BPN is now a 501(c)(3) non-profit and we are building a new website!
Read more, and see how you can help:
Dealing with Debt
Berkeley Parents Network >
Household Management >
Dealing with Debt
my husband and I are not able to organize our finances. We are kind of
really stupid when it comes to it... we got ourselves out of credit
card debt once, but slowly got back into it. Once in a while we figure
out a budget, but we don't stick to it. In a month or two, we stop
even looking at it. We owe thousands in CC debt, our oldest is just
starting college and we have to take out large loans for that. We have
a house with equity, but can't refinance because of the CC debt. I can
go on...it's pretty bleak. We both have jobs and make okay money.
I always thought that financial advisor/coach is just for people with
a lot of money, helping them investing and saving. But while reading a
post here recently, it dawned on me that we could benefit from a
financial advisor. So my question to you experienced folks is... can a
financial advisor help us look at our spendings, set a budget and make
a plan to get out of debt (no investing or savings are happening at
any time soon) ...how much would that (about) cost, and did you find
it worth it (and how do you pay if you don't have any extra cash)
...can you recommend somebody (Berkeley, Oakland preferably). Thanks
Hi, I was freaking out about our finances and confronting
the issue of our son going to college and we had a large
debt from previous expenditures. I went on the BPN archives
and Yelp and decided to see Julie Asti of Asti Financial.
It did cost to see her but after filling out the forms and
looking at our expenses and her projections of income, etc.,
it was VERY helpful. Plus one can constantly check in with
good luck! ALso, sign up with Mint.com
If you are looking for a financial advisor to help you
determine a long term comprehensive plan I highly recommend
Mark Zaifman (wwww.spiritusfinancial). Working with an
independent financial advisor will cost you several thousand
dollars - but you have to put that in the context of what
you may end up saving in the long run (e.g., tax decisions,
investment advice, as well as peace of mind).
If you are looking to get more organized and develop and
stick to a budget you can work with a financial coach.
Typically this includes an initial strategy session and then
ongoing weekly sessions (e.g., 30 minute phone calls) to
stay on track. Rates range about $100-$200/hour. So figure
about $200-$400/month for a few months. Again, the money
spent will bear fruit quickly.
If you have trouble using credit cards responsibly, then get
rid of them. Pay cash/check for everything.
You'll still need to budget, but at least you won't be going
We're in the same boat: middle-aged with 2 small children,
my husband and I have amassed a fair amount of debt, lots of
medical, credit card, not to mention the education debt! My
husband works full-time in the trades and I'm part-time so
our income is only fair and we STRUGGLE each month to just
pay our bills. We have no savings and no
savings/college/retirement plan and are often overdrawn.
Recently, I've done two things to help turn our finances
around. A year ago I went to a free credit counseling
service and consolidated about 6 credit cards. This company
(Money Management International) contacts your creditors and
works to reduce the interest rate. Then you make one payment
to them (along with a minimal service fee - our is about
$14/month) that satisfies the minimum monthly payment and
that you can afford and they pay your credit cards each
month. We have paid one CC off entirely and have 5 to go,
which should be done in 2 years. No more late or missed
payments and you can always go online and pay your CC
directly or pay into MMI directly if you have ''extra'' money.
And yet, we are still overdrawing and have recently started
using and accumulating credit cards again! In other words,
our habits have not changed. Tired of living this way and
wanting to change, I have just enrolled in Money 4 Life
financial advising which uses the Mvelopes system. As I'm
just ramping up I can't give a good indication of its
effectiveness but it clearly has some advantages: First,
Mvelopes is an online ''envelopes'' system wherein you direct
your cash/income into envelopes (like they did in the
depression and like my parents did when i was growing up)
and you spend from your envelopes, NOT your bank account.
Sounds obvious but, if you're like us, scrambling to make
all those first of the month payments, you NEED something
that shows you how much money you really have (or really
don't have!). Second, you can sign up for Money 4 Life
financial advising which is a once a month phone call with a
financial expert to TALK about your budget, your
allocations, your goals, how you're doing, what you messed
up, how to fix it, questions you may have (I have to go to
the dentist - where do I get the money??). You can do the
mvelopes system for free but the issue is changing your
habits! The financial advising costs about $50/month. I
sound like a salesperson for them but let me tell you I have
High Hopes for this working - they are going to help me
accelerate my debt payoff so that we can be debt free
(except education debt) within 3 years. We are talking about
$20K in debt. I have taken classes in debt reduction but
what I need is an advisor to help keep on track and help
change my habits!
