How to Get Out of Debt With the Get Out of Debt Guy » debts

I am on a Visit Visa in UAE and Have Lots of Debt. What Can I Do? – Rina

Steve Rhode — Fri, 25 Jun 2010 16:38:01 +0000

Rina

“Dear Steve,

I am currently on visit visa here in UAE as i have resigned salary from my previous job and got my employment visa cancelled as I got a better employment offer from another company but unfortunately it took them more than three months to start the employment visa processing.

Leaving my old job, they asked me to pay the visa expense which caused two months salary.
I have some credit cards which I defaulted on paying my monthly minimum amount because my previous company delays our salary which is the reason I look for another employment.

My new company took at least three months to start off processing my employment visa, thus leaving me jobless and without visa…I was forced to buy a visit visa in order to stay in UAE and wait for my new company to finish the visa processing. Now I am almost 5 months past due with all my credit cards and one of the banks already forwarded my case in alwasl legal advocates. I am wondering if it will have any effect on my employment visa application which my new company is processing now.

Please help me get out of this situation, as I am alone here in UAE, no family, no relatives to help me.

Rina”

The Answer:

Dear Rina,

If you are already the subject of legal action and an arrest warrant is out for you them it may impact your ability to get the visa. But looking at the standard UAE Visit Visa Application Form I can’t see anything asked that directly applies to your financial status.

As you may be aware, owing debt in the UAE and letting it go unpaid can result in imprisonment. I hope you can get your work situation resolved quickly so you can begin to repay your debt.

Big Hug!

@GetOutOfDebtGuy

Lauren is Searching For Ways to Get Out Of Debt And Make Her Bad Credit Go Away

Steve Rhode — Mon, 17 May 2010 07:36:02 +0000

From How to Get Out of Debt

“Dear Steve,

If I find a consolidation company to help me pay my bills will my bad credit go away?

Lauren”

The Answer:

Dear Lauren,

It is usual for people to search for a magic wand that will make their debt go away without impacting their credit report. There really is no such solution, and here’s why.

In order to help keep your credit report and credit score looking good you need to pay your debts as agreed. That means that you need to pay your debts in full or make at least the minimum payment that you contractually agreed to. Any repayment plan outside of that has consequences.

Typically by the time people come to realize they are in financial trouble they are either very maxed out or they’ve been late or missed a payment or two. Those events tend to be the cold water thrown in the face of the person in denial.

By the time those events happen, your credit report and credit score have already taken a hit. So many people go to credit counseling and latter say they were not behind before they went into a debt management program and the reality is, they were but did not remember it.

Eliminating debt and improving your credit score are two different goals. It is a bit like saying that you’d like to set a new land speed record and go scuba diving at the same time. Good goals but not necessarily requiring the same focus or tools.

To get out of debt and avoid bankruptcy you need to come up with a plan that you can sustain over the long course of paying down your debt. Typically this means that you’ll have to make monthly payments but they will be smaller than what the creditor wants. If you could afford the full payment you would not be looking for help, would you? These reduced payments will appear on your credit report and lower your credit score.

If your goal was to repair your credit and make your credit score and credit report look good, it is actually fairly easy to do but you have to at least pay your bills on time, without delay, without reduction and without exception.

When facing difficult debt it would be smarter and wiser to focus on a two stage process. First, seek out the best solution to address your debt. That might be debt management, debt settlement, bankruptcy, a second job, better budgeting, etc. And then once the debt is under control we can rebuild the credit latter.

Let’s plug the hole in the dam first and then we’ll repair it.

Big Hug!

@GetOutOfDebtGuy

The Answer:

San Wants To Know “We Need Some Way To Pay Off Our Debts”

Steve Rhode — Thu, 04 Feb 2010 21:19:01 +0000

From How to Get Out of Debt

“Dear Steve,

We need some way to figure out how to pay our debts off. We have credit card debt, car loan, a home equity loan that has a balloon next year, medical bills and owe a balance to my brother for his half of property we inherited jointly. We have two incomes and we should be able to live on them. We have about 15 years to retirement and we would like to be totally out of debt in 5 years so we can save for the rest of the time. We are behind on mortgage and 2 other creditors and are trying to get that caught up and current.

How do we straighten out our finances and make a budget that we can live with and still get things paid off in 5 years?

San”

Dear San,

I’m sorry to say you’ve got all the ingredients for a financial disaster brewing here. Here are the things that concern me the most.

