you decide if bankruptcy is right fo you, talk to the bankruptcy lawyer and get all the facts.
3. Adjust Lifestyle and Budget – As ironic as this might sound, the easiest thing to do is often the most difficult for people to execute, futzing with the budget. If we just look at your situation from a mathematical point of view, it can be repaired by reducing expenses, increasing income or a combination of both. Every dollar you do not spend remains in your pocket and can be used for debt reduction and paying bills. If you want to some help to adjust your budget, take a look at the Mvelopes website.

Scott, the bottom line is that none of these are perfect solutions, but they are possible paths to follow to get your financial life under control so you can live within your income again.

Please let us all know how things turn out for you. We care and want to know.

Big Hug!

@GetOutOfDebtGuy

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Teresa

“Dear Steve,

I have too many credit cards. Where do I start to get rid of them?

Teresa”

The Answer:

Dear Teresa,

Credit cards don’t magically appear in our wallets or purses. They appear because we have done something or participated in some process to agree to these credit instruments.

The first step to get rid of your credit cards is to do a financial autopsy and figure out what your actions were that led to you getting so many cards up till this point. Unless you can develop some awareness about that you are bound to repeat the same steps again.

You have three approaches to paying off the cards. The first would be to pay them in full. Second would be to adopt a debt snowball approach. Third would be to enter a credit counseling program if you are struggling but can afford to pay about 80% of the minimum payment you are making now.

And then once you start to pay off cards, you should keep your oldest credit cards open to help bolster your credit report and credit score. Don’t close those oldest cards, they carry a lot of positive weight to pumping up your credit score.

Once you start to follow this approach and you can come back and provide me with more information I’ll gladly help you further.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Teresa Writes In “I Have Too Many Credit Cards”

Opal

“Dear Steve,

I have two or three credit card that are debt free. Should I close these accounts since I don’t use them and don’t need but one active card?

Would it go against my credit to close these?

Opal”

The Answer:

Dear Opal,

As strange as this may sound, with only two or three credit cards to your name it does not make much sense to close any of them, and here’s why.

Your credit score is calculated using a number of different factors. One of the most important factors is how long you’ve had credit. These cards help to improve your credit report and credit score because you’ve had them for a while and they are not maxed out or delinquent.

If you can lock them away someplace safe, then I would do that rather than close them. I’m assuming that you are not having to pay an annual fee for any of them either. If you are paying an annual credit card fee then we should think about closing that card but only if it is not your oldest credit card. You can also call your creditor that is charging you an annual fee and tell them that you don’t want to pay it. About 75% of the time they will waive the annual fee then.

The way to discover when your cards were opened is to get a copy of your credit report and check the date opened that is reported to the credit bureau on your credit report.

You should also use the oldest card from time to time and pay the balance off in full at the end of the month. This will show some good credit activity on your credit report which will help to improve your credit score as well.

If you just went in and randomly closed cards, yes, it could hurt your credit score.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts”

Recently I was over on the Finance Your Life blog and asked Doctor S, the blogger there for his opinion on the following question:

“Do you become a financial failure when you break the budget just trying to get a bit of fun in your life when everything else around is stressful at home, at school, and with the finances?”

Here is what he had to say.

Dealing with my own personal finances has been an up and down journey. There were times before when the debt and spending mistakes really took its toll on myself and I felt extremely sorry for myself. While I was depressed with my situation, I never thought that I was a failure. I could not get any lower and decided that I had to start taking control of my finances. This was about a year ago and I had many things going on in my life, including a very serious relationship. My girlfriend was always on me about my spending and wondering why I would go out on the weekends splurging on big nights out in the city.

I guess it finally hit me one day that I had to make changes because I would not be able to progress, both personally and financially, if I did not make any changes. Fast forward to the present time where I have a monthly budget going on and I am making strides to stick to my budget. Months ago I was spending on average $450-500 per month on my weekend activities. Most of that spending was going on my credit cards which made my situation worse because I was continuing to accumulate credit card debt. I have reduced the amount I spend on the weekend to $225 last month and currently $149 for the current month of September with a little over a week left in the month!

Life is busier now and with that, much more stressful. I work from 8 AM till 5 PM and then two nights a week I have night classes as I am pursuing my masters degree. I usually get into the gym every day whether it is after class or after work. With all these things going on, I have so much time where I am busy which means less times to go astray on spending sprees.

I do not go out during the week or drink either. I have come a long way from the way I lived my life a year ago. Throughout it all, I know there will be times where I miss my spending amount that I budgeted for the month, but never will I use the word failure. That word is just too powerful to be used to describe anyone, let alone yourself. That type of mindset can’t be healthy for a person’s emotional state either. When we make mistakes we must realize that it is just another opportunity to learn from and make sure that we never make the same mistake twice.

So what do you think about the question? What’s your answer? Tell me what you think in the comments section below.

Steve

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Read the full article at GetOutOfDebt.org, click here: This Time I Asked “Do You Think You Are a Failure When You Break Your Budget?”

Today, the average person pays between 16 and 17 percent on credit card balances. While interest charges may seem low when you look at the monthly charge on your statement, over the long run they can really add up. In fact, the average person can put a hundred bucks or more in his or her wallet just by getting a lower rate on a credit card or two.

If you’re carrying a big balance, you can save even more. Here’s how much:

So what are you waiting for? Following are some strategies that will help you get all of the cheap credit you want.

Just Ask

A survey done a few years ago found that about half of the people who asked their current credit card issuer for a lower rate, got one. Most credit card issuers have many different programs, some of which may carry lower rates. But if you’re paying a higher rate they probably won’t tell you about the lower ones unless you ask.

Call and tell your card issuer you’d like to remain a customer but you’re going to have to leave if you don’t get a program with a better rate. Give the customer service person a break and be friendly. If you don’t get an immediate “yes,” don’t let that discourage you. Ask to talk with a supervisor or call back another time. (For this strategy to work, you should be paying your bills on time each month.) You might want to sweeten the pot by offering to transfer balances from another card.

Go Fishing

There are some 20,000 credit card programs available today. With that many, you should be able to find at least one that will offer you a good deal. A couple of sources you may want to try: cardtrak.com and bankrate.com. It can be confusing to sort through so many different programs, but it can be well worth it. If you’re confused about whether to choose a low fixed or low variable rate, keep this tidbit in mind: in most cases, a credit card issuer can raise the rate on a fixed card as long as you’re given 15 days advance notice. So that means a fixed rate may not necessarily be better if interest rates in the economy go up!

Open The Mail

You’re flooded with credit card offers, right? While some may well qualify for the “junk mail” category, occasionally there are a few gems. Look for a low introductory rate that applies to balance transfers until they are paid off, convenience checks that offer a good rate without a high fee or simply a straightforward low rate. If you’re considering a card with a low introductory rate that’s only good for a few months, make sure that the “permanent” rate is also attractive or you’ll be scrambling to find a new card in a few months.

One more thing to watch out for: due to recent changes in the law, “pre-approved” credit card offers aren’t always what they seem.

If you respond to one of these offers, the issuer can create a secret list of additional qualifications that can be considered before it actually gives you a card. So, if you say “yes” to a pre-approved offer, you may still be turned down based on those other criteria. Essentially, this means that “pre-approved” is really just pre-selected, not pre-approved.

Improve Your Score

You’ll have the best chance of qualifying for the credit you want if you have a good credit score. Credit scores are simply a way that lenders evaluate applications.

While every lender is different, there are generally some things you can do to improve your score: close accounts you don’t use; make sure you have at least a couple of major credit cards paid on time for the last 18 months or more; submit no more than four or five credit applications in any six-month period and avoid late payments or other negative information.

Consolidate

You may be able to lower your costs by consolidating some or all of your debt. For example, you may be able to transfer more expensive credit card balances to your cards that have cheaper rates. Or, you may find that a home equity loan or a margin loan against your investments offers a better rate than you’re currently paying. Other options can include loans against retirement plans or life insurance policies. Be very, very careful here. Many people fall into the trap of consolidating their debts and then running up new balances.

This strategy will only work if you are committed to paying off your debts as quickly as possible. So don’t blow it. Make sure you have good control of your spending, and a written plan for becoming debt-free in three to five years.

If You’re Turned Down for a Low-Rate Card …

First, realize you’re in good company. Most issuers turn down at least 50 percent of new applications, and the rejection rate for some with rock-bottom rates can be much higher — even 90 percent. Now that you’re feeling a little better, take a good hard look at that rejection letter. Do you understand the reasons listed for turning you down? Are they clear? Do they apply? If not, call the credit card company and ask for a clear, specific explanation. That way, you’ll know what you need to do to improve your credit before you apply again.

If you have been turned down, get a copy of your credit report. It’s free if you ask for it promptly. And it’s very important to check to make sure it’s accurate and up-to-date. Information about how to order it will be listed on the denial letter. You can also order a consolidated credit report, containing information from all three credit bureaus. You can also order a consolidated credit report, containing information from all three credit bureaus, at GetOutofDebt.org online.

Other Related Articles to Read

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• I Paid Off an Old Debt and My Credit Score Went Down. – Michelle
• Is It Possible to Easily Increase My Credit Score? – Tamara
• My Credit Score is Dropping. Is Yours?
• How to Easily Rebuild and Repair Your Credit After Bankruptcy, Foreclosure, or Reposession
• Teresa Writes In “I Have Too Many Credit Cards”
• I Would Like to Consolidate My Debt, However I’m Having a Difficult Time Finding Someone Who Will – Laurie
• Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts”
• Daniel Writes In – “How Can I Get Out of Credit Card Debt?”
• Bank of America is Charging Me 27% on My Credit Card. – Melinda

Read the full article at GetOutOfDebt.org, click here: How to Get All the Cheap Credit You Want

“Dear Steve,

Can i go bankrupt on just my credit cards?

Mike”

The Answer:

Dear Mike,

If you have other creditors like loans, car loans, mortgage, etc. then you need to list all creditors in a bankruptcy. You don’t get to pick and choose who to include and who not to include. Everyone gets an invitation to the bankruptcy party.

If you are asking me this question it sounds like you have a problem or difficult situation with one of your creditors. I would suggest that you click here to contact a local bankruptcy attorney, schedule a free consultation and ask the bankruptcy attorney for some specific advice base don your situation.

Steve

Other Related Articles to Read

• University of Georgia Ph.D. Student Sentenced For Fraud And Identity Theft
• East Coast Credit Card Fraud Ringleader Gets 12 Years In Prison
• Retail Store Credit Cards: How Many = Too Many?
• Couple Faces Serious Jail Time For Their $25 Million Nationwide Telemarketing Fraud Scam
• I Was Building a New House But the Bank Won’t Give Us What it Appraised For So I Put the Rest on My Credit Cards. – John
• Scott Writes Me and Asks For Help – “We Are Behind And Overwhelmed”
• Teresa Writes In “I Have Too Many Credit Cards”
• Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts”
• This Time I Asked “Do You Think You Are a Failure When You Break Your Budget?”
• How to Get All the Cheap Credit You Want

Read the full article at GetOutOfDebt.org, click here: Can I Go Bankrupt On Just My Credit Cards? – Mike

Daniel says, “I’ve been buried in credit card debt and it feels like I make payments each month and instead of things going down, things go up. My interest rates recently went up even though I have not missed a payment or paid late. Another one of my MasterCard’s just lowered my limit a lot. Is there any hope. Thanks”

Daniel,

Thank you for contacting me. I’ll do my best to answer your question honestly and openly.

There is nothing about credit cards that operates for your benefit or that you have control over. The banks issue the cards, raise and lower the limits and play with the interest rates as they want.

Banks are self-centered and only care about their risk and reducing their liabilities and so when they shrink credit limits and that leaves you more maxed out on the remaining credit and that hurts your credit report and credit score, quite honestly, they don’t give a shit.

The credit card company is concerned about only one thing, profit. I’m not being cynical here, just dead honest. Profit is what it is all about. Profit is what fuels the bank and the little guy, like you, we’ll you’re just a number on a screen. You are a cog in the wheel to help them generate profit.

The banks know that they can increase profit by increasing interest rates. The balance becomes how much to increase interest rates without chasing customers, profit machines, away. If you’ve got shitty credit, they’ve really got you by the short hairs. You are probably not going to find a better deal elsewhere.

When the economy looks great, banks will pass water out like ecstasy at a rave. When the economy looks bad and losses are creeping up then banks start cutting and pruning to minimize their financial risks, which may hurt their profit.

