Terrance Says His Debt Problems Are Worse Than Anyone He Knows


“Dear Steve,

First off I’m 20 years old and have debt problems worse than anyone I know. But besides that I have payday loans, banking accounts, cell phone, and one credit card.

Some happened before I was even 18. But I talked to a friend of mine who said she repaired her credit herself by just writing letter and calling the companies and creditors that had her account and made offers and stuff.

She also used the 7 year rule of having some of them remove. She said the only amount paid that was high was like $200.00. And also she in this program where they help you buy a house and rebuild your credit, they put like 4 thousand dollars down to the 2 thousand she put down. I just need help with getting my credit straight without bankruptcy.

Please just give me some kind of advice


Dear Terrance,

Thank you for writing to me for help. I know your money troubles feel like they are the worst, but you are not suffering alone. The most common question I am asked is if this is the worst case I’ve ever seen. And it does not take a high level of debt for it to make you feel bad. A relatively little amount of debt can make you feel hopeless and like you’ll never be able to get out of debt ever again.

Any contract that you entered into before you were eighteen is potentially voidable since you were not of legal age to enter a contract. For those agreements I would suggest that you contact a local attorney for advice and assistance in approaching those creditors.

Your combination of debt is what is troubling me. You’ve got the usual cast of high interest players in this mix. The payday loan, cell phone, bank accounts and credit card company can go after you hard to get their money back.

From what you’ve said it sounds like your friend made offers to repay less than the total amount owed in order to show the account had been paid off. If these arrangements had been made with a collection agency, it is probable that these debts will resurface again. Collection companies are hired to collect money but can not contractually obligate their client, the original creditor. If you want to settle a debt for less than you owe, be sure to get the agreement in writing from the original creditor.

If they don’t want to put it in writing then that should be a warning flag that it might not be a real promise on their part. What they may do is take your payment and then latter say that they never had an agreement with you and demand the rest of the money. I’ve seen it happen many times.

If they do agree to put it in writing, be sure to keep that letter and proof that you made the payment in a safe place. You may need that evidence to show the creditor and credit bureaus that the account is now paid off.

The seven year rule is a bit of a misleading trick. After seven years an old delinquent account will be removed from your credit report but that does not mean the debt has gone away or is no longer collectible. Waiting for a debt to be removed from the credit report and thinking that it has closed the door on that old debt, would be a mistake.

The most effective way to put an old debt to rest is to pay it off or go bankrupt. Bankruptcy will legally eliminate debts for good and for all time. A debt discharged in bankruptcy is no longer collectible.

The home purchase program your friend is in sounds very suspect. Unless this is a program run by a local government agency I would not trust anyone with what you’ve said. Anyone that is promising you to rebuild your credit and then makes you pay $2,000, even towards a house, makes bells and whistles go off in my head. I’d love to know more about that program and who is offering that. There is no way I would suggest that you participate in anything like that without giving me specific information so I can investigate it.

You are just starting your financial life. You are still young and at your age, bankruptcy would not be the worst case scenario. If you did go bankrupt I would hope that you would learn from your financial mistakes and use that first-hand experience to be a better steward of your finances moving forward and for the rest of your life.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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