Berkeley Parents Network: Dealing with Debt

Berkeley Parents Network

Dealing with Debt

Berkeley Parents Network > Advice > Household Management > Dealing with Debt

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In over our heads with debt!
Stress and Debt Wearing Me Down
Collection agancy calling about a 9-year-old debt

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In over our heads with debt!

October 2007

We bought a house in the bay area that we could not afford and now a year and a half later, after using credit cards to make up the gap every month, we're drowning. With baby #2 on the way, we just don't know what to do. We are not extravagant in any way and after taking on extra jobs we're still in the hole every month. We tried bankruptcy but the amount that we were asked to pay every month would have still left us in the red every month considering child care for a second child. The lawyer suggested we just don't pay the credit card bills (and pay him $600 a month to basically take the phone calls). Has anyone heard of this? Please help. don't know what to do.

My advice to you would be to find another attorney since this one sounds like he is trying to take advantage of your situation. I have never heard of an attorney answering phone calls from creditors for a fee. A good attorney will work out your bankruptcy and the amount you pay back each month to your creditors. I risk sounding like a broken record but if bankruptcy won't work maybe credit counseling? All in all my deepest sympathies. Hope you find a good attorney

I feel for you. The bay area is a tough housing market. Have you thought about maybe renting out the house you own and can't afford and getting an apartment for your family instead somewhere less expensive? You might find a way to get some traction there. Now may not be a very good time to sell your home, but you can maybe get by with someone else better-positioned to pay the majority of the costs. Dump the disreputable lawyer. You need to pay off your credit card bills asap. Try going to the bank that holds your mortgage and ask for a fixed-rate term loan for the purpose of paying off the credit card debt using your home as collateral over, say, a nice long 10-yr payback period that will make it doable. Then pay off the credit card companies and get them out of your life. Hopefully you haven't defaulted on the cards yet and still have the credit capital to get the loan you need b/c it will be very hard to pay them off once the default pricing (um, otherwise known as ''predatory lending'') kicks in. Unfortunately it is no longer online, or I would send you a cartoon that epitomizes the banking industry to cheer you up a bit. You are not alone in your dilemma. If you have any family members who could help you out with a place to stay while you're renting out your house or could co-sign to get the loan you need, now would be the time to call on them. Good luck! -anon

Hi, Where did you find this Laywer? Unless there is more information than what you wrote, what he is suggesting sounds highly suspect. Here are some other ideas:

I know this is a really horrible time to sell your house but if you are facing bankruptcy this seems like it would be better alternative. Depending on what your mortgage and property taxes are you could save a bundle by renting. Plus, you could pay off your debt.

Is there anyway you can cut back the cost of child care? Many times people want to have an in-house nanny for their new baby when it's much less expensive and just as fine to use an in-home daycare.

Can you re-finance to help lower your cost? Living in the Bay area is hard. We own a home and have two kids in preshool and it seems like every month I hold my breath. I Feel your pain. anon

Yeah, it seems what you've gotten yourself into is a common phenomena...house rich but money poor. Why you chose to buy a house that was beyond your means just doesn't seem to make much sense but I guess life is all about the decisions we choose to make and life is unpredictable. I'd fire the atty you've hired who is charging you $600 for phone calls. I'd suggest my bankruptcy attorney, Richard LaCava. He is in San Francisco. If you speak to him, I'm sure the chances of him giving you sage advice will prove helpful. Good luck to you. I hope you find a solution and learn your lesson: Trying to live a ''certain image'' is expensive... Been there

Sounds like you need to sell your house. As unattractive a prospect as it may be to go back to renting (or ''trade down'' for a cheaper house in a less outrageously expensive area), it's probably the best way to get your heads back above water, assuming you have enough equity at this point to cover the costs of sale and pay off those credit cards. The monthly cost of renting is almost certain to be less than your current housing costs -- and selling now is going to be much easier than winding up in foreclosure later.

If you had any prospect of an increase in income soon, or if you're now meeting your monthly expenses EXCEPT for the accumulated credit card debt, an alternate possibility might be taking out an equity line of credit. Use that to pay off the credit cards, consolidating your debt at a lower interest rate. Make interest-only payments without penalty until you're able to increase your income and pay it off. This is, of course, a riskier choice since it doesn't actually get you out of debt. anon

Before paying ANYONE besides debtors please consider talking with a representative about your situation. You would be surprised how some companies would we willing to work with you. How is talking on your phone calls going to assist you in getting out of debt. You would still owe the money you originally owed and plus you would be out the money you paid the lawyer. Sounds like a double whamm! If that fails consider consolidation, maybe it would be cheaper than current expenditures. Why pay the lawyer?