Home equity loan has a balloon payment due next year.
Can’t make it on two incomes.
Need to cash out brother.
Retirement looming but not enough savings for it.
Behind on mortgage.
Behind on two other creditors.
Want to be paid off in five years.

San, wishing and wanting don’t add up to reality all the time. But the good news is that with some adjustments there may be some solutions.

The issue of making enough money but not having enough to live on tells me that you don’t have a basic understanding of where your money is going each month. Don’t worry, most people don’t.

The fix for that is to use an online program like Mvelopes or just write down every penny you spend for thirty days and at the end of that period, categorize your spending and total it all up.

Either method will help you to clearly see where you might be able to make easy budget adjustments to reduce your outgo. I think the Mvelopes method is just easier. Every dollar you save by making budget adjustments way remains in your pocket for debt reduction.

The best and most logical method of debt reduction is the debt snowball method.

Debt Snowbal Debt Reduction

The basic steps in the debt snowball method are as follows:

List all debts in ascending order from smallest balance to largest.
This is the method’s most distinctive feature, in that the order is determined by amount owed, not the rate of interest charged. However, if two debts are very close in amount owed, then the debt with the higher interest rate would be moved above in the list.

Commit to pay the minimum payment on every debt.
Determine how much extra can be applied towards the smallest debt.
Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off. Note that some lenders will apply extra amounts towards the next payment; in order for the method to work the lenders need to be contacted and told that extra payments are to go directly toward principal reduction.
Once a debt is paid in full, add the old minimum payment (plus any extra amount available) from the first debt to the minimum payment on the second smallest debt, and apply the new sum to repaying the second smallest debt.
Repeat until all debts are paid in full.

In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name).

The theory works as much on human psychology as it does on financial principles; by paying the smaller bills first, the individual, couple, or family sees fewer incoming payment requests as more bills are paid off, thus giving ongoing positive feedback on their progress towards eliminating their debt. Source: debt snowball

You see San, without a major expense reduction or income increase it does not look good for a happy outcome here.

When people fall behind on their mortgage it is a priority to get that caught up. To do that means you typically have to fall behind on your other bills. But you’ve got that balloon coming up next year and the problem with balloons is that they explode. You might not be able to refinance that due to your current bad credit or because the mortgage industry is in a bit of a meltdown, then like now.

I’m sure your brother wants to be paid as well. Rightfully so. I’ve seen issues like this tear families apart. Don’t let that happen to you. Your brother is a creditor like the others and you need to treat him just as fair.

If you apply all those techniques and you still can’t make it them I’m afraid we are going to have to talk about the big B word, bankruptcy. Bankruptcy is a legal and viable option for you and before you make any sort of emotional decisions about bankruptcy I insist that you get a free bankruptcy review and talk to a bankruptcy attorney to get the facts rater than the assumptions.

If you go bankrupt you will have to move and you may lose some stuff but it would allow you to clear the debts and start saving for your retirement sooner rather than latter.

Big Hug!

@GetOutOfDebtGuy

Ben Wants To Know, “Will I Ever Get My Life Back After Bankruptcy?”

Steve Rhode — Tue, 19 Jan 2010 19:36:15 +0000

From How to Get Out of Debt

Ben wrote in through the GetOutofDebt.org site and asked for help and advice.

“Dear Steve,

At times I feel like my life is over. This year I did something I never thought I’d ever do, I went bankrupt. I was raised to pay my bills and I’ve always done that, but last year my overtime go cut and we were just making it by and this year my regular hours go cut and we started to fall far behind.

I contacted one of those credit counseling groups and asked for help but the monthly payment they wanted was just out of my reach. We could not afford that and the truck payment. I spoke to a bankruptcy attorney and then we gathered up the money to go bankrupt.

Now that is over and I feel terrible that I went bankrupt. Will I ever have a financial future again?“

Dear Ben,

The answer is that you will have a financial future again and you life is not over.

Bankruptcy can make you feel like a complete failure and a big loser but the reality is that what ever brought you to the point of not being able to pay your bills, happened. It’s a lot like the farmer that plants this years crop but it does not come in because of a drought. The lack of rain doesn’t make the farmer a loser, it’s just unfortunate that water did not fall from the sky in sufficient quantities to make the crop grow into cash to repay his debts.

Sure, if you want to be narrow minded and a big dick you could make a claim that you just walked away from your debts and didn’t man-up to them, but honestly, you know that’s not the truth.

I’d love to see all the people that bitch and complain about people that go bankrupt, lose all their shit and then try to put on a happy face and bound joyfully through the day.