Past due credit card accounts are rising. They are up 22% since this time last year because people are just getting so close to the financial edge that they are having a tough time paying the bills. And as wages contract people often turn to the credit card as a way to make ends meet. Balances go up and repayment becomes less affordable.

It is reported that consumer credit card debt has doubled since 1996 and is now cruising at around $1 trillion and while even though that number sounds really big, it’s not when compared to what it will be by 2018. The amount of consumer debt hasn’t leveled off, it is still on the climb.

Credit card companies don’t make a profit unless they poor more debt into the economy and more people use it. Banks can’t stop lending. Banks need you to go into debt.

The only real protection that consumers have is the law and right now the law lets banks do pretty much what they want to. Banks are able to change how payments are applied to your account, change the interest rates, fees and grace period, eliminate your rights for an impartial arbitration, and more.

Until the federal government gets the balls to pass laws that actually protect consumers, like through Obama’s Credit Card Bill of Rights, you don’t have much power to change what they are doing unless you pay your balance off in full and no longer carry a debt owed to any credit card company.

When you carry a balance on a credit card you are truly nothing more than a modern day slave, working hard to obey your master, the bank.

Other Related Articles to Read

• Rebecca And Her Husband Are Struggling to Keep The Business Going
• Soon, Where You Shop Will Control Your Credit
• Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts”
• Lower Your Car Payment. Skip It, Lower Your Interest Rate and Get Cash Back
• Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas
• Consumers Feel the Next Crisis: It’s Credit Cards
• Credit Card Horror Stories: Tales of Credit Limit Reductions and Account Closures
• YOUR VIEW: Charles Merlis
• Despite What They Say This Is Not The End Of Subprime Loans
• Ed Is Scared But Courageous In The Face Of His Debt

Read the full article at GetOutOfDebt.org, click here: Daniel Writes In – “How Can I Get Out of Credit Card Debt?”

“Dear Steve,

My husband and I own our own business but have been struggling lately. I work a 9-5 job while he stays at home to run the business. We owe a lot of debt in credit cards from working to get the business up and going – and we’re just a few hundred dollars a month from breaking even.

It’s so frustrating! So we rely on the credit cards to keep us a float for the time being, which I hate. We already owe almost $19,000 in credit card debt.

Is the government going to intervene with the way the credit card companies are gouging interest rates? The banks (Citi in particular) are getting bailouts with our tax money and then turning around and raising our interest rates. I can barely afford my minimum payments as it is.

If they keep doing this to me I’m going to have to declare bankruptcy. I’ve had 3 cards already tell me they’re raising my APR to a MINIMUM of 19.99% or more by February. The government is quick to help the big companies, but what about the small businesses? What are we to do?

Rebecca”

The Answer:

Dear Rebecca,

Sadly your situation is not all that unusual. A bit of the perfect storm I guess. You’ve just happened to start a business and financed part of it on credit cards at a time when the economy has fallen apart and lenders are freaking out.

The reason that your credit card companies are raising your rates is because they can. As long as you carry a balance on those cards you will be subject to whatever your creditors choose to give you. But there is a potential solution here.

If you don’t wish to accept the new terms and conditions the term update will give you instructions about what to do to opt out. Generally this will mean that your account will be closed and you will no longer have access to the card and it will show as closed on your credit report, potentially lowering your credit score as you move forward.

There is nothing on the table about any sort of government intervention. Government resists intervening to help consumers and in fact has done just the opposite. They government recently announced that they wish to make it easier for consumer lenders and credit card companies to get access to money to lend but there has been not a single peep about giving consumers any new rights or legislation to help them deal with problem credit card debt.

No bailouts of funds have been tied to the way the bank treats their customers or operates. I’m afraid there will be no lifeline coming for you from the federal government.

Your situation just reinforces what I have seen for years, banks do things that lead more people into failure than success. They have policies in place that force people into bankruptcy and then the banks get little back and blame the consumer for being casual or careless with credit.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Other Related Articles to Read

• Soon, Where You Shop Will Control Your Credit
• Daniel Writes In – “How Can I Get Out of Credit Card Debt?”
• Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas
• Tina Says “My CPA is Under Investigation For Fraud”
• Couple Faces Serious Jail Time For Their $25 Million Nationwide Telemarketing Fraud Scam
• Debt Free! And You Can Be Too
• This Time I Asked “Do You Think You Are a Failure When You Break Your Budget?”
• I Am 60K in Credit Card Debt And They Are Raising My Interest Rates. – Teresa
• Trish Says “Credit Counselor Is Going Out of Business And I’m Late On Payments”
• I Carry Very High Balances On My Credit Cards. – Joyce

Read the full article at GetOutOfDebt.org, click here: Rebecca And Her Husband Are Struggling to Keep The Business Going

“Dear Steve,

I’m married, my husband is disabled. I have 3 growing children and a 6 year old disabled child. My payroll checks go straight to bills. I use the credit card for foods and miscellaneous household items. I’m really struggling.

I go to work in deep depression and stressful almost everyday.

How do I get out of my debt? I’m not the type of person that always go shopping or buying stuffs that I don’t need. Please give me some advice that can help me go through this tough situation.

Thanks,
Thu”

Dear Thu,

First, let me offer you a big bear hug and give you my virtual shoulder to lean on. I’m so sorry that you are living through this right now and I can feel, from your words, how oppressive and stressful it must be.

Your open statement about the “deep depression” you are living with, concerns me. Depression is not conducive to getting out of debt. In fact, living with depression leaves you unable to make long-range plans, unable to follow through, unable to execute comprehensive plans, unable to deal with the hurdles that you face every day.

If at all possible I’d like for you to seek help for your depression first. This might be through talk therapy or medicine or a combination of both. If you can get help for your depression then facing your situation will become easier to deal with. Here is a list of places you can go to get help with depression and some of them may be free for you.

I don’t know what the balance of your bills are right now but I am sure they are growing since you mentioned that you are using the credit cards to pay for food and household items. That is never a good sign. What that tells me is that you can’t afford to live within your current income and that’s a huge problem.

Now is the time to search for benefits that may be available for you. You may be eligible for government benefits and you can search here for those.

Unless you are able to increase your income or reduce your expenses, then getting help with medical, assistance, housing and food benefits will be critical to you.

While bankruptcy is an option to eliminate your bills, if you can’t live within your income now, discharging your bills in bankruptcy isn’t going to help you to make it from day-to-day, that is unless the money you are paying on your bills now would help to bridge your cash valley you have right now.

If you want to learn more about bankruptcy, speak to a bankruptcy attorney and ask for a free bankruptcy review.

I think the best your solution will lie in a three step approach:

1. Treatment for your depression.
2. Discovering benefits you are eligible for.
3. Bankruptcy

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• I Was Injured and Can’t Work. – Bill
• Back When I Was Good at Making God Behave I Was Making Good Money – Julie
• Financial Hardship Installment Loan. – Tracy
• Adult Baby Continues To Receive Social Security Benefits – Fraud Allegations Dropped
• I Am a Caregiver to My Quadriplegic Husband and We are Maxed Out. – Linda
• It’s Been 25 Years and I Want the Old Student Loans Discharged. – Jennie
• How Can I Get My Husband Out of Debt Without His Cooperation? – Caren
• How Do I Prove I’m Disabled to Get My Student Loans Wiped Out? – Christina
• My Disabled Husband Wants to Take Money Out of Retirement to Pay Credit Cards. – Stacy
• How to Get Out of Debt. The Honest and Unvarnished Truth.

Read the full article at GetOutOfDebt.org, click here: Thu Wrote Me And Said “I’m Really Struggling, My Husband is Disabled, How Can I Get Out Of Debt?”

“Dear Steve,

I have been enrolled with a consumer law center that was working with my creditors on my outstanding credit cards. I was late on payments up to 4 months. I was told today that the law center is closing without helping to pay off my creditors. I was making payments to them at $200.00 per month and I have to submit paperwork to try and retrieve my money given to them.

I am back where I started plus 3 more months later. What can I do to pay my cards without the additional late fees and overlimit fees added? Who can i turn to for help?

Trish”

The Answer:

Dear Trish,

In a perfect world you would be treated as an individual and there would be a human on the other side of the phone at the creditors that could make some allowances for your situation. Unfortunately it is too costly for you to be treated as an individual so instead your situation will fall within one of the mandated policies and procedures from the creditors.

I seriously doubt they will eliminate the fees you were charged. It isn’t their fault that the consumer law center is going out of business. That is really an issue between you and the consumer law center. From the creditor point of view they have been waiting for your payments to bring your account current. They have not been receiving those payments.

You have not given me a bunch of information about your debts so my advice is going to have to be very general.

If your credit card balances are less than $10,000 than maybe a credit counseling or debt management program might be worth investigating to see if it is appropriate for you. If your debt is much larger than that or there is no expectation that you’d be able to keep up with $200 a month payments for the next six years, then bankruptcy would be worth looking at. Get a free bankruptcy review and see if bankruptcy is right for you.

It sounds like your situation is difficult and now that you are seven months behind on the credit cards it might just be too big of a hill for you to climb back over. If that is the case, use the $600 that you will hopefully get back from the consumer law center to help pay for bankruptcy.

Based on what you’ve said it sounds like the consumer law center was actually a debt settlement company where you send a monthly payment, which they accumulate, until they have enough money to approach a creditor about settling the debt for less than you owe. A traditional credit counseling program would have been sending payments to your creditors on a monthly basis.

There is no easy and painless way out of debt. Every option and solution, other than paying your debts in full or at least by the contractual monthly payment will result in some pain. That pain may be a damaged credit report, a lower credit score, fees, penalties, etc.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Other Related Articles to Read

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• Rebecca And Her Husband Are Struggling to Keep The Business Going
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• AK Wants to Use His Credit Cards to Consolidate His Debts
• Kayte Has Drained Her Savings And Can’t Pay The Bills Anymore

Read the full article at GetOutOfDebt.org, click here: Trish Says “Credit Counselor Is Going Out of Business And I’m Late On Payments”

“Dear Steve,

We have a LOT of debt and have some rental houses. Have several cards that are maxed. We still barly make all the bills on time, we don’t want to lose our houses, and we really don’t want to get bad credit. So what do we do?

How do we get out of debt without hurting our credit and no losing our rental houses? We still make all the bills on time BUT barely.

Amanda”

The Answer:

Dear Amanda,

If your credit cards are already maxed out your credit score is already suffering.

I think that you really need to face reality. I understand the desire to find a magic answer to make everything work but unless you have sufficient money to meet your contractual obligations then something is going to give. You can’t turn three quarts of water into a gallon.

You really need to sit down and decide what kind of life you want to live. Here are your options.

• If you want to hold on to the rental homes and improve your credit then look at refinancing the rental property loans to a lower interest rate and increase your income to reduce the financial pressure you are under.
• You can always continue on the path you are on now. It is stressful, not conducive to a happy life or a healthy relationship, and you already know how difficult it is.
• Or you can come to a realization that your current path is not sustainable, it is unlikely you are going to be able to increase income to reduce the pressure and that something has to give. If that is the case you could look at a debt management program to place the credit cards in. The creditors may reduce the interest they are charging you but your payment won’t go down all that much. You could also approach the rental home mortgage companies and see what loan modification options are available, probably none. Both of those actions will negatively impact your credit.
• But if you are going to ding your credit then you need to consider bankruptcy as an option. Rather than it taking seven years to get out of debt in a debt management program you could hand the rental homes back to the bank, discharge your credit card debt and have a fresh start in less than a few months. Even if you are not considering bankruptcy right now you still need to meet with a bankruptcy attorney and get a free bankruptcy consultation so you can learn more about bankruptcy to rule it out.

Alternatively, if none of those suggestions above sound good to you then I’d suggest smoking a whole lot of weed and stay in a delusional fog as long as possible so you can avoid reality that way.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• University of Georgia Ph.D. Student Sentenced For Fraud And Identity Theft
• East Coast Credit Card Fraud Ringleader Gets 12 Years In Prison
• Retail Store Credit Cards: How Many = Too Many?
• Couple Faces Serious Jail Time For Their $25 Million Nationwide Telemarketing Fraud Scam
• I’m Thinking of Filing Bankruptcy in Illinois. Can We Keep Our Rental Property? – Fla
• Disabled, Maxed Out, and Want Good Credit. – Kathy
• I’m Current But Maxed Out and Want to Get Out of Debt. – Julia
• I Racked Up Debt And Struggling With the Minimum Payment. – Peter
• Can the Collection Company Force the Sale of Our Rental House? – Stuart
• I Was Building a New House But the Bank Won’t Give Us What it Appraised For So I Put the Rest on My Credit Cards. – John

Read the full article at GetOutOfDebt.org, click here: How Do We Get Out of Debt Without Hurting Our Credit? – Amanda

MJ

“Dear Steve,

I’ve been able to work very little because of severe health issues. Sadly they are on going, with uncertain prognosis. Medical bills mounting as well. (about 5K).

