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

I’m Too Proud to Consider Bankruptcy. – Todd

Steve Rhode — Thu, 01 Sep 2011 21:21:44 +0000

“Dear Steve,

I have lived with debt most of my life. Parents divorced and on my own since 19. I put myself through school and lived off of credit cards while doing it. I never have caught up. I am now married with two kids.

We were fine with the debt we were accumliating since you never know how long you have to live, we lived for the now.

I own my debt and am not blaming anyone for it. I took it on knowing I ‘d pay more later. That’s how capitalism works. Then my wife lost her job and then had medical bills.I have a great job and in my mid 30′s. The problem now is that the credit card companies cut back all of the remaining credit and that zapped the debt to credit ratio and that had them jack up all the rates. We currently own about 120K of unsecured debt.

I am current on all of my payments and I have never missed a payment. I tried to negoiated a lower interest rates with the credit card companies, but they said they couldn’t becuase I hadn’t missed any payments.

One of them told to purposely miss a payment and then call back. I haven’t been able to get an equity loan since no one is willing to loan more than 85% LTV. Once I go over 80% I have to pay PMI, so it’s a wash anyway.

We have sliced our budget to the bare minimum, cut up our credit cards and have been living on cash for almost the last year. However, this debt clings to me hard. I am paying the monthly minimums, but it’s going to take 30 years to get rif of it.

We make about 125K a year and have a 30 year fixed mortage payment of $1200 @ 4.875%. I would love to get consolidated on this and be happy to pay someone 10%apr for this debt, but I can’t find anyone to do it.

You would think a bank would be happy to make that instead of me giving it to the credit cards. I understand that they see me as a risk since there is nothing stopping me from racking up more debt. I have about 20K in my 401K that I could pull, but that is just a start and may end up costing me more. I am worried becasue if anything unforseen happens, I have no way to pay for it. I talked with a debt counseling program, but they were not able to help me since I would actually need to pay all of my debts in 4 years, the monthly payments were too high. I am too proud to file for bankruptcy.

How do I get out of debt in less than 30 years? Am I out of options for a mid thirties guy that owns a house and has a good job? Should I start missing payments to renegotiate lower interest terms?

Todd”

The Answer:

Dear Todd,

You made an interesting statement when you said you were too proud to file bankruptcy. What makes that interesting is that it’s a decision based in emotion to a problem that’s based in math.

I don’t want you to let your “pride” leave you stuck in a situation that sounds as if it leaves you and your family in an unsafe position.

If you were unable to afford the credit counseling payment it sounds like you are also unable to save money and build up your emergency fund at this time as you are trying to dig yourself out of this huge hole. The lack of a financial safety net exposes your family to a potentially tragedy in the event of a big unexpected expense.

Being proud is a good thing but being uninformed about what bankruptcy would really mean for you in your situation, is not. That’s not prideful, that’s just uninformed.

Let’s start this journey with you taking a few minutes to read How to Get Out of Debt. The Honest and Unvarnished Truth.

Then, even though you may feel you are too proud to file for bankruptcy, you owe it to yourself and your family to at least look into it. You can click here to find a local bankruptcy attorney and talk to them for free.

What many don’t realize is that just because they go bankrupt, does not mean they can’t still repay their creditors for moral reasons. They just get to do it under terms they determine they can afford and which allow them to prudently and wisely save money and build an emergency fund to do better moving forward.

Come back and update me in the comments section below about what you decide to do and explore.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

This is a Scary Time in My Life. I’m Worried About Filing Bankruptcy. – Karina

Steve Rhode — Sun, 28 Nov 2010 22:16:45 +0000

From How to Get Out of Debt

“Dear Steve,

This is a scary time in my life. I am self-employed. I am 57 years old, single, and live alone in an apartment in San Francisco. Following my divorce three years ago, after 18 years of marriage, I found myself in the position of not being able to pay monthly expenses on my income alone.