Bankruptcy is hard and painful but believe it or not, what you have done is probably more responsible that limping along for years to come.

Bankruptcy is a legal solution that exists to help people out from situations where no reasonable hope exists to resolve the debt problems at hand.

When faced with huge debts people often live from paycheck-to-paycheck just making it by. They cut out things like needed medications, medical care, dental visits, etc. They also take away any fun times for the kids, a cheap vacation and saving for retirement.

Basically they make the future less safe to make up for past financial mistakes. Honestly, when faced with a bad debt problem you are better off facing it honestly, being real about how long it will take you to recover and determining if years of just getting by are something that you can do. You’re also better off going and talking to a bankruptcy attorney and getting the facts before emotionally deciding that bankruptcy isn’t for you.

My thought is that people at times like these have a greater responsibility to make the future better for their families than to unreasonably try to repair the past. And when I say better, I don’t mean a life of luxury, no, I mean proper health and dental care, caring for the children, not punishing them for your financial misfortune, and creating a caring, loving and safe environment for the kids to grow up in.

Ben, you’ll be surprised that now that you have gone bankrupt, creditors will be lining up again to give you unsecured credit again. In fact you’ll want to get credit again so that your credit report and credit score don’t just suddenly end with “Ben’s Bankruptcy”. If you want to get credit in the future you’ll need to start replacing your current financial problems on your credit report with good credit.

One of the ways of doing this safely is to get a secured card that will report to the credit bureaus that you are paying the card off. You can get a secured card online here.

Just remember this, Bad Debt Happens To Good People.

Big Hug!

@GetOutOfDebtGuy

How You Can Get Out of Debt Fast Without Filing Bankruptcy

Steve Rhode — Fri, 08 Jan 2010 13:54:57 +0000

From How to Get Out of Debt

So there’s this guy, Scott, who has developed an ultimate guide to getting out of debt. Sure, I’m as skeptical as the next guy but after looking over the information I was left with a problem, it looked pretty good.

His information page actually contains a bunch of information that you don’t normally see which led me to believe that he at least knew what he was talking about.

Now the rest of the information Scott promises to share with you, take a look for yourself and see if you’re willing to get under the voer and see what you can learn.

Here is what he promises:

Here’s just a small taste of what you’ll learn in this powerful new course…

How you can ELIMINATE 90% of your unsecured debt without making another payment whatsoever!

How a simple one page letter can get you out of debt completely, improve your credit, or cut your monthly payments in half… INSTANTLY!

A brand new “stealthy secret” way you can actually file for bankruptcy and keep it out of your credit report… FOREVER!

Why 75% of all debt management, debt consolidation and credit counseling cases end up in bankruptcy anyway. And what you can do to reverse this trend.

The most important and toughest decision you must make when deciding on a debt relief option and how to make it intelligently and morally (so you’ll never have to second guess yourself later!)

Why all debts are not created equal. And which debts you should pay first and why.

How to clean up your credit report almost instantly! Learn how to rid your file of all past credit problems, including late payments, collections, and charge-offs — all while improving your credit score.

Top 10 reasons you shouldn’t pay off your credit card debt. These techniques may be considered controversial by some and therefore not recommended for everyone. But they could be just the thing you need to fix your situation.

The only legitimate way to have ALL your debts cleared while maintaining a good credit rating.

How and where you can obtain a low cost loan you can use for any purpose (like debt reduction) without any credit check or income verification at all.

How (if necessary) you can survive with BAD CREDIT! This simple secret shows you how to lessen the negative effect your current credit rating has on your life and immediately make it more acceptable to every lender you come into contact with.

How to get the government to pay your bills and debt for you.

The single most important thing you must do! then Wham!… your entire debt disappears almost instantly. (And you never have to worry about the debt anymore. Once you know this simple secret you will immediately take all the “money stress” out of your life once and for all.)

How to get out of debt years earlier than normal while saving thousands of dollars in interest all without increasing your monthly payments by one cent. Simple action plan provided.

Here’s several simple ways you can lower your monthly bills and save yourself a bunch of money — up to $700 or more each month.

How credit card companies think and work… a few simple secrets that will show you how to trick and confuse them so they leave you alone — and even forget about you forever! Result: Debt GONE, almost overnight.

A proven method for paying off any debt for as little as 5 cents on the dollar! This is a method virtually anyone can use. And you can use it over and over again… and never damage your credit doing it.