I’ve been living off of credit cards and can no longer keep up with payments. Approx 2k per mo. in credit card payments. I’m not late on anything yet.

I’m wondering if you have any tips or tricks for relief? I’m working on selling my “stuff” to raise money but the state of the economy is a hindrance for that.

MJ”

The Answer:

Dear MJ,

If I had a magic wand to wave to make your situation repair itself, I would wave it for you. To be ill with an uncertain future is stressful enough, but to add about $40,000 of credit card debt on top of that, only compounds the stress and potentially shortens your life.

I know you have tried to do what is right for you, your obligations, your sense of right and wrong and what you have been taught. But I’m afraid that trying to meet the goal of not falling behind on your bills has left you in a worse situation.

At first, I bet you used the credit cards to make ends meet in an uncertain time but latter the cards got used more and more just to get by. And before you knew it, the balances were so high and so out of control. You might have actually found yourself taking a cash advance or two from one card to pay another.

And then when that day came, when you had no more money on hand to pay your bills, you started selling stuff to help make ends meet. But let me ask you, what is your plan to make ends meet when all your stuff is sold and the money is spent?

Selling stuff and draining assets to perpetuate a path that does not lead to a resolution is a comfort only while the money lasts. When all the cash has been spent and at the stuff has been sold, you will have nothing and nothing to give. You will discover that all that you have accomplished is to postpone the difficult day of reckoning and not made the actual problem go away.

Before we turn to solutions to euthanize your debt we must first set our attention to making sure that without reliance on credit, credit cards, and selling stuff, that you will be able to make it from month to month and live a life worth living. It does no good to eliminate your financial responsibilities, which you can no longer meet, only to leave you unable to afford food, shelter, utilities and clothing.

From what you wrote I can only assume that your severe health issues are not only ongoing but also may lead to your death. Unless you take bold action to eliminate your debt your struggles to repay debts that you can not afford my linger to your absolute last living day.

I would suggest that you take a long walk or go to that favorite cafe or restaurant that brings you joy. Order something to drink, maybe a hot cup of delicious coffee and and tuck in to a tasty treat. I want you to sip the coffee slowly and concentrate on the wonderful flavor of your edible gift and as you enjoy that moment, I want you to visualize how you want your remaining days to be. Ask yourself the following question, “Do I have a greater responsibility to fix my financial past or create a safer financial future for the time I may have left to live?”

If you decide that the next hour, the next day and the next year are most precious to you, then I would urge you to click this link and go see a bankruptcy attorney and seriously contemplate bankruptcy to eliminate your credit card and medical debts.

It certainly sounds to me as if there is no reasonable expectation that you will be able to live both a life where you can heal and a life where you can repay your debts, without sinking further in either health or debt.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: MJ – “I’m Ill, I’ve Got Bills, And I Don’t Know What To Do”

“Dear Steve,

Full time college student with debt from credit cards and past balance for a college in California.

I’m a 21 year old college student (about a year left of school) My student loans are all deferred until I graduate, but I have two credit cards and a balance from a college I used to attend in California. The total that I owe is about $3500 and all three of the creditors have collection agencies and attorneys harrassing me. I was served by capitolone and told that they are filing a judgement against me.

I attend the Culinary Inst. of America full time, so I am unable to work enough to pay these debts. I pretty much just make enough money to live on and my mom pays most of the misc. college expenses to help me. I would like to try and settle these debts but don’t know where to start. Might you be able to offer advice?

John”

The Answer:

Dear John,

Where do you start; with income. Until you get out of school it does not sound like you can make much, if any, money to begin to resolve these debts.

I’d just wait till you graduate, get a job, and start earning some money before you do anything. Otherwise, what’s the conversation going to be?

“Hi Capital One, it’s me John. I just wanted to call you and tell you I don’t have any money.”

Save the time and bake me a batch of snickerdoodles.

If they are going to sue you, they win. Like I said, it can all be dealt with latter.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

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• I’m Doing Debt Settlement and Getting Sued by Chase Bank. – Darlene
• Credit Card Debt Lawsuit – Consequences of Settlement Done Wrong
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• I Got Sued by Capital One. What Do I Do Now? – Leslie
• I Want Out of Debt Without a Chance of Being Sued. – Mary
• Thanks for This Website! – Rocio
• I’m Being Sued By Capital One. Should I Go Bankrupt? – Laura

Read the full article at GetOutOfDebt.org, click here: I’m in College and Getting Sued by CapitalOne. What Do I Do? – John

Kayte

“Dear Steve,

My husband and I have roughly $75,000 in credit card debt. Due to the economy, we both have experienced a substantial decrease in our income (i.e., commission based pay). We have exhausted our savings trying to keep up with our mortgage payment, credit card payments, car payments and other cost. We are now at a point where we can not pay all of our bills.

Would a ‘debt management’, ‘credit counseling’ or a ‘debt settlement’ program be the best way to improve our financial situation?

Kayte”

The Answer:

Dear Kayte,

Thank you for trusting me enough to send me your question. I only wish you had found me before you spent your savings trying to stay current.

The problem, in situations like that, is that the savings keeps you afloat until it is gone, and then you are in double trouble.

Debt settlement would not be the best path since you don’t have any money to make large settlements right now to eliminate some of those debts. And a credit counseling or debt management program might help with reducing the interest rates on your credit card debts but it is not going to help reduce your mortgage or car payments.

If you can afford the mortgage, car payment and reasonable living expenses, without the credit cards, then eliminating your credit card debt through bankruptcy might be worth looking into. I’d suggest that you speak with a bankruptcy attorney and ask for a free bankruptcy review to discuss your situation.

If you still can’t afford to live within your income even after eliminating your credit card debt then more dramatic and major lifestyle changes will be in order. These may include selling your home and renting for less money or selling the car and buying a less expensive vehicle.

Generally the largest monthly expenses for families is the mortgage, health insurance, car payments, utilities, and food. It’s hard to find easy reductions in those items without making major changes in where you live, what you drive, etc.

One major expense that I always hate to see people drop is health insurance. There is no doubt that health insurance is ridiculously expensive. For many the monthly amount spent on health insurance and medications is more than a mortgage payment. But if you don’t carry medical insurance, just one simple accident can clean you out and take you to bankruptcy.

Please let me know what you decide to do.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Other Related Articles to Read

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• Debt Problems Are The Same In Indiana As They Are In Ireland
• Ryan Writes In Looking For His Lifestyle Back
• Trisha is a Single Mom, Separated, and Facing Bankruptcy. What Should She Do?
• MJ – “I’m Ill, I’ve Got Bills, And I Don’t Know What To Do”
• Steve Writes In “I Want to Cash Out My 401(k) And Pay Off Debt.”
• Teresa Writes In And Asks “What Should I Do Next?”
• John is Worried His Debt Will Scare Away His Fiancee
• Tanisha Wants to Cash Out 401K To Get Rid Of Debts.
• April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?”

Read the full article at GetOutOfDebt.org, click here: Kayte Has Drained Her Savings And Can’t Pay The Bills Anymore

I got the question below through the GetOutOfDebt.org site from someone that identified themselves as In a World of Hurt. Feel free to visit GetOutOfDebt.org and ask me your question, you can use an anonymous name, it’s okay.

“Dear Steve,

We owe $103,000 on our first mortgage, $16,000 on our home equity loan, and $17,000 in loans and credit cards. Monthly out go currently $3,500.00 including utilities and necessities.

I was approved for a complete refinance which would pay all of the above off, and make out monthly out go 1220.00 + utilities and necessaties. We would have 1500 each month left over and by sending an extra 1000 a month payment to the principle blance we would have regained our equity in approx. 3 years.

The only problem is our equity was a gift to us from my parents, and I really do not want to tell them, where as my husband thinks we should tell them or we just won’t refi. So for now I have put the refi on hold. What would you or your readers do?

Do the refi and not say anything because this was a gift of money and by that they knew this was potentially an option?

Let them know you are going to do the refi and what your plans are, even though the reprocusions are going to most likely end up in a world of hurt?

Forget the refi, and find a nother way to get out of debt? That way the money is still there, and no one has hurt feelings.

Thanks.

In a World of Hurt”

The Answer:

Dear In a World of Hurt,

Well on one side of the coin your parents gave you money that created equity in your property and it does not sound like they attached any strings to that gift so technically I guess you could go do whatever you wanted to do. But that’s not what I would do.

Your parents probably gave you that money to use for the house so that they would worry less about you knowing you’d have a payment that was manageable. They most likely felt like they were setting you off on a sound path. It was extremely noble, kind and compassionate for them to do that for you. A gift that not many receive.

I think you owe your parents the respect, trust and faith to share with them what your situation is and the good news that you have a sound plan for addressing it. It is much better for you to be open and honest about what your intentions are than to have to keep this a secret that you are afraid will hurt them.

Moreover, I think you should also ask your parents to help you to be accountable for your plan and ask them to check your debt reduction promise to get back to where you started with their gift.

The accountability request helps both them and you and while there is no obligation for you to, it will demonstrate to them that you are returning your financial life back to the position they had hoped to create for you as a starting point. That will give them comfort and help you to achieve your goal.

Be sure to let me and everyone else here know what you elect to do.

Here’s a big hug for you and your husband.

Steve

The Answer:

Other Related Articles to Read

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• Consumers Feel the Next Crisis: It’s Credit Cards
• I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do?
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• University of Georgia Ph.D. Student Sentenced For Fraud And Identity Theft
• East Coast Credit Card Fraud Ringleader Gets 12 Years In Prison
• My Parents Have to Help Me Pay My Debt. – Karen
• Retail Store Credit Cards: How Many = Too Many?

Read the full article at GetOutOfDebt.org, click here: In a World of Hurt Writes and Wants to Know “Should We Tell My Parents?”

April

“Dear Steve,

I am married with three children 11, 4 and 3, I also have an 11 year old step son. We live in Jersey. My husband is a disabled vet (from the first gulf war). He gets a pension and I work at home so I can take care of the kids our income is less then $50,000 per year, our money is very limited. Since everything cost double it’s been harder and harder to pay bills. I am on time with everything. I am very concerned with my credit score. I’ve been flirting with debt consolidation but am a bit leery to what it will do to my credit. Plus their fees almost equal what I’d be saving in interest. I’ve tried calling my credit cards to have my interest lowered and they won’t budge (I really don’t think they have a soul charging over 23%, it should be against the law). I’ve tried borrowing money and no one is lending even with a score close to 700. What’s the point of having good credit? I want to pay my bills but they are chocking me and my family. Do I pay my bills or feed my kids? Even PB and J is getting expensive with a loaf of bread over $3.

Is there a program that can help me that will keep my credit intact?

I will appreciate any advice!

Thanks in advance,

April”

Dear April,

I’m so sorry that you are living through this right now. I know it is stressful but I think I have some advice that will help.

First, let me get right to answering your question if there is a debt consolidation program that will help you keep your credit intact. No, there is not. The only way to get out of debt without hurting your credit is to pay the debt in full or as agreed in monthly payments.

Credit agreements are “take no prisoner” contracts. They don’t make room or allowances for people to pay what they can afford. Instead they ask you to make firm promises to repay the loan in full or with regular payments. Anything outside of those payments is an exception and reported to the credit bureaus.

If you send less than you owe, it will be reported. If you go into a credit counseling program, footprints will appear on your credit report. If you sign up with a debt settlement company, you’ll fall behind on your debts and that negative information will be reported. If you go bankrupt, that will be reported for sure.

But the issue here is twofold. First, you can’t live a life you can’t afford to preserve a credit score. While your score is good, the consequences to living for that score are not so good.

Second, while you may be current on your bills, you won’t be for long. You are living so close to the edge that all it will take is one unforeseen event and your budget will be shot. Besides a safe monthly budget needs to include some money set aside in a savings account to build an emergency fund. If you can’t do that, you really are not making it from month to month now.

Disabled Vet

I am hopeful that you are receiving all the VA benefits you can for your husband. If not, here is a quick list of special loan programs for VA eligible members.