My apartment is rent-controlled but even so, it is still very expensive to live alone in San Francisco. I cannot get a roommate because the apartment is one bedroom and designed for a single person or a couple. Bottom line is that I have incurred over $100,000 in credit card debt, due mostly to cash advances used to pay monthly expenses and medical bills.

During 2008, I really struggled financially, but 2009 was the best year ever for me for earned income. I grossed over $90,000. This year all was continuing to go well until July. Since then I have lost more than half my monthly income due to the economic downturn. For example, one of my clients is a nonprofit and they have lost about half of their average contributed income this year, so my hours were slashed. I have earned less than $4,000 per month since July so I am considering talking to a bankruptcy attorney in December for a possible January filing.

My biggest fear is that the bankruptcy court might subpoena my income records from my clients. I am embarrassed to say that I am an accountant and financial manager and, though I excel in managing others’ funds, I apparently cannot manage my own. I know for certain that if the nonprofit were to find out that I was filing for bankruptcy they would dismiss me as the contracted financial manager. I might be able to hold on to my two smaller accounts but my income from those sources is not enough to cover my monthly rent.

What are the chances that the bankruptcy court would subpoena income records from my clients?

Karina”

The Answer:

Dear Karina,

While anything is possible, it is extremely doubtful and a situation I have never seen since 1994 when I first started helping people.

I understand how scary and frightening these times can be. I lived through them myself. They were not fun then. They are not fun for you now.

However, if you take a step back and look at the situation through the eyes of another, the issue here is one that is understandable and explainable. And that is the most important part if you were ever asked to explain. Even your clients have had to deal with economic changes. It is not as if these are wonderful financial times and you are struggling. No, these are horrible financial times and you and millions of others have found themselves in uncertain and difficult financial moments.

My advice is to own the situation, face it, and deal with it. If you do this then your life will improve quickly. The issue here is not if you’ve had financial problems, but how you’ve dealt with them. Taking action and filing bankruptcy is often the most responsible thing to do.

Don’t let your past distract you. You’ve picked a path to follow, do it and use the fresh start to do better moving forward. If you are going to file in January, click here to find a local bankruptcy attorney and develop a game plan now. The bankruptcy attorney may tell you to stop paying your unsecured credit now in preparation of filing.

Once you do file be sure to exercise those habits you would advise others to take, open a savings account and build an emergency fund.

If you would like a second opinion about your situation you could contact Damon Day. He’s a fellow debt coach.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

I’m So Embarrassed About My Money Situation. Can You Tell Me The Truth About Debt Settlement?- Gloria

Steve Rhode — Tue, 09 Mar 2010 19:10:39 +0000

From How to Get Out of Debt

Gloria

“Hi Steve,

I am a 23 year old college student and in dear need of finanical help and advice. This is such an embarrassing situation and it is taking a lot of me to ask for help. This is the first time I am speaking about my situation.

I have been on my own since I was 19 years old, going to school full-time and working minimum wage paying jobs.

During the past 5 years I have created about 16k in credit card debt (I have 3 credit cards, 1 from First Financial bank and 2 from Bank of America). I will graduate college in May 2010 and will have to start paying my 10k student loan that have generated about 3k in interest fees (and counting).

As of right now I am about 30k in debt, got laid off from my job this past February and is going through a hardship. Because I was desperate, I turned to a debt relief program (Freedom Debt Relief). I wasn’t serious about it when I first contacted the program but after speaking with a representative, before I knew it, I was in the next step of finalizing my contract. I don’t trust a lot of people and is weary of my trust with this company. I signed on board in April and have made two payments to this company so far and have made none to my credit cards.

The monthy payment I am making to the debt relief program is close to what I would be making to the 3 credit cards – a little above minimum payment. I have been receiving phone calls from the creditors and it is so difficult. I have been avoiding unknown numbers. The company says they will only work with my credit card debt and can work it down to 11k and will be paid off in 2-3 years.