How to DEMAND that the credit bureaus re-establish your credit rating to the exact level it was before you considered bankruptcy or before you began missing payments.

Why Debt Consolidation is one of the worst options you can take and why its even considered worse than a straight bankruptcy when taking care of your debt!

So if you’ve got a minute, take a peek at the information Scott has and decide for yourself if you want to read more. It’s up to you but remember, often unconventional information contains facts not found from the mainstream sources.

Mark Writes In “I Need to Go Bankrupt in the UK”

Steve Rhode — Mon, 14 Dec 2009 01:23:50 +0000

From How to Get Out of Debt

Mark wrote in about his financial situation.

“Hi Steve,

My wife and I need help. Since 2001 we’ve been living in the U.S. and we’ve just got our green cards. We moved to the U.S. from the UK and for years I’ve been struggling to pay back debt there using dollars to pay back British pounds. The conversion rate has not been in my favor.

I do not have any property or belongings in the U.K.

I’ve used up all my savings now and don’t have any more money to send back to the UK to pay these debts. I’ve only been able to pay about £100 a month on £25,000 worth of debt. What should I do?”

Mark,

If you had lived in the United States, or anywhere outside the UK for less than three years, you could have still gone bankrupt in the UK using a foreign bankruptcy service.

But since you’ve been gone longer, bankruptcy back in the UK is no longer an option.

You have a few of options.

You could make payment arrangements the UK creditors but that makes it hard to pay off £ with $. But as you have learned, a repayment plan without an expectation that it will resolve the situation only drains you of cash and does not eliminate the debt.
You could speak with a US bankruptcy attorney and consider a US bankruptcy and include your UK debts. There are more cross border bankruptcies these days.
You could do nothing, stop paying the UK debt and then deal with any creditor that comes after you in the US.

As silly as it sounds, option 3 might be the best at this time, certainly making more payments isn’t going to help at all. But I would still suggest speaking with a US bankruptcy attorney to learn about how that solution may help you.

Any more payments to creditors, I’m afraid, is just going to be throwing more good money after bad.

Big Hug!

@GetOutOfDebtGuy

I’m Planning to Divorce My Wife But I Don’t Want to Pay Her Debt. – James

Steve Rhode — Wed, 03 Jun 2009 15:36:26 +0000

From How to Get Out of Debt

“Dear Steve,

I am stationed in South Carolina and my wife is moving back to California at the end of summer with the kids. We are getting a divorce at some point down the road.

My main question is about me being responsible for her debts. We have really maintained seperate debts by keeping things in our own names.

I recently took out a signature loan to pay off all my credit cards. My car is paid off and the only debt I have is the signature loan $300 a month. My wife has all kinds of debt, school loan (incurred before we met), credit cards, car (very upside down which she bought while I was out of state for training without talking to me), and possibly more.

I took the loan out in my name alone without telling her to pay off my debts. I have about $1000 in the bank left over for moving expenses at the end of the summer. My income just barely covers the bills, while giving her $700 a month for her bills alone, she also gets $350 from her ex.

Bottom line is am I responsible for her debt?

James”

The Answer:

Dear James,

You are not responsible for debts in her name alone. However, I see that you didn’t mention the child support that you have to probably pay to her for the kids, if they are yours. Just be aware of this so you don’t get caught with your wallet down.

I assume you are in the military from what you’ve said. Thank you for your service.

@GetOutOfDebtGuy

I’m About to Have a Nervous Breakdown Because of My Debt. –

Steve Rhode — Thu, 14 May 2009 20:13:17 +0000

From How to Get Out of Debt

“Dear Steve,

60k in IRS debt and 20k in credit card debt, already living paycheck to paycheck supporting kids and adopted grandkids

What can I do, IRS has placed a federal tax lien so i can’t get a loan and credit card company is calling my work and home 20 times a day and applying 20% interest but is unwilling to talk settlement, I haven’t been able to pay payments vs. grogeries for 4 months now, I am going to have a nervous breakdown, Help?

Bill”

The Answer:

Dear Bill,

The reason you are feeling as if you are having a nervous breakdown is because the stress is extreme and you are in an un-winnable situation. So in order to change the stress level you are going to have to take some action to break the logjam you are in.

The IRS lien is going to prevent you from getting a loan. Without the loan you feel you can’t get out from under the credit card debt. You can’t afford to make payments and eat. As long as you remain under the credit card debt the collectors are going to call. The collection calls are stressing you out.