• VA – Home Loan – Construction
• VA – Home Loans – Cash Out Refinance (Regular Refinance)
• VA – Home Loans – Interest Rate Reduction Refinancing Loan
• VA – Specially Adapted Housing Program
• VA – Life Insurance – Veterans Life Insurance Policy Loans

I know you’ve tried to call your credit card companies to lower your interest and they won’t budge, I’m not surprised. The issue here is that you are current on your bills and the customer service reps that talk to you when you are current don’t have access to those special programs to adjust your interest or payment. The irony is that to reach those customer service reps you’ll have to go past due on your bills and that will hurt your credit score. Creditors don’t reward people for being proactive.

Another question you had was do you feed the kids or pay the bills. The 100% honest and moral response is that you fee your kids first. You need to put the priorities in the right order. They should be:

• Food
• Shelter
• Utilities
• Clothing
• Car or Truck Payments
• Other Needed Utilities (Reasonable mobile phone, cable TV, saving for an emergency, an occasional fun thing for the kids)
• Creditors

Do you have an obligation to repay what you borrowed? Yes you do, but if prices have gone up and you can no longer meet the bills under your current day-to-day reality, then what has actually happened is that the loan agreements remained the same but your life changed around them. That happens, that’s normal.

Are creditors soulless who charge 23% interest? You made that statement as well. Just yesterday I wrote about an account at 36.5% interest. In Europe the interest rates on a credit card can be even higher.

I’m afraid you’ll have to shoulder the 23% interest argument. The interest rate calculations are covered in the terms and conditions that come with each card. If you did not want to be subject to them increasing the rate then your options are to not take out the credit card to begin with or pay the balance off in full. That is the only way for you to gain your freedom from the terms you agreed to when you took the card out.

Let’s change a few things here.

1. Read my article about getting cheap bread. You should not be paying $3 for a loaf.
2. Read my article about where to buy cheap food. Doing that will help lower expenses.
3. Come to terms with the fact that your credit score is probably not going to be sustainable and loosen your grip on that.
4. You can try a debt management or credit counseling program if you want and see if they can come up with a monthly payment you can afford over a five to seven year period. But before you do that I want you to read what I said about credit counseling programs in this article.
5. If you take a good honest look at what you can afford to repay each month and it does not meet the creditor minimum payments then you might consider bankruptcy. If so, speak to a bankruptcy attorney for a free bankruptcy review and get the facts.

April, let me talk to the mother in you for a moment. Your children are young an impressionable. Please be sure to sit them down and have an honest conversation about the struggle that are going on. They need to understand that the reason you might say no to stuff they might want is not them, but the budget. They need to understand that it is the financial situation that makes things tough at times but no matter what, you love them with all your heart and soul.

Big Hug! Here is an extra hug for the kids.

Steve

Other Related Articles to Read

• Teresa Writes In “I Have Too Many Credit Cards”
• Opal Writes In “I’m Worried About Hurting My Credit If I Close Credit Card Accounts”
• How to Get All the Cheap Credit You Want
• Daniel Writes In – “How Can I Get Out of Credit Card Debt?”
• Bad Credit Debt Consolidation – Brutally Honest Advice
• Is Debt Consolidation a Viable Debt Solution For Unsecured Debt?
• Consumers Feel the Next Crisis: It’s Credit Cards
• Credit Card Horror Stories: Tales of Credit Limit Reductions and Account Closures
• YOUR VIEW: Charles Merlis
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Read the full article at GetOutOfDebt.org, click here: April Writes And Asks “Is There A Debt Program That Can Help Me And Protect My Credit?”

Steve wrote me through the GetOutOfDebt.org site to ask his question below. You can too!

“Dear Steve,

I currently make $46,000.00 per year with no benefits. My wife’s income is $19,800.00 per year. Three years ago her income was $35,000.00 per year.

We have racked up about $20,000.00 in credit card debt and have a car loan of which the pay off is $15,199.00. Our 5 year old home is appraised at $158,400.00 and we owe $120,000.00 on it. No other debt. We have a small 401k of $39,550.00 and am losing between $200.00 and $500.00 a month on. We are 59 years old.

I want to cash our 401 in and pay off the credit cards and what I can of the car. We would start paying back out retirement at $600.00 per month.”

Dear Steve,

One of the key factors here is that you purchased your home and based your expenses on what your lives were like five years ago. Apparently two years latter there was a change in income for your wife and it was at that time that things probably begin to silently slip and the credit card debt started to increase to help make ends meet.

The 401(k) plan feels like your cash sitting in the bank and at a time of stock market upheaval watching the value slowly decline is painful, for sure. But the stock market will rebound over time and those funds will go back up.

If you tap those funds now you would probably have to pay a penalty of 10% of the value of the funds on top of your normal income tax rate. That means that you could cash out your retirement fund right now and walk away with around $26,000, losing around $13,500 to taxes and penalties.

With that $26,000 you should probably pay off your car loan first and then half of your credit card debt. While you say it is possible, I remain skeptical that you would be able to start saving $600 a month after that.

Depending on how much your car payment is, your credit card minimums are probably around $400 a month. That might reduce your expenses by around $850 a month. That little bit of breathing room might just be enough to help you make it from month to month but if you can’t make your monthly contribution back into the retirement account you could wind up in worse shape.

So while the plan is to put $600 a month back into the retirement plan, in six years when you reach 65 you’ll have about $43,200 in your 401(k), more or less.

Now, all of that being said, it might be beneficial for you to cash out your retirement plan as long as you retire the car debt, half of the credit card debt, faithfully add the funds back into your retirement account and don’t suffer any future reduction in income.

It’s a gamble but really only you can decide if you want to take the risk.

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: Steve Writes In “I Want to Cash Out My 401(k) And Pay Off Debt.”

“I have a lot of debt. I fell behind after being diagnosed with cancer. All the medical bills were paid at first but I maxed out credit cards and then took out a HELOC. The HELOC made my debt worst because it just consolidated the debt but left open credit that was used again.

Now I have a suspended HELOC with a high payment and all the credit card debt the HELOC had covered. In addition there is continued medical bills that must be paid. I’m now behind or in collections with most of my credit cards and having to get payday loans.

I tried working with a debt settlement company and they were helpful. I just don’t have the money to pay into the account due to medical cost. What should I try to do next?”

Dear Teresa,

First off let me just tell you how sorry that I am that you’ve had to live through all of this. Life for many is stressful enough but to add the threat of cancer and then top that off with debt problems, I’m sure that some days for you have been almost unbearable.

At some point you need to focus your energy on getting better and beating cancer, for good, rather than suffer under the continued stress and pressure of your financial situation. That pressure can actually make it harder to recover as the added worry and stress acts negatively against your body.

Now, I’m certainly not suggesting that anyone that has cancer should get a free pass from paying their bills. But your story is different.

You see Teresa when reading your question I went of Oh! to Oh No! I would safely guess that your current financial life is terminal and needs to be euthanized with a heavy dose of bankruptcy.

The combination of maxed out credit cards, followed by a HELOC (home equity line of credit) for debt consolidation, followed by maxed out credit cards and then a payday loan is nearly always fatal.

While a short-term cash loan or payday loan can be a valuable tool to use in certain situations, it is not a good sign at the end of the lending chain. The best time to use a payday loan is when you have a gap and need emergency cash before the next paycheck and can then immediately repay it. Using it at the end of the borrowing cycle is never a good sign.

What your story and chain of events tells me is that by the time you got to the payday loan you were totally tapped out and resorted to a payday loan to fund just a bit more, when nobody else would. Your financial hole is so deep now that it would probably take the rest of your natural life to just partially dig your way out.

It is now time to talk to a bankruptcy attorney and get a free bankruptcy review of what bankruptcy will mean for you. Speaking to a bankruptcy lawyer does not mean that you are automatically going to file but it will give you more information to judge what bankruptcy will mean in your specific case.

If you had to devote life energy towards either a goal of trying to settle the debt or move forward after bankruptcy, I’d suggest bankruptcy, strongly. And if you say that bankruptcy s not for you because you have a strong moral belief that you need to pay back your debts, there is nothing preventing you from doing that, after bankruptcy. Just because your debts are discharged it does nt mean that you can’t repay them, but now without collection pressure.

Please write back in an let me know how things go for you. I care and want to know.

Big Hug!

@GetOutOfDebtGuy

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• We Were Going to File Bankruptcy But Then Stopped to Negotiate With the HELOC Lender. – Dorn
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• Jenni Can’t Make the Car Payment and is Behind on Rent and the Clutch Just Went
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• Robert Wrote “I Do Not Know Where To Start Other Than I Am in Debt”
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Read the full article at GetOutOfDebt.org, click here: Teresa Writes In And Asks “What Should I Do Next?”

The story below caught my attention. An early sign that things are getting worse for consumers. When you notice a noticeable uptick in credit card use in a down economy that means that more people are running up debt when they can’t afford to pay. Yikes!

POLK COUNTY (Bay News 9) — During these tough economic times more Americans appear to be turning to plastic when they’re making purchases, and business owners are noticing.

Crowder Brothers Hardware has sold hammers and nails to people in Polk County for three-decades.

And while many small businesses are struggling, their customers keep coming in.

“You can put off buying a new car or some new clothes,” said Bruce Phillips owner of Crowder Brothers Hardware. “But if your toilet is leaking you don’t have that option of saying, ‘well we can let it go — we’ll fix it in a few months.’ So, we’re fortunate there.”

Phillips says the biggest change he’s noticed through the years is that his cashiers now swipe more credit cards than they count cash.

“We’ve probably seen credit card usage go from 30 percent up to now 50 and 60 percent,” Phillips said.

But as more consumers get used to swiping, more are finding themselves in the red.
Americans now owe an estimated $850 billion in credit card debt, which is four times as much as in 1990.

Consumers aren’t the only ones affected by the increase. Small business owners like Phillips say they’re also paying a price as the popularity of plastic rises.

“Cash is king,” Phillips said. “Credit card — we pay a percentage to have those processed and that affects our bottom line profit.”

The Consumer Federation of America reports 58-percent of people with credit cards do not pay their balance in full each month.

Watch video.

Source: Business noticing increase in credit card purchases

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Read the full article at GetOutOfDebt.org, click here: Business Noticing Increase in Credit Card Purchases. Not a Good Sign.

Barcia

“Dear Steve,

Do to lower salary can only pay mortgage or credit cards of 100k. Went to bankrupcty attorney and he said we do not qualify for chap7 and chap 13 was not a good thing. Told us to stop paying credit cards and only mortgage. We have done that but are afraid credit cards will come and sue us. Unable to sell home owe 664k valued at 529k. In all honesty when we pay our mortgage and taxes and daily expenses have no money for anything else. Mortgage takes about 60% of income. We want to do the right thing.

Should we foreclose on home and pay credit cards? Please advise.

Barcia”

The Answer:

Dear Barcia,

My gut reaction after reading this was, “Huh?”

It sounds like your house is not affordable for your income. The most logical course of action here is to let the house get foreclosed on and then wrap the mortgage deficiency and credit card debt into one bankruptcy.

Doing the right thing is always an interesting statement. There is doing the right thing for your creditors, doing the right thing to repair the past, doing the right thing for yourself, and doing the right thing for the future. Doing the right thing is a wide open palate of possibilities.

In your current situation I think that doing the right thing means to create a safer environment for yourself. This would mean that you need to get your obligations adjusted so you can afford to live and have money to save. My bet is that you have no savings account or emergency fund to fall back on and that’s just not safe.

Your diagnosis sounds like a situation faced back when I was in medicine. Sometimes a patient would present with a diagnosis from some other medical practice. You’d look at the patient and think, not say, WTF! The best course of action for you is to make an appointment with another bankruptcy attorney and get a second opinion. Let’s see if the two professionals agree of the financial diagnosis and treatment for you.

If you stopped paying your credit cards, collection pressure will increase and they can sue you. Stopping payment is part of a process, not a solution by itself.

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: We Went to a Bankruptcy Attorney And Was Told Bankruptcy Was Not a Good Thing. – Barcia

An interesting story on Marketplace about the possibility of living a life without the use of credit cards in the America.

@GetOutOfDebtGuy

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• I Was Building a New House But the Bank Won’t Give Us What it Appraised For So I Put the Rest on My Credit Cards. – John
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Read the full article at GetOutOfDebt.org, click here: Should We Stop Using Credit Cards Altogether in America?

I know this is going to sound like crazy talk but keep reading.

Now is not the time to pay more than the minimum payment on your credit card if you don’t have a lot of money in savings.