I am recently engaged and my fiance has no clue about my debt situation and that I have signed on with a debt relief program. I just found out that his credit score is down the drain because he defaulted on some credit cards a few years ago (he was going through a divorce) but he is in good financial terms because he has a good paying job. My credit score was in the 700′s in April, when I last checked. I have always paid my bills on time, etc. I just have a lot of debt. I am told that my credit score will hurt badly if I continue with the debt relief program since it will take 2-3 years to settle all of my debt.

I am at a lost on what to do, be done with the debt relief program, pay the late fees I’ve incurred on my credit cards, continue making the minimum payments on them and keep the large debt…. (I will probably pay for the rest of my life)

Or stay with the debt relief program, let my credit go bad, and HOPE I will be debt free in 2-3 years?

I am concerned about my credit score more than ever now because my fiance has bad credit. He doesn’t even have one credit card so right now we are forced to pay everything in cash. I have no problem making the minimum payments to my credit cards, I know I can find a way to make the payments just as I have always done, it’s just the debt is so large. I want to take responsibility for my debt and want to do what is best for myself and my future.

Help…

Should a college student let her credit score go bad for the sake of saving money through an untrusted debt relief program?

Gloria”

The Answer:

Dear Gloria,

Thank you for trusting me to ask your question. I have no vested interest in you choosing any answer I give you and nothing to sell. I’m just offering you advice based on years of experience in helping people.

You appear to be enrolled in a debt settlement program. Debt settlement is a tricky subject. I understand the philosophy behind debt settlement and I’ve seen it work wonders in specific situations.

I am often contacted by groups and people that praise debt settlement and suggest that I speak out to harshly about it. After all, you are told that it will reduce your debt for less than you owe in a short period of time, and that sounds wonderful.

But my point of view is that of a guy that has actually done debt settlements and seen the issues that arise. In general, I think that the problems are greater than the benefits for most.

The problem areas with modern day debt settlement are:

Tax Liability – Forgiven debt is taxable as if you earned that money. You will need to pay income tax on that money at your regular rate. Many people are surprised by this and wind up owing the IRS money. The last folks you want to not be able to pay.
Missed Payments – Debt settlement works by withholding payments from your creditors in hopes they will get desperate enough to take less than the full amount you owe.
Bad Credit – When payments are not being made to your creditors it shows up on your credit report and stays there for seven years. Also, the amount of debt written off will appear as a bad debt on your credit report.
Collection Calls – A debt settlement company has no power to prevent you from getting collection calls when you are withholding payment from the creditor.
Getting Sued – If you are not paying the creditor, they can always sue you. Working with a debt settlement company does not prevent you from being sued. If you are sued, you will lose. What’s your defense, “I was sending payments to someone else.”
No Coordinated Plan – If you have multiple creditors and you don’t reach a settlement with all, then you may be still left in a difficult position. The time to settle is when all creditors agree and then do it with cash on hand in a lump sum payment.
Big Fees – People don’t seem to understand how much debt settlement companies are charging or that the initial money that is paid to the companies is being taken as fees and not saved for creditor payments. Fees range from 15% of the total debt to $5,000.
Many Will Never Settle – Many people will pay debt settlement companies for a while and then bail out. Most, if not all, the money paid to that point will be kept by the settlement company for fees.

I think that many good people are attracted to debt settlement as a way to resolve their debt situation because they are intrigued by the prospect of getting rid of their debts in a short period of time for less than they owe. It’s a natural reaction but it is also a reaction that can lead people into trouble.

In a perfect world I would love it if anyone considering debt settlement would also talk to a bankruptcy attorney. Not to go file bankruptcy, but to better understand all the options available to them and be able to make a better and more informed decision that is right for them.

Sure, bankruptcy attorneys sell bankruptcy, but guess what, debt settlement companies sell debt settlement as a magic cure. Only by listening to both sides can you understand what the truth is.

So where does all of this leave you?

From a practical point of view you’ve got debts you can barely pay now. Soon you will graduate from college, start paying student loans and you are getting married at some point. After you graduate you may find expenses increasing if you move for a job, get a new apartment, start commuting for work, etc.