If you change one thing here, eliminate your debt, the calls and pressure stop. Your only real option to break this logjam is going to be with bankruptcy to discharge the credit card debt. The IRS debt will have to be repaid or a repayment offer or an offer in compromise might be to help deal with the IRS debt.

I would strongly suggest that you go and meet with a local bankruptcy attorney, discuss your situation, and take some proactive action to alter the current path you are on. Once you do that it will make your life and the lives of those around you, better.

Big Hug!

@GetOutOfDebtGuy

Bush Administration Rolls Out Wimpy Mortgage Assistance Plan

Steve Rhode — Tue, 11 Nov 2008 22:22:15 +0000

From How to Get Out of Debt

The Bush administration today rolled out a plan to help homeowners in trouble with their mortgages. While proclaiming big help the plan does not go anywhere near far enough to help those in the most trouble.

Homeowners 90 or more days late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy are eligible.

The major issue is that this plan will not reduce the total amount owed on a home that is now worth less than what is owed against it. Also, people who don’t file bankruptcy are eligible but so many people are loaded up with all sorts of debts that bankruptcy is an accelerating solution for a lot of people.

The Bush mortgage plan is not an industrywide plan so don’t get all excited that it is either law or to be offered by all lenders.

Under this plan borrowers may be able to have their interest rates reduced or loans extended out for a decade longer to reduce the monthly payment. The goal would be to reduce the mortgage payment to 38% of the monthly household income. Citibank recently announced a similar plan but set their target at 40% of income.

This new program may not help homeowners in need if the lenders or investors in the mortgages don’t agree to the proposed modification. This new initiative by the Bush administration sounds nice but like a lot of other attempts comes up short and not full of meaningful assistance.

Is Debt Consolidation a Viable Debt Solution For Unsecured Debt?

Steve Rhode — Thu, 30 Oct 2008 04:27:40 +0000

From How to Get Out of Debt

It seems like every day the question of debt consolidation comes up and I think it is starting to drive me a little crazy. Some where in the human DNA is a gene that makes people think that when you have problems paying your bills that debt consolidation is the natural debt solution.

If I had my choice I’d rather make the bills magically vanish. I’d rather have that little leprechaun on the Lucky Charms box come and make my debt magically disappear. Debt consolidation does not do that. Instead, debt consolidation just wraps your debts into a new obligation.

It isn’t even possible to get a debt reduction from debt consolidation. The best debt consolidation program in the world is not going to consolidate your debts into a smaller balance. You’ll still owe what you owe. The only way to reduce your monthly payment would be by paying off your debts with a debt consolidation loan, typically a loan using your home as collateral.

If you default on your new debt consolidation mortgage, the bank will take your home and you will lose your roof. The consequences from defaulting on a debt consolidation mortgage refinancing are pretty severe so just know what you are getting yourself into before you sign on the line.

Borrowing money to pay off your debts may allow you to lower your monthly payment but that does not lower the amount you owe. Let’s be clear about that. The reason your payment may be lower is because the interest rate is lower and the length of time to repay the loan may be longer as well.

The most realistic ways to eliminate credit card debt quickly is if you happen to come into a windfall of money, like winning the lottery or inheriting money after the death of a loved one. I’ve seen both of these things actually happen and people have managed to get out of debt completely.

It’s really hard to time a lottery win or the death of a rich relative to your desire for a debt consolidation loan so don’t hold your breath waiting for that to happen.

Source: Is Debt Consolidation a Viable Debt Solution For Unsecured Debt?

Is Consolidating Debt the Way to Go? – American Chronicle

Steve Rhode — Wed, 29 Oct 2008 05:38:10 +0000

From How to Get Out of Debt

With so many ads on TV and the Internet proclaiming debt consolidation as the answer to financial difficulties, it´s no wonder many people assume it must be the ideal debt solution. The reality, however, is that many misconceptions surround the seemingly simple notion of consolidating credit card debt. In fact, consolidation will not necessarily reduce or even secure a fixed interest rate, and may not expedite your debt relief at all.

Services proposing to consolidate your debt will recommend the following: place several of your debts into the same account, so that you only have to make one single payment each month. What debt consolidators don´t tell you is that this process may not only make no impact on your total debt amount, but it could also prolong the term of your loan.