If you thought the foreclosure crisis was bad, just watch what is going to happen to credit cards. With twenty thousand Americans a day losing their jobs, you need to prepare for the worst. Remember after 9-11 when people bought bottled water, plastic sheeting and duct tape to protect themselves, well now is the time to start stashing cash to protect you from the financial storm we are in.

Already we have seen dramatic examples of creditors running for cover by slashing available credit limits and jacking interest rates up to the max, even for people with good credit.

Historically people have found comfort in their credit card available credit. They felt that in case of an emergency that the card would save them and in that belief people have failed to save sufficient cash on hand to protect them if the card was no longer available.

The economic tsunami that we are living through is causing more people to turn to living on their credit cards when they are faced with unprepared economic hardship. This is going to result in higher losses for banks and in response they are going a dramatic shutdown of credit limits or the card.

People forget that having a credit card is a privilege, not a right. The card is yours to use at the whim and discretion of the issuing institution.

What is probably going to accelerate this demise of the credit card is new legislation that is coming into effect next year that prohibits credit card companies from jacking your rates way up like they are now. It is a good piece of legislation that is intended to protect consumers, and it will, in the future. But next year, left with the option of keeping you at your current rate or closing your card, banks will opt to close cards or close down your credit limit because they see more customers at risk.

The card closures and credit limit reductions will hurt your credit score. More creditors will take notice of your lower credit score and close your card or reduce your credit limit. This is a bad news situation that will feed on itself.

So, just imagine right now, if you had not access to any of the credit currently extended to you on your cards, how much cash would you need to have access to right now? Do you have it on hand?

Most experts today say you need to have six to nine months, most people don’t. I think at the very least you should have at least three months of cash in a boring old savings account that you can get to within 48 hours if you had to.

Now, does this approach make mathematical sense? Absolutely not. The least expensive way to get out of debt is to pay down high interest rate debt first, but if you are doing that at the exclusion of saving you need to understand that the cost you will pay for not having emergency cash available, might be the loss of your home or the inability to eat.

So where are you going to get this cash to save? Well a recommendation in the Wall Street Journal suggested:

But people without enough on hand right now may find it makes sense to borrow from their credit cards and put that money in a bank account. Sure they will pay a negative spread, borrowing at 12% and earning 1%. But they may figure that is the price of being prepared.

I don’t think I’d go that far but at the very least, only pay the minimum payments on your credit cards right now and not a dime more. Use the extra cash you would have sent above the minimum payment to put in your savings account.

There is a value in the comfort of knowing you’ve got cash on hand to protect you if your credit cards were either no longer able to used or maxed out because your credit limits had been reduced to your current balance.

Saving cash in a savings account like that offered by ING will give you a higher return than your local bank and at least let you make some interest on your savings account.

I’m not screaming that the sky is falling. I just think you need to be reasonably and prudently prepared if a financial nuclear winter is coming, and it might be getting a whole lot worse.

Steve

Photo by Monojussi

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Read the full article at GetOutOfDebt.org, click here: Don’t Pay More Than the Minimums on Your Credit Cards

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• I Was Building a New House But the Bank Won’t Give Us What it Appraised For So I Put the Rest on My Credit Cards. – John
• Scott Writes Me and Asks For Help – “We Are Behind And Overwhelmed”

Read the full article at GetOutOfDebt.org, click here: Credit Cards From Beyond the Grave – Just Because You Need to Laugh

Jenni

“Dear Steve,

I am behind on my car payment. I can’t pay my rent this month. The clutch just went out on my car. I work two jobs but I can’t get to them now that my car is broken. I joined the Army but I don’t leave until January.

How can I get my bills payed? How can I get out of this mess?

Jenni”

The Answer:

Dear Jenni,

First, let me thank you for your commitment to entering the armed forces. No matter what role you will be playing, the courage, dedication, sacrifice and commitment are to be applauded.

Your situation is a very difficult and a tough spot to be in with few good answers, but here are some suggestions.

The initial fall back position is to turn to family and friends for help. They are typically the most understanding unofficial lenders to turn to in time of crisis.

Next, this is when having good credit and access to a credit card is helpful. This is the actual emergency that everyone always talks about needing a credit card for. Using a credit card at a time like this allows you to use the money of other people to make ends meet. But that money has to be paid back.

If you don’t have a credit card you can use and you can pay the money you need back the next time you get paid, then I would suggest a payday loan. The fees for payday loans are high but so is the cost of not being able to fix the car and get to work to get a check.

Payday loans are typically used by people that are unbanked, don’t have easy access to credit cards, or need a short term loan in an emergency. You can click on this link for more payday loan information.

I am not a big fan of expensive borrowing but then, I’m not a huge fan of getting evicted or not being able to get to jobs you already have, to pay the bills.

Finally, if you are the member of a church or religious organization, you can always turn to them for help in your time of need. Depending on their financial circumstances, they may be able to lend a hand.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Jenni Can’t Make the Car Payment and is Behind on Rent and the Clutch Just Went

“Dear Steve,

Here is the situation.

I have 50K of debt between credit cards and lines of credit and a 20k vehicle loan.

When I first met my fiancee, she asked about credit card debt, I was defensive about it so i just told her that i didn’t have any.

She knew I had a truck loan at the time. Then I sold a house and got 35k and spent the money on repaying some of my debt. she kept pressing me to pay off the vehicle instead so I told her that I did. So now I have the credit card debt and the truck loan and she thinks I have neither.

I have created a plan to slowly pay off the credit card debt and the vehicle loan is on monthly payments I always make.

I don’t know what to do, I never wanted to be in a position like this?

I feel if i tell her about all my debt it would crush her.

John”

The Answer:

Dear John,

It’s not the debt that would crush her, it’s your string of financial lies. Stop lying to her. If you truly love her, she deserves the honest truth from you about your situation. Otherwise there is no other way to look at the situation latter as an intentional deception and financial infidelity on your part.

And as much as you may want to keep this a secret, it can come out and the most inopportune time. At some point in the future you may apply for credit together and she may see your credit report and then what, an explosion.

I’ve watched good guys lose the love of their life simply because they were afraid to be open and honest about their financial situation. If you can be intimate in bed and with your love, you can be intimate about the reality of your debt.

My suggestion, order a copy of your consolidated credit report using this link. You’ll be able to print it out right away. Then, as difficult and uncomfortable as it might be for you, talk softly to her and tell her you have some important information that you want to share with her because you trust and love her and want her to be your wife, forever.

Then confess the truth and show her the credit report so she can see that you are telling her the full truth. Having a bottle of wine around to share during this conversation, doesn’t hurt.

A marriage or relationship built on truth is better than one set on a shifting pile of sand and lies.

Things might get frosty for a couple of weeks but in the end she will trust you more, respect you more and it will work out much better.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: John is Worried His Debt Will Scare Away His Fiancee

“Dear Steve,

I am disabled and falling in debt faster than i can handle. I am barely staying alive with trying to feed my family. I am behind on my mortgage and regular bills (utilities). I stopped paying on my credit cards just to try and keep my utilities from being disconnected. credit card companys are calling me constantly for there payment. I don’t even have the money to pay the lawyer for claiming bankruptcy. I don’t know where to turn. please help !!

What can I do???

Ed”

The Answer:

Dear Ed,

You’ve done the right thing by stopping payments to the credit card companies. You need to focus your repayment efforts on the mortgage and utilities at this point.

What I don’t know is if you can reasonably expect to be able to afford your mortgage any longer. It might just be that will your reduced income that you can’t afford the home. In that case you should give the home back to the bank and then go bankrupt to eliminate all your past debt, including any money the bank may want from you following the foreclosure of your home. I am assuming that you have little to no equity in your property.

At that point you can stop running for cover all the time and just focus on building a safer financial future for you and your family using what you’ve got coming in each month.

There are self-help bankruptcy materials available and you can usually get free bankruptcy forms from the local bankruptcy court.

If you decide that you can move then you can stop making the mortgage payments to save a rent deposit and to file for bankruptcy. That should allow you to do what needs to be done.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Ed is Disabled and Falling in Debt Fast. What Can He Do?

“Dear Steve,

I can not pay my credit cards,because of sickness.

I have a auto loan with Capital One and a credit card with them as well.

If I just pay only my auto loan on time each month and stop paying on the credit card, can they touch my car because I pay one and not the other.

James”

The Answer:

Dear James,

You are in luck. I can’t think of any past case when Capital One would repo a car with a Cap One auto loan because of a failure to pay the Cap One credit card.

This is primarily because it is two different loans that are not tied to each other. Now, I have seen this happen with credit union debt when someone has a credit card, bank account and savings account all with one credit union. What some credit unions have said in the past is if a member defaulted on a credit card account that they would not release the lien on the car loan once it was paid off until the credit card account was paid off.

Even though Capital One is now providing banking services, I’ve still only heard about this car and credit card problem with the credit unions.

Thanks for the question.

Steve

The Answer:

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Read the full article at GetOutOfDebt.org, click here: James Wants to Know If Capital One Will Take His Car If He Stops Paying His Credit Card

“Dear Steve,

I have never heard anyone ask this question or any money experts suggest it: If my wife and I have many joint user credit cards and lots of debt, could it help our credit scores if we changed the status of our joint cards to just the primary user, thus showing each of us is responsible for about half the debt we our now on the books together with? We pay on time but the biggest drag on both our scores is the amount of debt we owe. What do you think? Coulld it backfire and show we are taken off a long held card? Does anyone really know what would happen?

Jeff”

The Answer:

Dear Jeff,

Well if you could do that it possibly might help but I doubt it. Depending on your level of individual debt and individual income your debt to income ratio could get all out of wack. But the biggest issue here, and why this is an interesting mental exercise, but not a practical one is that your creditors are not going to let you do this.

If a creditor has two people jointly liable for a card, they are not going to let one go. Hooks in two is better than hooks in one. You could possibly get your wife removed but you would have to have the card at a $0 balance and the creditor would probably re-qualify you for the card, potentially lowering limits and raising interest rates.

You might be better off applying for a new credit card in your sole names and then doing a balance transfer to the new card. While that accomplishes the goal of dividing the debt, it also hurts you since you will now have more lines of credit out there for use and if you close the old cards, and you’ve had them for a long time, that would lower your credit score.

Thanks for the really interesting question.

Steve

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Jeff Asks About Trick To Boast Credit Score. “Will It Work?”

Store cards in good times are a good source of profit with their exceptionally high interest rates but in down times they can be an anchor around profits.

Not only are store cards generally easier to acquire by people with lesser credit but they are often the first to go unpaid when there isn’t enough money to spread around.

Target Chief Financial Officer Douglas Scovanner, on a recent conference call, said credit cards are the company’s “second-largest challenge.”

In the past year, the net charge-off rate on retail cards has jumped 2.4 percentage points to 8.1 percent. The charge-off rate on general-purpose cards has risen only 1.7 percentage points to 6.08 percent, according to industry newsletter Nilson Report. [Read More]

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Read the full article at GetOutOfDebt.org, click here: More Bad News For Nordstrom and Target Credit Cards

This weeks personal finance brain trust question was:

What goes through your mind when people say that they HAD to use their credit card to get by? Is using a credit card when you can’t afford to pay a smart or necessary thing to do?

WC – A 27-year-old writer living in Chicago and writing about personal finance through The Writer’s Coin.

I think that people should take that as a warning. I realize for some people it’s the only option, but anyone that catches themselves saying that should really reprioritize to make sure that it doesn’t happen again and that they’re not making things worse by paying with a credit card. Whether it’s “smart” or not depends on how big of a hole they’re digging and what the alternatives are. If they could cut their spending somewhere, then it’s a bad call.

Credit cards have the potential to help but also the potential to make things worse, and not realizing that is a huge mistake. For the people out there who have no choice and have nowhere else to turn—credit cards are a serious warning. If you can’t get by without them you are in deep trouble and something needs to change ASAP.

Patrick Bryan – Living in Northern Ireland, Patrick helps people in a very different environment and economy but yet, mush is universal and much is the same. Visit Patrick’s Northern Ireland blog on debt.

To pay your essential bills on your credit card is clearly a danger sign, however I can’t condemn people for doing it, and I can understand why it feels like the only alternative at the time. Many people also have temporary cashflow issues, and using credit cards helps them get by until (for example) their bonus is paid, or a big contract comes in. It is a great way of getting fast, accessible credit for short periods of time. I use my credit card for most of my purchases (including groceries and fuel) and enjoy 56 days interest free borrowings, why shouldn’t I use the credit cards money for free in that way? I always make sure however to pay the bill each month and use this discipline to keep control of any of the wilder spending urges I experience.