I'm really sorry to hear that. I bet it's more common than people let on, especially here in the bay area. I think the first thing you should try to do is sell your house and either buy one or rent one that is more within your budget. If that is the biggest capital outlay you have, then that's where you need to start. After that, you can go through your budget and see how much you can pay toward childcare and credit card debt and work with your income to see how much can go to what. We looked at all of our credit cards and their balances and the one with the highest balance we started to pay off more than what was due while the other cards got paid the minimum. When the first card is paid off, then switch that money plus the minimum you were paying on the next highest card and pay that one down. We're currently doing this and it's slow but working. I don't think paying a lawyer a monthly amount will help you in any way when that money can go directly to your bills. But I really think you need to get from under the house payments you can't afford first. Good luck! Pam

Stress and Debt Wearing Me Down

Jan 2007

I need help getting my head above the ongoing, crushing stress that is choking me and making me further depressed by the day. I have student loan debt that is equivalent to a mortgage but without the house. I have a job that is sucking the life out of me with the level of stress and deadlines and negative conflict, but allows two work at home days per week and pays me well enough to just stay afloat of my debt, monthly bills, and child care as a single mom. I definitely can't get ahead in this area. My aging mom and some siblings live in the Bay area- which is the main reason I stay-especially as a single mom. The immense joy in my life is my toddler whom I adore and look forward to being with- most of the time; though, I have no time for myself at all and I'm becoming a bitter and angry person. It's hard to be here surrounded by so many beautiful, unaffordable homes and realize unless I sell my soul and compromise my relationship with my child (which I won't do) I will never really make a dent into my debtload to afford a home here. It feels that life is so damn hard and I resent those with wealth and who have it easy. I think I need a career change as well as an attitude change and maybe some anti-depressants, but I'm so swamped and overwhelmed, I can't figure a way out of it all or even what step to take first since I have almost zero time. Losing hope and no longer the upbeat, happy, joyful person I once was....it's becoming scary and I need to snap out of it for my chid's sake and mine. All comments and suggestions welcomed. overwhelmed

Consider Debtors Anonymous. It's an AA based program with people for whom debt and money are overwhelming, consuming issues. My friend is an active member, and praises DA for keeping her out of debt and helping her focus on future achievments. http://www.debtorsanonymous.org/ anon mom

First of all, you have to know you are a great mom willing to do what's in the best interest of your child. You sound like a great person but so overwhelmed you can't make a clear decision how to even start. In my past I had the debt situation, including loans, acquired debt, and I felt like the only thing I was paying off was interest, but the bills never seemed to be going down. I also had anxiety attacks which make the problems worse and make you feel more depressed. Here are my recommendations which worked for me. 1). Get immediate help for your state of mind (i.e. counseling to discuss problems/medication if you feel depressed 2). Consolidate whatever your debts are into one loan so you have some control over the bills 3). Look into other areas where the cost of living is lower and you can start fresh-if I wasn't married with children, I would not live here. It's too expensive and to tell you the truth, I would like a slower pace life for my children to grow up (There is a Price for Privilege). Just know also, just because you think these wealthy moms have an easy life, they too have their set of issues they have to deal with which may include the husband's not being home for long hours they have to work so the wealthy moms are essential single moms most of the day, etc. You also want to give your child the best you can offer her so how can you possibly give her a better life if you are constantly stressed. By saving in another area, you can save for her college, get a new, very nice home for a great price, clear your mind. You mentioned your mom is getting older. My parent in laws are up in years and it is harder for them to take care of my kids when they visit so they may not be the ones you can always depend on and I am sure there would be other resources available in other towns (ie. daycare, preschools). I hope this helps. You deserve to be the happy, loving person you still are. I am sure your family and friends want the best for your wellness as well. I hope I helped! Sympathetic to your stress

I know how it is. Check out The Total Money Makeover by Dave Ramsey, for some how to's of getting out of debt. It has given me a solid plan and some hope. j

I'm sad to hear you're having such a rough time. Please do make an appointment with a psychiatrist as soon as possible. Anti-depressants really DO help. They blunt the edges of your stress, anger & sadness so you can take a deep breath, see things more clearly, & start taking steps to make your life more manageable. A good, compassionate mental health practitioner can also help you sort out your feelings & develop coping strategies.

All-in-all, you sound like you're an excellent mom; a high-performer at work; well-educated; etc. You seem to be handling the demands of your life quite successfully -- except for the part about being kind to yourself & getting your own needs met. I've learned that part of being a good mom (or person) is finding ways to mother yourself. A brisk walk during your lunch hour; paying a neighborhood kid $5.00 when you get home from work to play with your toddler for an hour while you decompress a couple days a week; a warm bubble bath & a glass of wine after your child goes to bed; etc. are all ways that you can cut yourself a little slack. You also may need to find ways to cut corners at work (i.e. figuring out which tasks can be skipped or not done absolutely perfectly -- I call it the ''good enough'' theory)

Don't worry about not being able to afford to buy a house. Things have a way of working out. You wouldn't believe some of the stuff that goes on inside of some of these perfect-looking houses. I grew up in New York, where real estate has always been un-affordable & many successful people rent all their lives (& sometimes even buy a nice vacation cabin in some pretty, laid-back area). Things do have a way of working out. Good luck! -- Home-owner paying property taxes with credit cards