Is Consolidating Debt the Way to Go? American Chronicle, CA - 21 minutes ago … the debtor to discharge their debts by filing for payday loans in recent years, offering some contrast to the get-out-of-debt ads we´re bombarded with. …

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

Read the rest here: Is Consolidating Debt the Way to Go? – American Chronicle

How to Avoid Filing for Bankruptcy – WTVF

Steve Rhode — Wed, 22 Oct 2008 18:17:00 +0000

From How to Get Out of Debt

By Lisa Smith Filing for bankruptcy is often viewed as a quick and easy way to get out of debt. While it will make some of your debts go away, U.S. residents may find that what you get in return may be more than you bargained for, thanks to legal …

Click Here for Credit Card Debt Help

Source: How to Avoid Filing for Bankruptcy – WTVF

Robert Wrote “I Do Not Know Where To Start Other Than I Am in Debt”

Steve Rhode — Tue, 21 Oct 2008 13:49:21 +0000

From How to Get Out of Debt

“Dear Steve,

I do not know where to start other that I’m in debt. I want to pay all of my credit card debt starting with my lowest and working my way to the last but I can not accomplish this while I’m paying everyone and can not make any headway. Can I just send something to the others and concentrate on one credit till it’s paid for and move on to another?

On a good note I do own my home, so should I get a loan to pay off this cards. I could probably settle for less money that I owe but I also know that this will hurt my credit.

What do you suggest?

Thank You,

Robert”

The Answer:

Dear Robert,

Thank you for the question.

When I read your question to me I was filled with hope. There appears to be a clear and fairly painless way out of debt for you without hurting your credit. In fact I think it will help your credit.

Since you can probably get a mortgage against your home or refinance your current mortgage to take some cash out I would suggest that you think about doing that and if you can’t take out enough to repay all your debt, then take out enough to pay, in full, your highest interest rate debts. Don’t settle them. You are right, that will hurt your credit.

Once you pay off the highest interest rate debts with the cash from the house, that will give you the breathing room you need to focus on paying off the remaining debts using the debt snowball approach.

By paying all your debts off in full, it will improve your credit report and credit score. While debt settlement can be a good and valuable tool to use to eliminate debt in some situations, it is not a magic wand for all. Debt settlement will wound your credit report and lower your credit score.

Think of that new mortgage you are going to get just like a debt consolidation loan for credit card debt. After you’ve used the debt snowball approach to pay off your other debts, focus your efforts to pay off that debt consolidation mortgage that you took out for that credit card debt. Before you know it, you’ll have that paid off early as well.

If you execute this plan, you should be just fine, it will involve little pain, and as long as you don’t rush back into debt you will have a brand new financial future.

Big Hug!

@GetOutOfDebtGuy

The Answer:

The Personal Finance Brain Trust Tackles – Trying to Make Ends Meet But Still In Trouble

Steve Rhode — Mon, 20 Oct 2008 18:32:46 +0000

From How to Get Out of Debt

This weeks personal finance brain trust question was one that I received online.

My wife and I are both working, paying rent and land payment (have been trying to sell it), 3 kids and other debts and bills we are struggling from pay to pay and never get ahead. We have also borrowed money from family to help, but are still in trouble.

What can we do to ease the pressure.

Help!

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

This is the type of question that really gets to me. This is a case where money-saving tips and tricks come up short. This isn’t about cutting corners and saving money, these are situations that require life changes.

Gradual but drastic changes in how people live their lives. As Eminem so eloquently put it in the movie 8 Mile: “Do you ever wonder at what point you got to stop living up here and start living down here?”

It’s easy to cut corners and maximize a budget when you’re cutting things like movies and dinners out on the town. This question hits at the core of problems people have around the country: much more serious problems that require bigger changes.

It’s going to be hard, but my advice for this person would be to drastically change the way he/she handles their money. It may not be fun, but you have to stop living beyond your means, and if you’re “struggling” you shouldn’t be living at the level you are right now. Follow Eminem’s advice.

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.

It is difficult to fully answer your question without more information and the first thing I would encourage you to first carry out an income and expenditure analysis.

Keep track of all your spending for at least a week but preferably 30 days.

Hopefully this will show you where your money is going and perhaps suggest ways to economise. It is amazing how much we can all spend on little things like newspapers, magazines, coffee etc. All of these are small expenses but can quickly add up to a lot of money each month.

Of course if your shortfall is high each month then more drastic action might be called for. It seems to me that you might have to give up on your dream of being a homeowner for a while. If you are struggling with rent and a land payment then by the time you develop the land you will probably end up with a property which between mortgage payment, taxes and maintenance will cost you more each month than renting. I have seen too many people over the past few years struggle to be a homeowner in order to build equity, only to end up repossessed because they can’t afford the running costs.