My advice to people who are finding that they have to use credit to get by is to first look at their budget – identify what is happening and take action. If it is going on non-essentials and you are not clearing the bill each month, stop buying them! If you still have a shortfall each month you need to ask yourself some tougher questions – can you downsize the car, shop at cheaper stores, cut back on the family vacation next year? Ask yourself this question – “if credit cards hadn’t been invented, how would I have managed to pay the bills this month, and what would I be doing differently in relation to my spending?”.

It is a very dangerous activity to use a credit card to get by at present as providers are starting to identify people using their cards to shop for essentials and are reducing limits and in some cases withdrawing cards if they think the customer is getting badly out of shape. They are also actively cutting credit limits and withdrawing unused cards.

Leaving aside the rights and wrongs of putting essentials on credit cards my advice is to try and wean yourself off the habit, even making some life-changing decisions if necessary to try and live within your means. In the coming recession I strongly recommend curtailing your borrowing wherever possible and try not to rely on credit to buy anything you can’t repay when the bill comes in.

Patrick – Patrick writes two excellent blogs, Cash Money Life and the Military Finance Network.

I think a lot of it depends on the situation. When many people are just starting out in life, they may not have an emergency fund in place or have a lot of savings. In this case, credit cards can be used as a last resort for emergencies. They are much better than using payday loans to make ends meet.

The important thing is that people only use credit cards to get by for true emergencies – food (not fast food or restaurants), car repairs, plane tickets for a family emergency, etc. The problem comes when people think they NEED to use credit cards to get by and end up using them for expensive clothes, jewelry, or other luxury items.

Steve Rhode – A personal finance blogger and founder of the Myvesta Foundation, a global social enterprise that helps people find solutions for money troubles. You can ask Steve your debt related question through GetOutOfDebt.org and he’ll help you for free.

Ouch! Not much good happens from using credit and creating debt when there is no reasonable expectation that you will be able to repay it. It only leads to bigger problems down the road unless you win the lottery or find a windfall of money to pay off the debt.

It might not be a smart thing to do but I can certainly understand how some might find it a necessary thing to do. I remember right after hurricane Katrina hit New Orleans and slaughtered that area. People were without homes, without food, without jobs and without hope. People used their credit cards to buy diapers, pay for a hotel room or pay for food.

And being in that same situation, with a hungry child looking up at me, I can’t say that I would not do the same thing in that situation. That does not make it right but maybe desperate times call for desperate actions.

Abusing a credit card may be necessary but there will be consequences to pay latter. Those consequences could include bill collectors, bad credit report, a bad credit score, threats of lawsuits, being sued, wage garnishments, etc.

When someone tells me that they had to use their credit card to continue to get by when not faced with an unusual life emergency, well then that’s a clear sign that we need to come face-to-face with the reality of the situation and deal with it.

Using a credit card to make ends meet at the end of the month, month-after-month, or using once credit card to pay another is critically dangerous to your financial health. What will happen soon enough is that the denial about the financial situation will soon get stuck on the tracks and be broadsided by the powerful and fast moving freight train of reality. That’s painful. You need to take action and get off the tracks before that happens.

J. Money – You’ll enjoy the blog Budgets Are Sexy for a look inside the life of one blogger and how money impacts it.

I think “Wow, they must have REALLY been in a sucky situation!” I’m more of a positive thinker, so I tend to give people the benefit of the doubt from the get-go. I bet most of the time the people confuse NEEDS with WANTS, but that usually pops in my mind later if i’m giving it more thought.

There is nothing with with putting NEEDS on your credit card to get by – this is life, and it’s not always perfect. If you need food or shelter, and have absolutely no money in the bank, then you’re pretty much out of luck. It also depends on the timeframe we’re talking about here. If we’re talking about a few years here, then obviously there are some other ways to get your hands on money – loans, friends, etc. But i see no problem w/ loading up the card for a few months and then working to pay it off as quick as possible.

I personally put everything I personally can on a credit card to manage my budget. It gives me 30 free days, ya know? I pay it off in full each month, but worst case scenario you rack up a little interest when needed. That’s what it all comes down to really – the needs vs wants.

Dawn – Iowa Hippie Chick blogs about money love and marriage and offers so very insightful posts on personal finance that involve emotional insight and awareness. Visit her blog.

What goes through my mind

• Is they don’t have a grip on their personal finances.
• They probably don’t have a spending plan/budget.
• They definitely don’t have an emergency fund.
• And they just aren’t getting real with themselves, about their own money!
• I don’t think it is a smart thing to do, at all.
• It just dig’s their debt hole deeper, compounding their problems.
• Solution = Emergency Fund!

Marcus – The creator of the CreditMattersBlog, this blogger has a deadly sharp point of view when it comes to consumer debt issues. Visit his blog.

It is what it is. Some people are deeply into debt. I suspect that some people use their cards as a last resort. When someone tells me that they HAD to use the card, I ask how that actually transpired. Did they always use cards to supplement their income? Did they start using the card recklessly and then end up in a hole? For the most part, most people don’t have to use their cards to get by — at least not initially. It’s only after they’ve started loading up on debt, and can’t keep up, that they usually have to turn to credit cards to make ends meet.

Your second question is much easier to answer. If you can’t afford to pay your credit card bills in full each month, you should stay away from cards. You’ll eventually get buried if you can’t pay your card in full each month. Most of the people I’ve run into — who ran into trouble with cards — typically carried balances from month to month. Carrying balances, especially ones that continue to rise, is also not good for your FICO score. Higher utilization translates into lower scores. I’ve written extensively about the virtues of paying in full.

Using a credit card, when you can’t afford to pay the balance off each month, is not smart.

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Read the full article at GetOutOfDebt.org, click here: So You Have to Use Your Credit Card In An Emergency – Personal Finnance Bloggers Question of The Week

Looks like predictions of a less happy holiday shopping season are true and this article supports my position in Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas.

Home Depot Inc., Sears Holdings Corp. and other retailers may lose as much as 8 percent of their holiday sales this year because lenders and stores are clamping down on financing.

Almost a quarter of shoppers say banks cut the spending limits on their credit cards, according to a survey by America’s Research Group, which also provided the sales-loss estimate. More people are being rejected for new cards, hurting sales for bigger purchases. Demand is being pinched just as retailers prepare to enter the holiday selling season, which accounts for as much as 35 percent of their annual revenue.

“Banks just don’t have the money,” said David Bassuk, a New York-based managing director at consulting firm AlixPartners LLP. The tightening credit is putting retailers “at big risk to lose those sales or lose those customers,” he said. “There is a big concern there with the holiday spending.”

A quarter of consumers polled in a Standard & Poor’s survey released Oct. 15 said they’re at or near the limits on their primary credit card, and 20 percent said they’re approaching the limit on their secondary cards.

Outstanding credit-card debt has risen 75 percent since 1999, while real wages have grown 4 percent in the same period, according to a report last month by Innovest Strategic Value Advisors, headquartered in New York.

Target Corp., the second-biggest U.S. discount chain, is cutting credit lines and granting fewer increases to store-card holders to cope with the “very difficult credit environment,” said Chief Financial Officer Douglas Scovanner.

Chase Card Services, a unit of JPMorgan, “has lowered the credit limits of customers who have shown signs of increased risk,” spokeswoman Tanya Madison said in an e-mail. It’s still boosting them for its most credit-worthy customers.

Click Here for totally free debt help, advice and answers.

Source: Sears, Home Depot May Lose 8% of Holiday Sales on Credit Limits

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• UGH
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Read the full article at GetOutOfDebt.org, click here: Sears, Home Depot May Lose 8% of Holiday Sales on Credit Limits

Yesterday I wrote about a little old hardware store that had noticed an increase in card purchases over cash. That’s not a good sign if people are using plastic more for routine things and especially in this environment of credit card issuers reducing credit limits, raising interest rates and closing cards.

You see, the credit card issuers are getting freaked out that more people are going to start using the cards when they can’t afford it. Shocking! I guess that’s okay when you can limp along and make the monthly minimum payments but otherwise it is a bad thing.

The credit card message has been “use the card, use the card, use the card” but that pendulum is swinging to “don’t use the card, don’t use the card, we’ll take that card”.

Apparently this trend is not limited to just the United States or just hardware stores. A story in India noted:

Usage of plastic money is increasing with times but at the same times it is also increasing the worries of credit card companies. In September 2008, the transactions done through credit cards went up by nearly 20% against the previous month. Normally this would be a reason to cheer for the card companies but presently it has become a cause of concern.

The credit card companies are worrying because they think that rising usage of credit card may also result in higher number of defaults among these users.

If all of this is true, which it is, retailers are going to be hating life this holiday season as credit card issuers start closing cards to avoid even higher losses. Without available cash or loose credit, consumers won’t be able to go overboard on holiday spending.

I’m thinking we need a joust between banks and retailers. Wouldn’t that be fun to watch?

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Read the full article at GetOutOfDebt.org, click here: Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas

At ByDesign Financial Solutions, a debt-counseling service in Modesto, Calif., they’re working overtime these days. “Our call volume went up 97% in the past five weeks, which has left us scrambling,” says Martha Lucey, president of the nonprofit agency. “[The callers] are close to the max on their credit cards, and they just can’t figure out how to manage. We’ve seen credit-card companies decreasing lines of credit, and the [debtors] don’t have any room left. They just can’t juggle things like they used to.”

The debt binge was fueled by easy money and the belief that prices of assets — those of houses in particular — never went down; only interest rates did. That era is over. It will be replaced by what will be one of the more painful, and consequential, economic chapters in our history: the great deleveraging of America.

But the credit crunch is not anywhere near over. “It took 20 years for us to get into this situation — leveraged to the hilt — and it will take more than a couple of years to unwind it,” says Paul Ashworth, senior U.S. economist at Capital Economics. “And even when we get back to normal, that normal is not going to be the same. We won’t have this sort of freely available credit that we had before for households and businesses. It’s going to be a different reality — a more austere one — when we come out on the other end of this.”

Read more here.

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Read the full article at GetOutOfDebt.org, click here: Surviving With Less Credit

Nearly all the biggest credit card banks have agreed to a temporary pilot program in which lenders would forgive as much as 40 percent of the amount consumers owe, allowing them to pay back the remainder over time, they said. The amount of debt to be forgiven would be determined case by case, depending on the borrower’s financial condition; those receiving close to the maximum forgiveness level would be nearing a personal bankruptcy filing.

Current government rules don’t allow lenders to offer repayment plans that reduce the amount of principal owed and borrowers to repay the balance over a period of several years. In cases where the principal can be reduced, under credit card settlements, borrowers normally are required to pay off the remainder over months rather than years.

Groups seek credit card debt forgiveness BusinessWeek - 34 minutes ago issue around 80 percent of all US credit cards. Americans now are weighed down by around $900 billion in credit card debt , according to Federal Reserve figures.

Click Here for totally free debt help, advice and answers.

Read the rest here: Groups seek credit card debt forgiveness

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Read the full article at GetOutOfDebt.org, click here: Groups seek credit card debt forgiveness

Information is already leaking out about the efforts of American Express to closely watch the places their card members shop at as an indication of credit problems.

With mounting losses by credit card companies and an avalanche of new bad credit card debt to come, creditors are looking for ways to identify potential high risk customers in order to reduce credit limits or increase interest rates.

I would think that a pattern that involved a lot of entertainment expenses, casino charges, thrift store shopping or using the card to pay another card, could potentially be an indication of brewing problems.

Any formula put together by creditors to screen use is going to be inherently unfair. For most people a pattern of recent charges that gets flagged can be easily explained, but for others, this might allow creditors to nip a debt problem in the bud.

I would think that another warning sign would be increasing balance on other cards you carry. We already know that creditors are monitoring your credit report for evidence of other late payments so watching balances on other cards seems logical.

Or maybe watching for a sudden use of credit cards for expenses not typically charged in the past. This might be a flurry of charges for utility bills and at grocery stores when this was never the pattern in the past.

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Read the full article at GetOutOfDebt.org, click here: Soon, Where You Shop Will Control Your Credit

Lenders are shunning consumers already in debt and cutting credit limits for existing cardholders, especially those who live in areas ravaged by the housing crisis or who work in troubled industries. In some cases, lenders are even reining in credit lines after monitoring cardholders who shop at the same stores as other risky borrowers or who have mortgages from certain companies.