If you are barely getting by right now, I think that it is more likely than not that with upcoming life changes, any monthly payment plan you can barely meet now will fail at some point in the next two to four years. When that happens, any progress you made to get out of debt will be eroded or eliminated.

Rebuilding your credit is actually fairly easy but first we need to close the door on this old debt first.

I think it would be extremely beneficial for you to pull your consolidated credit report and ask your BF to do the same. Use this consolidated credit report, it’s the one I use and love.

Next, sit down together and review both of your credit reports. If you can share the most intimate parts of your lives, you should be able to share this stuff. Once you are both on the same page with regard to your financial situation, then we can start making plans on what the future path is for both of you. Don’t let the reality of your credit situation take control of your life. Own it. Deal with it.

Based on what you’ve shared with me and the decades of my experience with debt issues, my gut is telling me that any debt settlement or credit counseling approach is probably going to fail based on your situation and time in your life. In order to move forward you may have to consider bankruptcy as a way to end the old debts and turn your attention towards building a better financial future instead of trying to repair your past. Find a local bankruptcy attorney, schedule a free bankruptcy consultation appointment and go talk to them.

Being embarrassed or ashamed about your situation is perfectly normal. When I lived through this stuff I felt exactly the same way. But Gloria, it does not define you, it actually just falls into the bucket labeled “Shit Happens.”

In all my years I have met very few people that set out to intentionally screw their creditors. Most people wind up in a bad situation through a series of events that were never planned.

You can blame yourself all you want to but you’ve got to come to peace with this and take ownership for dealing with it.

From the pain and angst of this situation, some good can come. I want you to always remember what it was like and how you felt to live through these issues and then use those memories to help someone in the future with advice, compassion and consideration. Pay it forward.

Let me know what you decide to do and keep me posted through the comments section of this question.

Big Hug!

@GetOutOfDebtGuy

I Feel So Embarrassed, Ashamed, and Without Hope Because of My Debt. – Karen

Steve Rhode — Wed, 22 Jul 2009 14:00:35 +0000

From How to Get Out of Debt

Karen

“Dear Steve,

I am 62, divorced, working full time and heavily in debt. I tried Consumer Credit counseling, Debt Settlement by closing what little 401K I had and finally have filed for bankruptcy. My court date is in 1 month and I just received an audit from the IRS and find I owe another 5000 due to my own stupidity.

I used Tax Cut in 2006 to save money and forgot to add my alimony into the wages. I have no idea what to do at this point. To say I am stupid with money and numbers is an understatement, I am ashamed, embarrassed and totally without any hope . I have heard great things about you and sincerely hope you reply

How do I get the IRS to take less than I owe now that I have filed bankruptcy without losing my home

Thank You

Karen”

The Answer:

Dear Karen,

I hear it in your words that you are feeling like this is a horrible situation that can’t be dealt with. The good news is that I see this as a more positive situation.

The only unfortunate point is that you closed out your protected 401(k) to deal with your debt. I would rather have seen you keep those funds by going through bankruptcy first instead of consumer credit counseling.

The Internal Revenue Service (IRS) is in a different mindset that the mean spirited group that you remember.

In these days of economic strife I actually find that the IRS has become much kinder and friendly to talk with. I would suggest that you be as proactive as possible in reaching out to the IRS at this time and negotiate a monthly repayment plan you can afford. They are more reasonable than you would expect.

The lump-sum settlement you describe is an Offer in Compromise and those are much harder to come by and expensive to deal with. I don’t think you are a good fit for that solution.

With your bankruptcy to end your past debt problems and an IRS repayment plan on the tax debt it sounds like your financial situation is finally under control. You’ve got nowhere to go but up now, baby!

Now, let’s get to the way you are feeling about the situation. I felt that way when I lived through those times. Nearly everyone of the millions and millions of people with money troubles today will suffer in silence because they feel the same way also. It’s normal.

But the reality is that the only person that thinks negatively about you, is you. Your creditors don’t give a damn. There care was only for your hoped for profit. Now you’ve slid into the “oops” column they are not wasting a single second on judging you.