Now could be a good time to offload that land cheaply, put your finances in order and perhaps even put away some rainy day money in a zero risk readily accessible deposit account.

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

The first thing you want to do is create a master list of all your income and all your regular expenses. With this list you will then determine if you have enough monthly income to cover everything. As you list your recurring expenses, look for ways to reduce them such as dropping cable or satellite TV, stopping monthly subscriptions, etc. You can also look to further reduce expenditures by buying generic products, reducing your utility usage, etc.

After you have cut expenses, look at the paper again. If the expenses side of the paper is larger than the income side of the paper, you are still in a losing situation. The only solution is to either cut more expenses or bring in more income. You may be able to cut recurring expenses by requesting rate reductions from creditors, reducing luxuries, and selling items that have recurring payments (such as the land or a car). To bring in more income you can try working overtime, taking on part time work, starting a side business, or holding a garage sale to sell unneeded items and make extra cash.

The only way to get ahead of the curve is to bring in more income than your current monthly expenses, there is no other way.

Steve Rhode – A personal finance blogger and founder of the Myvesta Foundation, a global scoial 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.

When everything has been cut to the bone and there is no other expense to cut, that’s when you should start looking at benefits you may be entitled to. Government benefits like food stamps (now called SNAP), food allowances for women, infants and children (WIC) and health benefits like Medicaid should be there in your time of need. You can see this previous answer for more information on these benefits and others.

Maybe you’re feeling like you are too proud to hunt down those benefits. But you’ve paid into those programs through your tax dollars all this time. If you are in need, don’t let pride stand in your way of feeding the kids.

You should really take a good look at bankruptcy and see what debts you can get rid of in bankruptcy. Since the land won’t sell you can either reduce the price way, way down to move it, let the land go back to the finance company and include any residual debt owed on the land in your bankruptcy, or let your bankruptcy lawyer try to negotiate down what you owe on it so you can include it in the bankruptcy but keep it.

I’m really concerned about the borrowing from family to help make it. You’ve noticed that’s not working so in reality all you are doing is just going further into debt but to a different person. It is not solving the problem.

Getting out of debt is hard, difficult and sometimes damn near impossible, but it is not rocket science. If you can get your basic expenses to fit within your income, with a buffer to save a little in a savings account and get by, that’s what a basic budget should look like. If you are trying to pay down debt on a new spending plan or budget then you’ve got to trim down your expenses so far to include your basic expenses, debt repayment, and savings.

The pressure is intense and debilitating but it is not going to ease until you start to put a plan in place to resolve this situation. The pressure you are feeling is the force that builds up between the wall of reality and the wall of demands as they move closer and closer to each other. Once you alter your financial existence or eliminate your debt through bankruptcy, then the relief valve will open and the pressure will decrease.

You will find that your best solution will probably lie in a combination of these actions. That might be, cutting back, bankruptcy, benefits and then focusing on building a new financial life and putting money into a savings account.

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

Oooh, tough one :( First off, i’m sorry to hear that you’re in this situation, that’s def. not fun – especially when it involves a family. I do, however, give you mad credit for reaching out and looking for solutions! Now, do i have a solution? Yes, actually i have a few, but without any specific details it’s pretty broad. And I’m afraid none of it’s all that new or exciting:

1) Track all your $ – Find out where every single dollar is going! (not where you *think* it’s going, but where it *is* going)
2) Make more cuts – Go down this list of expenditures and decide which are necessities, and which are “likes”. Cut out the “likes” for now, and focus on the needs. You can always go back once this passes.
3) Create a budget – After you’ve made some cuts, or before even, come up with a REALISTIC budget. This is important for a number of ways, but mainly to help you track your progress each month.
4) Have c/c debt? – Try consolidating and/or asking for a lower interest rate. It won’t pay it off, but it sure would lower the amounts you owe each month!
5) Bring in more money – A bit obvious here, but it’s imperative at the rate you’re going. If you haven’t already, try asking for a raise at work – you may get shot down, but it’s worth a try. If that doesn’t work, consider looking around for the next step up, or in the meantime even looking for a 2nd job that one of you can take. It’s not ideal, but it may be necessary.

Again, it’s sorta hard coming up with specifics w/out more details, BUT i can promise you that if you give all 5 of these a shot, you’ll have a much better chance coming out of all this much sooner :)

Lourdes Writes In “What Should I Do to Get Out of Debt?”