While such changes protect lenders, some can come back to haunt consumers. The result can be a lower credit score, which forces a borrower to pay higher interest rates and makes it harder to obtain loans. A reduced line of credit can also make it harder for consumers to manage their budgets, because lenders have 30 days to notify their customers, and they often wait to do so after taking action.

Indeed it is. If you’re not in top shape for the credit card shakeout that’s already taking place, there isn’t much you’ll be able to do about it. It’s probably already too late. After years of flooding the market with credit cards (and generous limits), banks are finally starting to take it back. Eric Dash, a New York Times reporter, does an excellent job of distilling the situation. From

Click Here for totally free debt help, advice and answers.

Read the rest here: Consumers Feel the Next Crisis: It’s Credit Cards

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Read the full article at GetOutOfDebt.org, click here: Consumers Feel the Next Crisis: It’s Credit Cards

“Dear Steve,

I am currently unemployed. I have approximately $20k in credit card debt. I have been contacted by the IRS that my CPA is under investigation for fraud and I have to refile my taxes from 2002-present.

So far, I owe $4k for 2007 to the IRS but have not refiled the previous years. I have completely stopped paying on all my credit cards- it has been over a year now I believe. I no longer own a house and put my car note in my mothers name. I rent a duplex. I had considered bankruptcy but I was advised that it would be just the same to stop paying on the debt.

My question to you is whether I should just keep ingnoring the creditors or actually go through with filing bakruptcy. I had perfect credit until I got divorced in 2003. I am not able to make any monthly payments at the current time.

Tina”

The Answer:

Dear Tina,

I would have to disagree that stopping paying your creditors is the same as bankruptcy. The only thing they both have in common is that you are not sending payments.

When you stop paying your creditors without closing the door on the past debt it can and will resurface latter. There is a huge market in selling old bad debts downstream to collection companies and unless your euthanize your old debt with bankruptcy, it will limp along and struggle to come back to life at the worst moment and choke you.

If there is no realistic expectation that you are going to be able to pay the $20,000 in credit card debt then talk to a bankruptcy attorney and go bankrupt now. Bankruptcy is not going to be able to deal with your unfortunate tax situation and that is a much bigger mess to deal with at the moment.

An alternative plan would be to stop paying your creditors, use the money to re-file your previous taxes and then if you are left with a big tax liability, file then. The IRS is the most powerful creditor in the land. You don’t want to mess around with them and have them sieze your bank account or garnish your wages. If you are not left with a big tax bill then you can resume paying your creditors. Although you’ll probably be so far behind at that point that you will be fed up.

After the IRS issue is resolved, if you can or want to repay your discharged bankruptcy debt, you can. There is nothing stopping anyone from repaying discharged debt. Just don’t expect a thank you from your creditors.

Big Hug!

@GetOutOfDebtGuy

The Answer:

Source: Tina Says “My CPA is Under Investigation For Fraud”

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Lenders are shunning consumers already in debt and cutting credit limits for existing cardholders, especially those who live in areas ravaged by the housing crisis or who work in troubled industries. In some cases, lenders are even reining in credit lines after monitoring cardholders who shop at the same stores as other risky borrowers or who have mortgages from certain companies.

While such changes protect lenders, some can come back to haunt consumers. The result can be a lower credit score, which forces a borrower to pay higher interest rates and makes it harder to obtain loans. A reduced line of credit can also make it harder for consumers to manage their budgets, because lenders have 30 days to notify their customers, and they often wait to do so after taking action.

“We used to get a couple of offers a week, but I haven’t seen a credit card offer in over a year,” said Brett Barry, who owns a real estate agency outside Phoenix and described his credit record as strong. “What blows me away is these companies are in the business of extending credit, but they don’t want to do it for me.”

Mr. Barry said that, without any notice, American Express had reduced the credit limit on his business and personal credit card at least four times in the last year, which he said had lowered his credit score. The moves have also made it difficult for him to manage his payroll and budget, he said.

As Economy Slows, Lenders Begin to Curb Credit Cards New York Times, United States - 2 hours ago Currently, the total losses amount to 5.5 percent of credit card debt outstanding, and could surpass the 7.9 percent that occurred after the technology …

Click Here for totally free debt help, advice and answers.

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90 percent reduction
I received a Macy’s Visa back in 2005 that I didn’t even recall applying for. The credit limit was $5,000. Nevertheless, I didn’t use it until this year. I had planned a trip to Disney in Florida and wanted to use it then. I called to activate it and found out that my limit was reduced to $500. How drastic was that?!
– Patricia S.

Bruised credit scores
I am 49 years old and have been employed since 1993, when I graduated from law school. My wife and I have lived in the same home since 2000. Neither my wife nor I have any late payments on any obligation we have had over the last 10 years or more. We do, however, have a good deal of credit card debt, very nearly all of it at 4.99 percent interest or less. Our annual household income is over $90,000 and our total monthly debt payments, including my student loans, our credit cards and our mortgage, is about $2,400. My wife’s credit score was about 720 and mine about 690.

A few months ago, Bank of America advised rather abruptly that it was cutting our cards’ credit lines by a total of about $30,000. This increased our credit utilization ratio rather dramatically, and it has begun affecting our credit scores. My wife’s score has dropped by more than 50 points and mine by an even greater amount. In turn, I believe other credit issuers will begin cutting our credit limits. We just received notice from American Express, for example, that my wife’s card limit through them will be cut by over $5,000. No doubt actions such as this will further depress our credit scores.

As a consequence of their actions, my wife and I are seriously considering severing our relationships with Bank of America and American Express. Although this sounds like the proverbial cutting off of one’s nose to spite one’s face, I don’t know what else to do to express my displeasure with these companies other than discontinuing their opportunities to profit from my patronage.
– Doug H.

Bankrate.com did a story on Friday (sorry for not getting to this earlier) highlighting some of the same stuff that I’ve been pointing out here for weeks. More and more customers are experiencing credit-limit reductions and account closures. Over the course of the past few weeks, Bankrate.com readers have been chiming in with their own credit-card tales. Many of their stories will seem familiar.

Click Here for totally free debt help, advice and answers.

Read the rest here: Credit Card Horror Stories: Tales of Credit Limit Reductions and Account Closures

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Read the full article at GetOutOfDebt.org, click here: Credit Card Horror Stories: Tales of Credit Limit Reductions and Account Closures

Consumers in the UK with poor credit histories are being targeted by unscrupulous high street retailers. About 100 retailers including chains such as Woolworths, Comet, Mothercare and B&Q have signed up to a doorstep lending scheme that results in consumers paying an APR of 222%.

Outrage Over Credit Cards with 222% APR QCK, UK - 1 hour ago The money must then be repaid at a rate that is more than 10 times the average APR of a credit card. Debt groups and politicians have expressed anger at the …

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We’re bailing out large corporations, it’s time to help the little guy.

A few years ago, the powerful credit card lobby flexed its ever-growing muscles and changed the universe to its advantage. The government eliminated criminal usury (interest rates of 25 percent or more had been illegal), took away bankruptcy protections, voided many regulations and proceeded to screw the public.

Now, credit cards routinely bill around 30 percent interest, charge exorbitant fees making the real interest rate even higher and creatively manufacture ways to bring down your credit score so you cannot qualify for the low-interest rates they advertise to lure you into their ravenous clutches. They have created “universal default,” allowing them to raise their rates if card holders fall behind on other bills that have nothing to do with the credit card they issue. They have taken bait and switch to new heights to befuddle the public.

How can ordinary people, who are struggling with their finances, keep up? The government has sent out “stimulus” checks to encourage us to spend on goods and services. Instead many people have used it to reduce their credit card debt on which they are paying confiscatory rates. Credit card debt has increased exponentially in the last 10 years. If interest rates on credit cards were lowered significantly, people would have more to spend on goods and services and the economy could recover quicker.

YOUR VIEW: Charles Merlis Hartford Courant, United States - 2 hours ago Instead many people have used it to reduce their credit card debt on which they are paying confiscatory rates. Credit card debt has increased exponentially …

Click Here for Credit Card Debt Help

Source: YOUR VIEW: Charles Merlis

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Read the full article at GetOutOfDebt.org, click here: YOUR VIEW: Charles Merlis

The recent bailout of several major financial institutions by the United States government has raised concerns of a “credit crisis” in America. Borrowing money has certainly become a favorite pastime, with the US government alone in hock for over ten billion dollars. And with the average American owing more than $8,000 in credit card debt, paying everything back is going to take a while.

Fortunately, there are companies that can help reign in debt. That’s why, after hearing a commercial on the radio, President George W. Bush made a call to (555) BIG-DEBT, the number for the Big Debt Credit Counseling Service. Bush, along with Treasury Secretary Henry Paulson, members of the House Ways and Means Committee, and members of the Senate Budget Committee, met for four hours on Thursday with John Little, a senior counselor with Big Debt.

Henry Paulson, still under scrutiny for his handling of the federal budget, was pleased. “I don’t know why I hadn’t thought of calling them before,” Paulson said during a post-meeting press conference. “Big Debt told us about secret programs that credit card companies and banks don’t want you to know about. We were able to cut 200 billion in credit card debt right off the top. And with easy monthly terms, and an equivalent increase in middle-class taxes, we’ll have the full debt paid off ten years sooner.”

Humor: US Solves Credit Crisis, Credit Cards Gather.com, MA - 2 hours ago And with the average American owing more than $8000 in credit card debt , paying everything back is going to take a while. Fortunately, there are companies …

Click Here for Credit Card Debt Help

Source: Humor: US Solves Credit Crisis, Credit Cards

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Read the full article at GetOutOfDebt.org, click here: Humor: US Solves Credit Crisis, Credit Cards

“Dear Steve,

When I read the news I get so afraid that I will get laidoff. Business at work seems to be slow and I find myself surfing the internet more at work and reading more of these stories about the pink slips that are coming.

I’ve got bills and credit card debt to payoff and a wife and kids to care for and I’m afraid. What should I do, or maybe, what can I do now?

James”

The Answer:

Dear James,

I’m afraid you are right, the news is not good about jobs in the near future. As an employer even I am not immune from facing those same pressures and potentially reducing staff. Even sites like one of my favorites, The Consumerist, has just laid off some really good writers.

Rather than blow smoke up your ass and give you hollow good news I’d like to give you some honest and from the heart advice that you can use.

1. Losing Your Job Does Not Mean You Suck – When pink slips and job loss notices are distributed it does not mean that you are not a valuable member of the team. In my past I had to once layoff 18 members of a 70 person team. It was horrible at it and cried each time I had to do it. Maybe that shows a weakness in me, I’m not sure. Regardless, it was painful for all concerned.

   As an employer it was not a decision that I took lightly. I fully realized that these were the lives of good people that were going to be hurt by the failure of my business to produce enough income to support them. I was deeply hurt that I had failed them by not finding my magic wand to save them.

   Decisions to let people go were based on a number of factors that had nothing to do with who they were as individuals. Sometimes business is just business and what had to happen to save the remaining jobs.

   I guess what I’m trying to say here is that if you’ve been working hard, contributing ideas and help to the company, and doing your best, you could still lose your job but that it not a negative reflection about you.

   Layoff decisions in big companies come from slash and burn policies to reduce a specific head count or certain departments. Again, that is not personal it is personnel.

   You might find my America’s Job Bank page helpful for looking for a new position.

2. Let’s Assume That You Are Going To Lose Your Job And Start Implementing a Plan – It is always better to plan for the worst and enjoy the best, if that is what fate is going to give you. And so much that life has to offer is fate or divine intervention or just random luck.

   Even before you get notice I think you should consider the following advice now.

   1. Talk Honestly With Your Family Now – Even if you’ve always maintained a facade as a strong provider it is time to sit down with your spouse and lay out the facts. Once the two of you are on the same page then it is time to sit down with the children and be open about the facts now. Let them know what your concerns and worries are. Let them know that there might have to be cuts and ask them to help where they can to reduce expenses. Keep the entire family in the loop so there are no bombshell surprises.