It has all been unfortunate but there is no sense wasting a perfectly good mistake. Learn from it, forgive yourself, move forward with hope, and most importantly, share what you’ve learned moving forward and help someone else with advice or a hug wile they try to deal with money troubles.

Here is a really big hug for you.

@GetOutOfDebtGuy

You May be Down and Unemployed But You Are Still a Hero to Me.

Steve Rhode — Fri, 20 Mar 2009 19:36:54 +0000

From How to Get Out of Debt

When I was growing up my Dad found himself unexpectedly unemployed. He went from being an executive to without work, through no fault of his own. I often think back about those days as I read the emails of people that write to me for help who are now unemployed and struggling.

I asked my father to share with you what his experience was like. Here is what he said.

To all of you out there who have been swept up into joblessness by our current economic emergency I urge you to remain strong, stay positive and recognize that the emotional strain and self doubts you are experiencing are part of the process. There are many thousands of you out there right now with many different stories. Here’s mine. I share this very personal and difficult memory in hopes that it will help put some perspective on your situation.

I grew up in humble surroundings. Unexpected opportunities, some luck and the loving support and personal sacrifices by parents and a loving wife allowed me to pursue challenging academic studies culminating in the award of the first Ph D in Political Science granted by Michigan State. This was followed by a professional career in college teaching and administration, private sector professional jobs and federal government work both here and abroad.

You can imagine how exciting, challenging and satisfying my early professional experience was. I began to feel that I was invincible and the future was nothing but more and better experiences. And then it happened. I became a victim of downsizing by a private firm. In what felt like a blink of the eye I went from senior executive to the invisible rank of the unemployed. I was in shock. How do I provide for my wife and children and cover the financial commitments? Equally stunning were the bad feelings and emotional toll—I’m a failure, I’ve dropped out of sight and few care, what did I do to deserve this, it’s not my fault, no wait a minute it’s the work of those blankety-blanks that included me in the downsizing, I’ve been treated unfairly and on and on.

It took a while, along with the understanding and support of my wife, before I could get through the initial shock and to begin making some positive moves, such as looking for job opportunities that would sustain us until we could get back on our feet and be able to hopefully look toward a better future.

The choices were scarce. I final found a job at the National Wildlife Association coding “Ranger Rick” membership applications for conversion to digitized records. I also landed a temporary job at Sears over the Christmas season demonstrating kitchen devices, such as Popeils Kitchen Magician. The demonstrations attracted the curiosity of Christmas shoppers so I always performed before a crowd.

Often the devices did not work as suggested by the advertising and it inevitably drew laughs. To add to my discomfort many times previous professional colleagues and contacts were part of those crowds. My spirit, on the other hand, was always buoyed by the fact that my young son, who didn’t have any concept of what I did in my professional work, loved to come watch, thought what I did was cool and finally could understand what his father did. I was glad when this temp job was over and I went back to my new friend “Ranger Rick”.

Months went by before I was able to find a new professional opportunity that made use of my education and experience and restarted a meaningful and satisfying pathway to eventual retirement. But I will never forget my jobless period. While stressful it was an important part of my life experience. It taught me a number of things: respect for all jobs and workers and taking pride in whatever you do if you do it to the best of your ability; not allowing bumps in the road of life to deter you or lead to lasting negative thoughts about yourself; recognizing that bad times are not generally permanent if you believe in yourself and do what is necessary to move on; the comfort of a loving wife and family.

So know my thoughts are with all of you out there who have hit a bump. Don’t ever give up, keep the faith and keep looking for that silver lining in the future. It is on the way.

As a young child of twelve or so I remember back on those times when my Dad was struggling, not with shame or embarrassment but awe and admiration that he found a way to do what he needed to do to feed his family and earn an income.

But those days seem so simple now; we had four television channels, all in black & white; for entertainment I played outside; and dinner out was a few times a year event.

During that unemployed time I even remember a time or two when my parents even asked to borrow money from my piggy bank and then repaid it promptly when they could.

