ML Writes In, “I Can’t Pay My American Express Card.”

Steve Rhode — Mon, 22 Sep 2008 04:16:52 +0000

“Dear Steve,

I am self employed and have lost an important account. I now cannot pay the minimum on my American Express card, which is $2,000.00. If I pay them I can’t pay my other expenses.

Have you any ideas ?”

Dear ML,

Ouch! I know how much it hurts to lose a major account and have your income suddenly decapitated.

At times like these you need to prioritize your other debts. Things like rent, mortgage, utilities, necessary food, transportation expenses, etc. are priority debts and should be paid first.

The reality is that after those expenses and a little held aside for an emergency fund, then and only then can you even think of sending AMEX any cash.

If you think this s going to be a short-term problem and you will be able to replace the income soon then the most logical approach may be to call American Express, explain the situation and politely inform then you are not going to send them a payment this month.

Falling behind on your account has consequences. They may charge you a high rate of interest on the balance, close your account, and report you as a bad debt to the credit bureau. While all those things normally would want to be avoided, the reality right now is that you probably don’t have the cash to pay them.

Draw a hard line in the sand and in 60 days, if you are not able to replace the lost income, then you need to come back and let me know. We’ll have to work on a Plan B at that point.

Here are a few cardinal rules when it comes to dealing with your creditors.

Don’t be an asshole.
Tell the truth.
Keep your creditors informed.
Remember this is not a reflection of your value, worth or self-esteem. It just is what it is.

So, follow my advice and then put this matter aside for the next two months and instead focus on replacement income. If you can land that then payment promises can be made and American Express can be appeased.

Big Hug!

@GetOutOfDebtGuy

Ryan Writes In Looking For His Lifestyle Back

Steve Rhode — Tue, 16 Sep 2008 01:52:54 +0000

From How to Get Out of Debt

Ryan wrote me through the GetOutofDebt.org site asking about how to resolve his debt situation. If you have a question you’d like to ask, just send it to me using the form at the bottom of this article.

“I have about 20-25k in outstanding credit card debt, along with 10k in car payments still as well as a recent condo purchase. I make decent money but also have 2 child support payments which really damper my costs. I also like to live a lively lifestyle that may hinder this. How can I get out of debt, curb the creditors or get some money to assist me?”

Ryan,

There is a two option secret to getting out of debt. Option 1 is to increase income and option 2 is to reduce expenses. One of those options or a combination of both will always be the key to getting out of debt.

But what you’ve told me so far only leads me to believe that the debts are accumulating without any hope in sight. The most worrisome statement you made was “…I also like to live a lively lifestyle”.

I’m afraid your options are a bit limited and that if you were to take any action to eliminate your debts that bankruptcy would be the most logical approach. Bankruptcy won’t eliminate your child support obligations but it may wipe out your 20K of credit card debt and that will probably save you $500 a month in expenses. (Click here to find a local bankruptcy attorney.)

But because of your recent condo purchase I strongly advise you to find a local bankruptcy attorney and discuss this option with him or her first before making up your mind one way or the other about bankruptcy.

Without increasing your income the only way to reduce expenses is through lifestyle reductions. What do I mean? Well, basic expenses like mortgage electricity, water, car payment, etc. are for the most part, fixed expenses and can’t be negotiated down. You need to buy groceries but you could stop eating out as often. Making that choice would be a lifestyle change.

But the reality is that unless you are willing to make fundamental changes in your life, and eliminate going out and spending on optional lifestyle expenses then are hope that you would be able to sustain these cost reductions would be misplaced.

If you feel uncertain of what to do right now then entering a debt management plan to see if some interest rate reductions may be available to you from your creditors would be worth exploring. (Click here to get debt management plan information.)

Debt management or credit counseling programs are probably not a long term solution for you but they will let your tread water while you decide if bankruptcy is right for you or you are honestly willing to make lifestyle reductions to free up some cash from your income to use to pay off your debt.

One last tip, if you’ve been making that car payment for a long time and you’ve paid it down below what the car is worth then looking into refinancing the old loan is worth considering as well.

Big Hug!

@GetOutOfDebtGuy

How to Get Out of Debt With the Get Out of Debt Guy » logical approach

ML Writes In, “I Can’t Pay My American Express Card.”

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Ryan Writes In Looking For His Lifestyle Back

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