We are Using Your “Eliminate Your Debt Like a Pro” Book and Have Some Questions. – Joanne


“Dear Steve,

We are using your “Eliminate Your Debt Like a Pro”, We have Credit Card Debt and Loans from Business’s that were sold in 2006, We moved to Asia so my husband could take a very good paying job. The contract that he signed states that there could be no bankruptcy in our past. I am assuming that we would not be allowed to declare bankruptcy now either or he would lose his job.

So bankruptcy is not an option. I am starting to send the letters to the credit card companies now. We have reconfigured our spending and expenses and are tweaking them once a month to see if we can save more for debt and savings. We are trying to save some money at present for emergencies and just in case my husband loses this job. So we are not making much progess on the debt payments right now, just maintaining them. So of course we are accruing interest at 18% on average. The job at present is helping us maintain our debt, but it is difficult to be so far away from our families.

We do feel frozen that we have to stay here just to keep floating our debt. We want to be FREE and do as we wish. Like Everyone Else!!!

First off the savings and debt payoff are a difficult decision to make. How much should we save? How much should we put towards debt? What if he did lose his job and we declared bankruptcy, would that really be any different than doing what we are right now?

We still have to pay off our debt no matter what. Right? What is the reason people declare BK when it goes on your credit history. It is not a quick fix like people think. Is there any help out there with this new administration?


Dear Joanne,

I’m glad my book “Eliminate Your Debt Like a Pro” is helping you. I think a lot of people don’t realize that I give the book away for free on my site. Anyone can download a copy of the book right now.

Your question is an interesting one. Thanks for asking it.

One issue that struck me was your statements about bankruptcy. That is a really big deal that I want you to not assume about. If the company your husband is working for has an human resource department he can speak with confidentially to inquire about what the current company position is about bankruptcy, he should. I would hate to rule bankruptcy out as a viable option if we don’t have to.

I’ve seen bankruptcy pose an issue for people who work in some banking and investment jobs and those people with security clearances but I have also witnessed many people in those positions able to get permission to go bankrupt on a case by case basis.

Let’s just say that bankruptcy is hypothetically out of the question. This might be a good time to consider settling the debts as an option.

I’ve been very outspoken about my unhappiness with most companies that sell debt settlement services. There are a few good companies out there who are open and honest about the drawbacks of monthly payment debt settlements. These good companies inform people of their fee structure, the dangers of being sued by your creditors, the tax implications of settling, and how much money you will get back if you cancel their services.

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Personally I have witnessed amazing results when offering lump-sum debt settlements to creditors to close the debt claim for 40%-60% of the balance owed. While good results are possible, there are negative credit report consequences and tax implications.

This is why I’d like for you to be 100% clear on the current company position about bankruptcy. I’d hate to see you try debt settlement to avoid bankruptcy, only to have your credit report trashed by debt settlement, and have that cause you the grief with the job that you wanted to avoid.

Bankruptcy is not a quick fix, while the technical parts of bankruptcy might occur rather rapidly, it is something that your credit report must recover from. But then again, any debt solution has the same issues even if you went into a credit counseling program or did debt settlement.

The damage or marks to a credit report are really not that important. Sure, in the short run your credit score will be lowered and your credit report won’t be stellar but all that can be improved and fixed by getting back into the credit game and start getting good credit report reported after the streak of bad credit. A secured credit card is a really great way to do this. Also key is making sure that you have closed the door on the old debt in some way, with bankruptcy, debt settlement or paid it off in full.

People really freak out about their credit report. And yes I do agree that having a good credit score is a good thing, but you can’t lose sight of the fact that the credit score is designed for the benefit of your creditors, not for you. It is supposed to be a numerical indication about your level of risk to a lender so they can make an automated split-second decision if they want to lend you money. It has nothing to do with you being prudent or practical about managing your finances.

Stepping in front of the pain of a bad credit report or bankruptcy is a bit like a patient from my old ophthalmology days. This teenage girl had gone to Asia and managed to pickup a parasite. The parasite made its way through her bloodstream and into her eye and it became a tiny worm floating around in the vitreous, the clear gel inside your eye. This girl never asked for the parasite to infiltrate her and ask you can imagine, she was not all that thrilled with have surgery to suck the little worm out.

These economic times are a bit like the parasite story. Through no intentional fault of our own, we often find ourselves awake in a new day and struggling with decreased income and increasing expenses. And as much as we would prefer to not have parasitic debt dragging us down, it naturally can infect us. And if the financial surgery is bankruptcy, as much as we might not want to face it or consider it, that does not mean that it isn’t the right surgical intervention for the illness at hand.

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Now, to your savings. I will acknowledge in advance that some may disagree with me on this but hear me out. Having just spent two years living outside the U.S. I realize that being outside of the country carries some unusual challenges and expenses. Needing to come home for an emergency or a visit is not like a long car ride, it is an expensive international flight. And if you decide that you are moving back to the U.S., then that is a huge expense in itself. I’m personally still a bit bitter about the $1,100 charge I had to pay to have our shipping container stored while waiting to be x-rayed by Homeland Security. A completely unexpected expense.

In your present situation, I would urger you to make only the minimum payments on your debts until you have at least $7,000 in savings. Once you hit that target, then make the minimum payments but out of the extra dollars you have each month, use half for debt reduction and half to save till you hit $10,000. Then you can cut your saving back to 25% of extra dollars each month.

This approach will help you to build your mandatory safety net as fast as possible to protect you since you are far from home and may need to come home unexpectedly if the job situation changes.

Does that all make sense?


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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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