I wish I had some ''solution'' for you but unfortunately all I can offer is the consolation that many of us are feeling the same way (to some extent) and little thoughts/suggestions that may help. Although I am married, we suffer the same financial trap. Student loans etc, etc. It was so bad we had to leave the Bay Area. Unfortunately, the Bay has become a place for the wealthy. Unless you bought years ago, the chances of buying home in a decent area for the average American are about ''zero''. So, my first thought is to perhaps consider relocating. It is really tough but the quality of life you can gain is priceless. The one thing we have always refused to do is allow our children to suffer because of the cost of living in the Bay. Sure, there are other qualities that we miss but we either had no time to take advantage of them or could not afford them. As far as being frustrated with the wealthy..there are a ton of them there and that won't change. Perhaps taking your focus off of being a homeowner for a while?? Mostly, it sounds like the first thing you should do is seek out some help to get a handle on the stress/depression. Nothing in the world is worth your or your child's mental well-being. Then, slowly try to organize your life around your priorities. Perhaps a move? Different job? Tiny bit of time for you to have fun? It is all possible. Life is tough no doubt but you love your baby and are blessed there- On the toughest days we try to begin with the blessings (our children) and then things seem to always work out :) Money is an awful reason to be miserable and something that has become all too common in the Bay-you are in no way alone in your feelings. Baby steps.... anon

My wife and I are both stressed and worn out by the high cost of living. We also wish we could own a house. Sometimes it looks to us like everyone else owns a house, has lots of money, etc. The truth is, however, most people are struggling and don't say anything, thereby perpetuating the illusion that all is well when it's really not! I can understand how you feel! In your post, it's clear that a lack of time and money are causing most of your grief. Could your family help you out financially? I know it's a long shot, but sometimes it's worth trying. While ours hasn't been able to help, we know some people whose families are helping. If not, you have to ask yourself if it's worth staying here. This is something that we ask ourselves all the time. If you can do similar work someplace else where the cost of living is reasonable, it might be worth moving to get breathing room. Yes, you would be giving up the Bay Area, but you would be getting back your life in return. Otherwise, there's more drastic options like consumer credit counseling and bankrupcty with all the negative consequences they entail. You'd have breathing room, but afterward it would be difficult to move, get credit, perhaps even a new job. Something else that might work, though it's not for everyone, is to look for a coop situation with another single mother who wants to share expenses. That might free up some money, even time, if the two of you can work out childcare costs, etc. However, it does come with a loss of privacy and boundaries, so like I said, it's not for everyone. Finally, if there are jobs in your profession that pay more than the one you're currently at, it might time to look for one. Anon

Collection agancy calling about a 9-year-old debt

June 2005

Yikes! I just received a letter from a collection agency for a debt that I defaulted on over 9 years ago (unfortunately due to a car accident and inability to work and no disability insurance, otherwise perfect credit before this... ) According to a credit report from Equifax in 1997 it was ''charged off account''. Last year I received a personal credit report from Experian and it was not even listed. I assumed it was written off. Now I receive this letter from a collection agency and I am not sure how to proceed. They don't threaten legal action but it sure is scary. The original debt was 12k and now it is 22k and I made under 22k last year and have serious grad school debt so I am just surviving right now. Any suggestions or where I can get advice on how to respond? Thank you. Anon please

First of all: under the Fair Credit Reporting Act, credit information bureaus (such as Experian, Trans Union, and Equifax) cannot report information such as yours after 7 years from the date of last activity. If it was charged off in 1997, it cannot be legally reported to the bureaus nor affect your credit score. I would suggest pointing this fact out to the collection agency. Sometimes, just knowing your rights is an amazingly effective tool. :) Kathleen

I would ignore it. There is a statute of limitations for invoices/accounts and after 9 years, it is unreasonable to expect you to have any records to corroborate the amount due, etc. (Imagine if you had paid it, you wouldn't keep the record of payment for that long, would you? That's the reason for a time limit)

It's a large amount and very tempting to the collection agencies and they know all the right words to say that will trigger your guilt, fear, anxiety, etc. Above all, don't give them any money as a good faith gesture. This is a common trick that results in starting the clock all over again on your account. Check with the Fair Debt Collection Act (google it) to find out your rights and obligations.

Of course, don't ignore any summons served on you. It's not likely to happen given what I've mentioned about the statute of limitations, but you never know. And don't confuse a real summons & complaint with those legal-looking collection agency form letters.

It's not about not paying your bills, it's about something this old being uncollectable because records aren't available. anon

If there has been no collection activity of any kind for over 4 years, then the contract statute of limitations has expired. Contact a legal person for more details - the laws may have changed since I was in this biz... michael

In California, nothing can happen to you if the statute of limitations on the underlying debt has expired. In CA, a suit for breach of a written contract has a statute of 4 years. You need to look at what the basis is for the underlying debt but I am fairly sure that most will have expired after 9 years. The time limits are in California Code of Civil Procedure beginning with section 312. You do need to send the collection agency a letter advising that as the underlying debt is not collectible due to the statute of limitations expiring, any attempt by the Agency to collect the debt is in violation of the Fair Credit Reporting Act (beginning with 15 United States Code Section 1692) and that you trust this matter is closed. Don't let them bully you. This happened to me recently with a $500 bill from college 14 years ago! They will try to collect but cannot - just make sure you write the collection agency. anon atty

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