Finally Turning my Finances Around
Some advisors (such as myself) will help you in this area but the fee is based on
assets managed. A financial planner will help set up a plan, but they may or may
not allow followup consultations, which it sounds like you want.
two words: dave ramsey . We read his book, Total Money Makeover and
its made a huge dramatic difference in our lives. In the first year,
we paid off a 16k credit card. Still have lots of debt to pay off but
now we are closing in on our car loan. He has 7 steps to financial
freedom. Check it out.
one baby step at a time
I am in a horrible predicament and would like to get some
advice. Background-divorced mother with full custody of 2
teenagers (one in college...not cheap....) without
financial assistance of ex husband. I earn about 100K a
year which sounds good but my mortgage including property
taxes and insurance is $4200 or so a month. College is 2K
a month. Applied for financial aid and got the bare
minimum which is already used up...This leaves me with
little extra. I have run up my credit card to 20K (I know-
no judging please.) I have stopped using credit card but
of course I am in a big jam as I cannot make minimum
payments on credit card and am currently barely able to
make ends meet. I tried to refinance but the bank said I
was 'close but not close enough' to qualify for a lower
interest rate. Now that I cannot pay my credit card bill I
am now losing my credit rating. I am so upset and angry at
myself for getting myself in this predicament however I am
dying to right the situation and get back on my feet. Does
anyone have any advice? Please- no judgement! I have done
my best and even take extra jobs to make ends meet. My
company pays for financial counselors but I am worried
that I might get someone who does not know what they are
doing? However-I do not have an extra dime right now so
cannot pay anyone who you might recommend. The worst part
of this is that I am so humiliated and embarrassed...I
have not told anyone. However it is taking a terrible toll
on me. I have one good friend that I could possibly borrow
money from but that is just a band-aid and I need a real
fix. thanks and it feels good to just get this off my
chest. thanks bpn'ers
What has said saved us was doing the total money Makeover by Dave
Ramsey. He has a website and his books are in the library. If you can
read and are disciplined you can run the program on your own like we
did. Otherwise there are classes you can take online or in person. We've
stuck with his principles and are digging ourselves out of a mess. Good
i see the light
First, you will be okay. Next, call a nonprofit credit help
service. They are paid by the government to help deal with
debt issues. Make sure they charge nothing and are a real
nonprofit. They will help you consolidate debts, lower rates,
and create a plan to get out of debt. That will relieve the
initial stress. Then, call Beatrice Schultz at Westface
Financial Planning BEFORE you do your FAFSA for your son this
year. She is an expert at getting families the help they need
with financial planning for college. Beatrice helps many
people that I refer to her from my college preparation
Your situation sounds frustrating and my heart goes out to
you. Financial planners will tell you that, if you have to
choose, it is more important to make sure you have the
savings you need for retirement before you pay for your
kids' college. You can't borrow money to pay your expenses
in your old age, but your kid can borrow money to finance
their degree (and then pay it back when they have a job).
Given your current financial difficulties, you need to
stop covering some or all of that $2,000/mo for tuition.
It's unfortunate, but your child needs to take out loans
to cover more of that cost, get a job to help out, or even
consider a lower cost option for school (maybe first two
years at a community college, perhaps). It is a tough
decision, but you have to make sure your basic needs to
last you through old age are covered. Good luck!!!
Daughter of a financial planner
I know you won't like it, but the answer is too simple -
either cut expenses, or raise income. (Or spend what you have
It looks like your mortgage and prop taxes are 50% or more of
your gross income - you need to get this ratio down. Can you
sell/downsize the house?
Credit card debt is the worst - 30% APR. Stop spending, cut
up the credit card, pay down the bills, live more simply.
There's no other way.
It's Too Simple
I used Consumer Credit Counseling Service in Santa Clara a
long time ago and was totally impressed with how
professional, non-judgmental, and kind the staff were. A
nonprofit service such as a CCCS would be a good place to
go; if you're really feeling shy, you could perhaps visit
one in a different county. I remember calling, making an
appointment, and filling out a list of my debts and
expenses. The man who helped me had some great ideas about
how to get back on track and again, no judgment.
Second, I have used the ''free'' employee services offered
through my employer for all kinds of free advice and found
it really helpful. I always ask where the person who's
helping me is based (to avoid sharing personal information
with anyone in my area, specifically because I have a
somewhat public profile and wish to keep our financial stuff
personal). The advisers, everyone from a financial planner
to a real estate attorney to a tax attorney, provide a
certain amount of advice (time based) for ''free'' and after
speaking with them I felt like I had a better handle on what
to do because I knew more about the options. It's kind of
like knowing a bunch of smart people who you can consult
with for free to get some good ideas with no obligation.