Steve Rhode — Wed, 24 Sep 2008 15:40:40 +0000

From How to Get Out of Debt

“Dear Steve,

I’m in debt really heavy from credit cards and other loans.

What should I do to get out of debt.

Lourdes”

Dearest Lourdes,

Wow, I really want to help you with some great advice and awesome guidance but gee-whiz a little more information would be really helpful. Maybe next time you write in you can share a bit more, please.

Based on what you told me, here are some things you can do that will cover the basics:

Reduce Expenses – Use extra money saved to pay down your debt.
Increase Income – Get a new job or a second job to help bring in more money to pay down the debt. Look on the job board or job bank page for a new job in your area.
Maybe Consider a Debt Management Company – If you are just paying the minimums you might want to take a look at a debt management company to see what debt reductions they can offer you. Warning: It will hurt your credit.
Save Extra Cash – Before you start sending all your extra cash to the credit cards and loans, save it up in a savings account so you’ve got emergency cash available. At the end of the year you can use some of your cash to then pay down the highest interest rate debts or smallest balance debts, whichever gives you the most emotional satisfaction.
Bankruptcy – If you are unable to pay your debts and you’ve done all of the above, maybe now is the time to get a free bankruptcy review from a bankruptcy attorney in your area.

Keep us posted on what happens.

Big Hug!

@GetOutOfDebtGuy

Lenora Asks The Squirrel – “What Should I Do About My Debts?”

Steve Rhode — Mon, 31 Mar 2008 16:17:43 +0000

From How to Get Out of Debt

Lenora wrote to me and asked:

Dear Get Out of Debt Squirrel,

What should I do about my debts? I am trying to set up a budget, but even with a budget, I can’t make all my payments. I need help now? I have over $23,000 in credit card bills and I want to get free of all of them. My husband thinks bankruptcy is the answer. But I am not sure God wants one to do that. Help!!!!!!!

My Dear Lenora,

While it feels like the walls are closing in on you and that you are living through desperate times, rest assured there is a way through this mess.

It doesn’t really matter what the number is that you owe. What is important is that there is not enough money coming in to take care of the bills.

As you say, even if you take your expenses down to the bare minimum, you still can’t make it from month to month. That is a clear indication that no amount of catching rain water to flush toilets, washing out Ziploc bags or reusing aluminum foil is going to do the trick.

Your husband has mentioned that maybe you should go bankrupt, and maybe you should. After all it is a legal and valid solution for dealing with overwhelming debt.

You mentioned what would God want you to do and I think it would be a mistake to automatically discount bankruptcy as an option simply because of what you think God might want for you. Think about it, she led you here for a reason and maybe that reason was to read this answer and to talk about bankruptcy?

Your options really come down to a few basic choices:

Do Nothing.
Increase Income and/or Reduce Expenses.
Go Bankrupt
Enter a Reduced Payment Plan.

Lenora, it’s not rocket science, just tough, difficult, emotional and gut wrenching. As a furry squirrel sitting on a distant branch the path you should take seems clear. Here is my plan for you.

Lenora’s Plan of Action to Get Out of Debt

First thing I would suggest if you need immediate relief from debt collectors or collection calls and you are not yet ready to go bankrupt is to enter a reduced Payment Plan where you can consolidate your debts.
I would also suggest that either now or as soon as you are ready you should talk to a bankruptcy lawyer. This doesn’t have to be with the intention of going bankrupt but to educate yourself about the realities of what bankruptcy means to you and your husband.
At some point following the meeting with the bankruptcy lawyer or during the early months of your consolidated debt plan you may decide that you can’t continue to make payments and live in the stress and pressure that you are currently in. You might opt for bankruptcy.

The advantages of this approach are that this does not force you to go bankrupt now if you are not mentally ready for it. And it allows you to make a good faith effort to repay your debt based on what you can afford to pay with professional help in the meantime.

Only you can decide if bankruptcy is right or wrong for you. But I ask you to consider this as you say your evening prayers. Lenora, do you have a greater responsibility to fix the past or attempt to fix the future? If you want to fix the future then it just might make more sense to go bankrupt now, get yourself back into a safe position where you can afford to live, and then if you have extra money leftover, you can always repay your creditor for moral reasons.

Going bankrupt does not mean you can’t still honor your debts. It just gives you legal protection and a fresh start, or you can keep living in the past. The choice is yours.

From a squirrel point of view I always prefer to hunt for as many nuts as I can and save them for the winter to come rather than worry about how many I didn’t have last year.

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