You might be living through a time in your life where you were once a high flying executive and earning a great salary and now you are not employed and don’t know what to do. Here is what I learned from my father, do something.

Do Something

It is not a matter of having to swallow your pride when you are down and out. It just is what it is. In my case when my father found a job demonstrating the Kitchen Magician at the local shopping mall, I thought it was the coolest thing in the world that he was up on that little stage doing the demo. And when he would put a tomato in the Kitchen Magician and smash down on it, the more smashed it was, the better, I thought. I’m sure he was dejected, depressed and felt like a failure after having run a division at a big corporate company but he sucked it up and did what he needed to do.

So if you are down right now and unemployed, there are still plenty of opportunities to be a hero for your kids, just like my father was to me. Just show them that you understand your role and responsibility as a provider and do what you need to do to get by. If you do, they will always be proud of you.

And as my father said, “Don’t ever give up, keep the faith and keep looking for that silver lining in the future. It is on the way.”

Steve

Holly Writes In “I’ve Kept This Secret From Him For a Long Time.”

Steve Rhode — Wed, 10 Sep 2008 00:32:52 +0000

From How to Get Out of Debt

Holly wrote in and asked her question through the GetOutofDebt.org site. You can too.

“Hey there,

I have been with my boyfriend awhile now, and we’ve just started to talk about purchasing a house and getting a joint credit card. We’ve never discussed finances further than how much money we make per year.

I have bad credit, and I’m pretty sure I should tell him, but is there an easy way to do it? I wanted to avoid the subject until it was fixed. I owe about $6000 that I’m slowly paying off, but it’s there in collections just making the credit score worse.

I know his credit is excellent. We’re only 27, he makes $100,000 a year, and I make $75,000 a year. I made some bad decisions in my early twenties that now I’m paying for. I guess I’m embarassed to tell him. Any advice?”

Holly,

The fear of being judged is always much, much worse than the reality of breaking the news to your partner.

If your relationship has moved that far along you are pretty serious about this relationship and moving it forward.

Forget about the credit issue for a moment. How would you feel if he was keeping a secret from you simply because he was afraid if you would judge him or be critical. You’d probably tell him that was silly and that he should feel free to tell you anything.

When it comes to issues about money and credit, honesty truly is the best policy. The last thing you want to happen is for some mortgage broker to blurt out that your credit is horrible. “It’s What!!!”, he’ll say, and rightfully so. However, if you tell him now, if a mortgage broker mentioned it he’d say “I know, we are working on improving it.” A much better outcome.

I think the best approach is to get a copy of your credit report and in this case I’d strongly suggest this particular consolidated credit report and order your credit score with it as well. Why this one? Simply because it is very easy to read, has all three credit bureaus on it side-by-side and it is color coded to make everything clear and apparent. If you get your credit score with it you’ll see exactly what you need to do to improve your score as well.

I think this is important for full disclosure and transparency when you sit down together and share this credit report with him. Guys are more visual. This credit report will make it easier for him to take in. If your going to share the truth, share the whole truth, show him all the details, and be as open and honest as you can be.

The reality is that he may be pissed at first, that’s a completely normal reaction, but 99.9% of the time, with a little space and time, if he was angry, he’ll come around and calm down.

Besides, think about it like this, if this breaks your relationship apart, how strong is it really? It’s not like you cheated on him or killed a puppy? It’s just credit, you made a mistake and it can all be fixed.

Big Hug!

@GetOutOfDebtGuy

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

I’m Too Proud to Consider Bankruptcy. – Todd

The Answer:

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This is a Scary Time in My Life. I’m Worried About Filing Bankruptcy. – Karina

The Answer:

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I’m So Embarrassed About My Money Situation. Can You Tell Me The Truth About Debt Settlement?- Gloria

The Answer:

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I Feel So Embarrassed, Ashamed, and Without Hope Because of My Debt. – Karen

The Answer:

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You May be Down and Unemployed But You Are Still a Hero to Me.

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Holly Writes In “I’ve Kept This Secret From Him For a Long Time.”

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