Anyway, just wanted to encourage you to get help. There are
SOOOOO many people struggling right now and there is nothing
to be ashamed of.
Regarding your credit card payments, I have used Consumer Credit
Money Management in the past. They were incredibly helpful and non-
judgemental. They meet with you, figure out all your credit card debt,
how much you CAN afford to pay a month and work with the credit card
companies to lower your interest rates. While you're on their program,
allowed to apply for any new credit cards. I had thousands in debt and
all off through them. They're a non-profit company, and only take a
monthly fee. www.moneymanagement.org
Check out Dave Ramsey and his book ''The Total Money Makeover'' (you
can get it from the library or go to the website). You'll find a lot of
answers to the questions that you asked. It seems to me that a $4200
house payment isn't sustainable on your income. Can you consider
moving? That would lift a huge burden off you.
What a difficult situation! I have not been in your position so cannot
comment on that side, but what automatically stuck out to me is the
$2000 a month you are paying for your kids' college. I honestly think
you need to have a ''come to Jesus'' meeting with your kids and tell
you will have to reduce the amount you contribute and thwy will have to
increase. Three months into my college career my father fell ill and
not work another day until his death. My mom was a sahm scraping by.
I begged and pleaded with the financial aid office, who gave me another
$500 grant for the year (whoopee) and the rest in additional loans in my
own name. I worked 30 hours a week in school full time aNd graduated
with loans too. Oh well. My mom would send money here or there, or
occasionally buy me a plane ticket home. Why do so many kids today
automatically expect their parents are required to pay for college? It's
nice if the parents can, but obviously you cannot at his point! Be
with your kids a Nd let them learn from your mistakes. It is painful but
you have to start somewhere. Hope you can get through it!
just do it
I don't have specific suggestions. I just wanted to say I'm
a single mother of a child still in college. I've been alone
with the responsibility since she was 7. It is just HARD in
the Bay Area to raise a child alone. I hope this doesn't
sound like bad news to you because I don't mean it that way,
but I AM the worst case scenario and I'm coming out the
other side. Sick kid, credit card debt, foreclosure, high
rent, business failed in the 2008 economy, bankruptcy,
living with family. I mean, all that.
I don't think I've told any one friend about ALL those
things because, well now I'm starting over but I was
embarrassed and ashamed. The bankruptcy was the icing on the
cake and sitting there with the document preparer felt like
just rock bottom, but she told me there are so many people
in the situation. There are, it's a nation-wide, world wide
thing. Nolo Press even re-wrote the intro to their
bankruptcy book to reassure people not to be ashamed. So
don't be ashamed. I know you're not that low but still,
don't. Be proud of yourself. People who are supported and
who may judge have no idea how quickly they would use credit
cards to pay for medical help or college or whatever for a
kid if they had to.
I do think I'd find a way to get out of that mortgage
though, get into a smaller place. Look into the bpn archives
about short sales (if you own) and options for getting out
from under that, just to get the cash flow going. It's
excellent that you have work, be thankful.
Sorry no big suggestions, just a few words of encouragement.
I guess I want to say, if I - the lowest of the low - can
survive, you can. Don't give up. Do all you can. Listen to
other people who post. And if it gets as bad as it can,
which it probably won't, you will survive. Everything you're
doing for your kids matters.
best of luck
I'd suggest calling the Consumer Credit Counseling Service of San
They will work with you to develop ''debt management plan'' which
negotiating a lower interest rate with cc companies on your behalf and
up with a feasible consolidated payment for all credit card bills. Don't
ashamed of calling or worried about your credit because of doing so; I
and it did not impact my credit negatively, and most importantly, it
get out of debt.
Been there too
Hi Very Anon - sorry to hear you're in such a stressful situation. I
while money doesn't bring happiness, it sure makes things a hell of a
Here are some recommendations I would make in order of first moves to
resorts assuming you have already trimmed all discretionary expenses
you are able.
First, you need to tackle that credit card issue. The interest and
repercussions are going to continue to hurt. Have you tried calling the
card company and negotiating a plan with them? Or perhaps a legitimate
debt consolidator? I had a friend whose husband got into credit card
and this really worked for them.
Second, and I know this is difficult as every mother wants to provide
everything for their kids, but can your son take out a small college
help with expenses and free up a little monthly cash for you? Nothing
that will put him in debt he can't see out of, but just something to
belt until you can get your financial house in order. Maybe by the time
graduates, you'll be able to help him out with the loan balance.
