Get Out of Debt Guy - Steve Rhode

I Want to Become a Financial Adviser But My Debt is Holding Me Back

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Question:

Dear Steve,

In my late 20’s.

Building my book of business as a financial advisor

Currently making approx. $10k a yr

3 Credit cards totalling approx. $15k w/just over $15k total credit line; approx. $500/mth payments

Rent: $400/mth

Car: $2100 left; $260/mth payment

2014 taxes: $6000 balance

2015 taxes: $2000 balance

Great Lakes Fed student loans: approx. $30k (on income based repayment plan- currently $0/mth)

Navient Fed student loan: $2500; $50/mth

Wells Fargo Private Edu Student Loan: $75k current balance; graduated in 2012, original payment was going to be approx. $900/mth, got reconsolidated down to $625/mth, began making those payments in january 2013, made them consistently until feb 2016, was granted a 2 mth deference, have not made monthly payments since loan came out of deference in april 2016; was proactive and reached out to wells fargo before deference was selected to try and adjust the monthly payments down, gave them my info and they wouldnt budge; reached out again after deference period was over and tried option again- same result; at the end of my conversation with the service rep with my questioning next steps and alternative options and their explanations, it became awkward for service rep to admit i was correct in assuming that once i was 90 or 120 days past due, then I would default and ONLY then when i technically default and my credit score is destroyed, will wells fargo reps from another department be able or willing to work with my on repaying/restructuring the payments/debts

Based on info I provided, if you can crunch some numbers, I think it should be evident that I cannot afford to live above poverty level let alone do so and make $600/mth payments.

Before this past year: began establishing credit at 17 yrs old; even with this amount of debt, i had a 775 credit score and never missed any payment of any sort for anything and had no derogatory marks on my credit report

Based on this info, what are your thoughts regarding seeking out a bankruptcy lawyer to get dismissal on a portion or all of my private education loans? Do i have a legitimate shot?

Also, what are the next realistic possible consequences i could be looking at?….being sued? wage garnishments from amounts of money that aren’t enough as they are already?…possible employment jeopardy considering i am in the financial industry and have a U4 which requires disclosure of bankruptcies, etc.?….jail?…

Most people are at some point where there they feel there is “hope” and “faith” in the system to some extent, which to a debtor is important, because it gives a person a reason to try and that person in debt will keep trying to repay the debt. I have now reached the point of “not caring”. Im not angry anymore. I have simply learned that going in debt to fund your education because your parents cant afford to help you so that you can become a positive contributory member of society and doing things the right way will in fact, be more detrimental and pointless.

Let me know your thoughts on my questions (sorry, i know it says one question, but i figured what the he**)

Thank You

Bryce

Answer:

Dear Bryce,

Wow! That’s a lot to digest.

Let me just hit the highlights of things that need attention.

Income – I completely understand your desire to build your financial advising business. But ultimately your options are dictated by income choices and options.

Financial Advisor Consideration – I have no idea what kind of licenses you are going for or what firm you are working with. But before you take another step you should absolutely figure out the license and registration requirements are for someone with financial issues. Sometimes a defaulted or delinquent debt can hold you back and so can a bankruptcy. Just sayin’ it would be a good idea to know that now before you spend a load of time and money and then find you are unable to obtain the licenses you want.

Deferment – Deferment is not a repayment option. It is a way to make your already unaffordable balances get bigger and even less affordable.

Hurdles to Options – The reality that different options are available to people who default is just a factor of all types of companies. For example, I just rented a car and it wasn’t till I called the cancel the reservation that they cut my rate in half. Financial advisers cut transaction rates for big clients all the time. This is just the way business seems to work, especially in large organizations that have defined policies and procedures.

Credit Score – I would be surprised if your current credit score is wonderful because your debt to income ratio is totally out of wack. Frankly, at this time the least important concern is your credit score.

Going to Jail Over Your Debt – You are not going to go to jail over your debt however if you don’t work out some solution then you may be sued, a judgment issued and your wages garnished.

Bankruptcy – You want to know if bankruptcy is an option for dealing with your student loan debt. It is certainly something to look at. Much of the benefit of the bankruptcy depends on the school you went to, how the loans were disbursed, and/or the willingness of the bankruptcy attorney to file an Adversary Proceeding to get the private student loans discharged or reduced. Both solutions are possibilities. I would suggest you start by reading These Private Student Loans Can Be Easily Discharged in Bankruptcy.

Federal Student Loans – Why aren’t your federal student loans all consolidated into one Direct Loan on one IBR at $0/month?

My Opinion – It seems you’ve got more pain ahead in dealing with the debt and I can’t see how pursuing becoming a financial adviser with the potential consequences ahead makes sense at this time. Obviously you have a passion to become an adviser and you should follow your passion but until you get the total debt under control you seem to just be marching towards a registration or license issue with the potential tax debt, student loans you can’t afford, and your other debt.

You’ve got the U4 form to complete, as you mentioned. That form contains the following section.

So not only do you have to worry about how a bankruptcy might impact you but also a debt settlement or a judgment. Unless you have written confirmation your financial situation will NOT impact your ability to become a broker, the logical path would be to deal with the debt first.

And by the way, your income seems to be so low right now that you should absolutely be looking at public benefit programs to help you make ends meet. Look at Benefits.gov and see what you are eligible for. Food assistance at the least.


Big Hug!
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