   2. Don’t Buy Another New Thing On Credit – If you might find yourself in a hole, you can stop digging it deeper right now. You can use your credit cards to make a purchase but make sure you are paying for what you buy in full each month. If things get really bad and bankruptcy might be in your future, which it might, then recent credit purchases can pose a problem.
   3. Cut Where You Can But Don’t Eliminate – It is important to prepare for an eventually but you don’t have to run for the bunker right now. If the family is used to going out to eat twice a week, trim it back to once a week and then maybe once every other week. You don’t need to cut out things that bring happiness completely.
   4. When You Face Fear, Bring Hope – You are facing uncertain times and these moments make us face our fears. Actually they just make us focus on our fears and make us feel desperate. The reality is that anyone can lose their job at anytime, and for any reason. Even in your best days there was always a possibility that you could be unemployed. You would have been hopeful then if that had happened, be hopeful now.
   5. Evaluate Most Every Purchase – As you are your wife go forward from this point, spend money wisely and thoughtfully. Start asking yourself why you are buying this thing and if you really need it. Here are some helpful pre-purchase questions to ask yourself, in your head. If you ask them to yourself out loud in line, people will stare.
      

      Pre-Purchase Checklist

      • I feel like I really want this. Why?

      • What does this thing represent to me?
      • Once I buy this, how will it make me feel?
      • If I don’t buy this, how will it make me feel?

      (This list is from page 122 of my book The Path to Happiness and Wealth which you can download for free as my gift to you.)

      If you find that you are purchasing an item because it makes you feel better, you deserve it or it reduces your stress; put it back. Now is not the time for medicating yourself with shopping. Now is the time to be a good steward with what money you do have.

      That means that if you feel like you must buy a name brand of a particular item that is more expensive and you have not evaluated the less expensive alternative, do it now. Just because you have always bought the name brand of an item does not mean that the extra expense is justified, it primarily means that you have associated a benefit from purchasing that product.

      Not that long ago I travelled all over doing some price comparisons and found where I could buy the things we normally use for the least amount of money. You might want to do this also to find out where your money buys the most. Read the article.

   6. Let’s Assume That You Will Not Be Able To Find a Replacement Job – It is better to deal with the issues of not being able to find a job that pays the same amount as you are making, now.

      There are certain realities to go along with that situation. If you do not have enough income to support your current lifestyle, you are going to have to layoff part of your current lifestyle. I guess that’s what trickle down economics is all about, at least in down times.

      You might have to go bankrupt, talk to your mortgage lender about a loan modification, buy generic instead of name brand, drive the family car till is falls apart, etc. All of these things are a reality.

3. What Happens When You Lose Your Job – If you’ve been working this plan then you will be better prepared to deal with the pain and misfortunate of losing your income. At least by thinking about these things in advance you will have better prepared yourself for the eventualities. The most likely solutions when you are not bringing in enough money are:
   1. Only pay the essential bills; food, shelter, clothing, utilities, etc. You will notice that credit cards and other unsecured debts are not on that list.

   2. Look at credit counseling and see if that is a payment you can afford with your new limited income.
   3. Talk to a bankruptcy attorney and find out if bankruptcy is right for you. Many bankruptcy lawyers offer a free bankruptcy review.
   4. Reduce your lifestyle. Move to cheaper housing, rent if you have to. Trim back on expenses that you can’t pay for in cash. Get out of your car lease or refinance your car loan to lower your transportation costs.
   5. Think of your savings account money as water that can’t replaced in a drought. Consume it as carefully and wisely as you can. When it’s gone, it’s gone.

As always, I’m here for you when you need my help. I wish I was there to give you a big hug, goodness knows you sound as if you could use one. We don’t have to tell anybody.

Steve

The Answer:

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Next time I hear someone complain about high interest rates on credit cards in the U.S., I’ll be sure to pass this story along to them. Wal-Mart de Mexico, which is known as Walmex, plans to ramp up its credit-card business in Mexico by the end of the year, according to Bloomberg sources. All told, the bank plans to issue more than 100,000 cards. The cards will have annual percentage rates that range from 59% to 75%. Ouch. Amazing interest rates, no? Consider this: that’s down from 90%!

Next time I hear someone complain about high interest rates on credit cards in the U.S., I’ll be sure to pass this story along to them. Wal-Mart de Mexico, which is known as Walmex, plans to ramp up its credit-card business in Mexico by the end of the year, according to Bloomberg sources. All told, the bank plans to issue more than 100,000 cards. The cards will have annual percentage rates that

Click Here for totally free debt help, advice and answers.

Read the rest here: Wal-Mart de Mexico Plans 100,000 Credit Cards by Year-End — With Interest Rates of 59% to 75%

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Read the full article at GetOutOfDebt.org, click here: Wal-Mart de Mexico Plans 100,000 Credit Cards by Year-End — With Interest Rates of 59% to 75%

Debt is a major problem for a lot of people these days. The problem is, even if they know they want to get out of it, they have a hard time figuring out how to start.

If you fit this description, this 12-Step program spells it out for you.

Now, there isn’t one way to get out of debt, and the best program should be tailored to each person’s individual situation. But if you feel like you just don’t know how to begin, this program is designed to give you a sort of guide — one that should be adjusted to fit your financial situation.

It’s aimed not at people who have their finances together and are just trying to pay off a credit card or two. It’s aimed at those who have trouble finding any extra money to pay off debts, who seem to find themselves getting deeper and deeper into debt, and don’t know how to stop it. In other words, it’s a bit of an emergency program.

Disclaimer: I’m not a financial advisor, and if you are in need of one, I suggest you find a qualified advisor. My only qualification is that I’ve made great strides in getting my finances under control, in starting an emergency fund, in paying all my bills on time, in not getting further into debt, and in eliminating my debt (I should be done by the end of this year). This program is based on my experiences, and on the large number of books and websites I’ve read.

The Zen Habits 12-Step Get-Out-of-Debt Program

1. Acknowledge the problem. The first step is admitting you have a problem. The first week, all you have to do is say to yourself, “I have a problem with debt. I got into this because I spend money I don’t have. But I believe that there’s a way out, and I can do this. I can control my spending, make a plan, and slowly get out of debt.” That’s a major step. Now set aside just 30-60 minutes a week to deal with your finances — make it a set day and time, and don’t let yourself miss this appointment.

2. Stop digging. If you’re in a hole, the first step is to stop digging, and that’s what you’re going to do this second week. For 30 days, see if you can stop any non-essential spending. If you have a major problem with credit cards, cut them up. If you’re not so bad with credit cards, at least put them away and don’t buy stuff online for one month. What’s essential? Obviously your bills, housing, auto, gas, groceries … that kind of stuff. Non-essential? Clothing, CDs, DVDs, books, magazines, gadgets … you know what I mean. Just 30 days. After that, you can decide how much to spend on these things.
3. Make small cutbacks. This third week, take a look at things you normally buy and see if you can cut out a few of them, or spend less on them. Groceries? See if you can buy house brands instead of name brands. Coffee? Make it yourself at home instead of buying out. Lunch? Try packing it to work instead of eating out. Add up what your cutbacks will save you this month.
4. Start an emergency fund. This fourth week, set up a savings account, if you don’t have one already, for an emergency fund. Now take the amount you saved in Step 3 (and even in Step 2 if you think you can make them last for awhile) and set up a regular automatic deposit from your checking to this emergency fund savings account for this amount. It’s important that before you start paying off debt, you have at least a small emergency fund. Aim for $1,000 at first, and you can grow that later. The reason: if unexpected expenses come up, and you don’t have an emergency fund, you will skip your debt payments to pay for the unexpected expenses. The emergency fund protects your debt payments.
5. Take inventory. OK, this is a step that we don’t like to take. But take a deep breath. You need to do this. Remember what you said in Step 1? You can do this. This fifth week, set up a simple spreadsheet. In one column, list all of your debts — credit cards, medical bills, auto loan, etc. You can leave out your mortgage, but put everything else. In the second column, put the amounts you owe for each debt. In the third, put the minimum monthly payment, and put the percentage interest in the fourth column. Total up the second and third columns to see your total debt owed and how much you have to pay, at a minimum, towards debt each month.
6. Make a spending plan. We don’t like to do this step either. But it’s not going to be as painful as we think. This sixth week, set up another simple spreadsheet or budget. In one column, list your monthly bills (rent or mortgage, auto payment, utilities, cable, etc.) — everything that is a regular monthly expense. Then list variable expenses (things that change every month) like groceries, gas, eating out, etc. Later you should add irregular expenses (stuff that comes up once in awhile — less than once a month) such as auto and house maintenance, clothing, insurance, etc. But we won’t get into that now, as we want to keep it simple. In the second column, put down the amounts for each. Be sure to put enough for things like gas and groceries, as you don’t want to be short. Be sure to also include your minimum debt payments and your emergency fund deposit. Now, list your income sources and monthly amounts. There. You’ve got a temporary spending plan (you’ll want to add the irregular expenses later). Now, if the expenses are greater than the income, you’ll need to make adjustments until the expenses are equal to or less than the income.
7. Control spending. If you’re into your seventh week of this debt plan, you may find it hard to keep track of your spending and ensure that you’re sticking to your spending plan. Here’s the key: first do the emergency fund deposit. Then do the debt payments. Then do your monthly bills. Then withdraw the variable amounts in cash, and put them into separate envelopes. It’s old-fashioned, but it works, as you don’t have to worry about overspending. When your envelope is empty, you can’t spend anymore. Continue to cut back on non-essential spending as much as you can at this point, so you’re able to stick within your spending plan.
8. Pay bills on time. This may be a problem for a lot of people. It’s important, if you want to get out of debt, to start paying all your bills on time. If you follow the payment plan outlined in Step 7, your bills should be paid before you get to any discretionary spending categories. At this point, you want to focus on getting those bills paid on time, and making it a habit. If you have trouble remembering, try one of these methods: 1) pay bills as soon as they come in — take them to the computer and pay them online, or write out a check and prepare the envelope to be mailed the next day; or 2) set up a reminder in your calendar program to tell you when bills are due.
9. Start a snowball. Now that your finances are relatively under control, you can start a debt snowball. At this point, you should have the beginnings of an emergency fund, you should know how much you owe, you should have a temporary spending plan, you should be paying bills on time and controlling your spending. Now you can focus on paying your debt. Here’s what to do: If you can find at least $100 from your spending plan, use that to start your debt snowball. You may need to cut back on discretionary spending (as you did in Steps 2 and 3). Or, once your emergency fund is at $1,000, you can use the amount you were putting into that account for your debt snowball. If you have trouble finding $100 for a debt snowball, you need to look at what other expenses you can cut back on. OK, once you’ve found at least $100 for your debt snowball (and more would be better), take a look at your debt spreadsheet. First, order the debts from the smallest amount owed to the largest. Now, look at your smallest debt owed — you will start by paying $100 (your debt snowball) plus the minimum monthly payment on that debt each month, until the debt is paid off. When the debt is paid off, you will take the amount you were paying on it (let’s say $50 monthly payment plus the $100 debt snowball for a total of $150) and pay it to your next smallest debt, until it is paid off. Continue to pay off your debts, one at a time, until they are all paid off. Now you have a large sum you can put into growing your emergency fund, and funding your irregular expenses, and finally start investing.
10. Find larger cuts. Once you’ve controlled your finances and started your debt snowball, there are ways to increase the snowball — and hence the speed with which you get out of debt. Look at your larger expenses — are there ways you can eliminate or cut back on them? Can you sell your car for a smaller, used model? Can you find a smaller house or apartment to rent? Can you sell your house and rent a cheaper one? Can you get by with one car? Can you eliminate some services you’ve been using? Whatever cuts you make, apply that amount to your debt snowball — don’t spend it.
11. Grow your income. Another great way to get out of debt faster is to make more money. Look at ways you can make money on the side — or ask for a raise or get a better job. Take 30 minutes to brainstorm. Are there ways you can start a small business online? Sell your valuables on eBay? Start freelancing on the side? Get a part-time job? This only has to be temporary, but the more money you make, the faster you’ll get out of debt. Be sure to apply your new income to your debt snowball.
12. Track your progress. On your debt spreadsheet or budget program, be sure to update it every payday (or however often you pay debt) so that you can see your shrinking debt amount. You should be able to calculate how many months you have left before you’re completely out of debt. It may be a long ways off, but it’s within sight!
13. Bonus step: Celebrate! It’s important to celebrate, not only when you’re out of debt, but along the way as you eliminate each debt. Have fun! Make this an adventure. It can be amazingly satisfying to stop spending and gain control of your finances instead. Find free entertainment, make it a challenge to be frugal and save money and find cheap used stuff. Pat yourself on the back along the way.

This article, which is superbly insightful, comes to you courtesy of Zen Habits. It contains so much good information that is worth reading again and again.

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Read the full article at GetOutOfDebt.org, click here: A 12-Step Plan to Get Out of Debt Fast!