Lastly, and this isn't a great option, but if things are really so bad,
home ownership isn't where it's at for you right now and selling and
to something more within your current budget and with fewer monthly
expenses might make sense. It's worth thinking about.
I wish you the best and hope things improve.
I was in a similar situation, so no judging here. My
Call your credit card company IMMEDIATELY. Explain the
situation to them. If they ask what happened to you
financially and why you can't make the full payments right
now, tell them you had unexpected medical expenses; they
cannot explore that (even if they wanted to) due to HIPAA.
For us, this was true. For you, maybe it is and maybe it
isn't. It doesn't matter. They're a CREDIT CARD COMPANY!
They have plenty of money! Get on a payment plan agreement
with them. Get them to lower your interest rate. If the
first person you called says there nothing they can do,
call back later and you'll get someone else. It took me a
few phone calls to finally find someone who knew what the
rules were about this sort of thing. For us, our companies
(we had THREE that we did manage to pay off) lowered the
rates to about 9.9%. One did it and cancelled the card,
which was fine. The other two did it based on us making
the payments on time. This will help protect your credit
As for your child in college, I have less information. I
would say ask the financial advisor/any CPA friends about
if your child can become independent on paper for tax
purposes, and therefore apply for financial aid
her/himself. The college will also have a financial aid
office; they will know all the ins and outs. Call them for
advice. Perhaps your child can do work-study to offset
tuition in the future? Perhaps your child may need to take
some time off from school and work? I am sure that
universities allow their students to take a leave and then
come back without having to re-apply. You don't want to
lose your house, and if you can't pay, you can't pay.
Refinancing. What are the parameters of the bank
saying ''close but not close enough''? Find out. There may
be something in there you can work with.
Finally, explore things like food banks, keep up with your
second job, ask your teens to work and give part of their
money to the family, etc. Can you take on a renter for
awhile? I have heard that college-aged foreign exchange
students are nice for not only the sharing of cultures but
you also get paid.
Don't borrow money from your friend. Trust me; I have, and
it gets weird. It's just addressing one debt with
hang in there!
How about sell the house and rent a small apartment for a
while? You didn't say that you were underwater so, if not,
your house is your biggest financial asset. Use it to get
yourself out of this situation, and now (coming up on
spring) is the right time to do it. (However, as Suze Orman
would say, do not use the house to pay more than your
already-committed share of your kids' tuition. And
definitely make sure the college is aware of your changed
financial situation for next year.)
I'm sorry to say this but it is time for you to sell your
house. There is no way to keep your head above water with a
$4200 mortgage and a $100,000 income. While $100,000 sounds
like a lot, it really isn't. You can get a decent condo for
$200,000 these days, getting your mortgage down to $1500
per month. Or you could rent if you don't have the down
payment. If your house is underwater, walk away from it.
You could just stop paying your mortgage and stay there for
up to a year. The money that you save can be used for your
moving expenses and deposit on your new place.
It's a brutal strategy but it will solve your problem. I
really don't understand how you've made it this far with
such a high mortgage. Mine is $2300, I make 2X what you do,
and I still find finances to be stressful.
Sorry about the nuclear option
I'm sorry to hear about the predicament. While you may feel alone, I can
confidence there are many out there in the same position or worse. Of
this isn't meant to make you feel any better about the future. My guess
mere fact you are asking this question means you've already taken
save what you can. There are other avenues, (could you live with less
does your oldest work while in school, etc...)
As an advisor I've come across this many times before, feel free to
discuss further if you wish. (and I understand you aren't looking to
conversations don't cost anything!)
There is no need to be so hard on yourself. It seems like
you are extremely hard working, the funds just don't add up.
It could be time to refinance or look into a smaller house.
It is a great time to buy. Is there any possibility of
renting out a room?
The US is one of the few places in the world where you can
make a 6 figure salary and feel poor.
I was a teacher for adults and when I got pregnant my entire
program was defunded due to budget cuts. Our surplus went to
k-12. At first it was great because I went on unemployment.
Now, I need a job and it is unbelievably difficult. You are
lucky you have found such a high paying position. I hope you
work out your finances soon.
I'm really sorry to hear about your predicament. I'm a
financial advisor and it pains me to see people in your
situation. That being said, since you are asking for a
FIX, not a band-aid, I'll give you some suggestions that
may be harsh, but you are in a place where I don't think
small steps will make much difference. Bear in mind, that
I don't know enough about your situation to know if these
suggestions are possible for you, but with the limited info
you provide, I would suggest:
- Sell the house and rent instead (I've got to believe you
can find a very small place for a lot less than your total
mortgage/tax/insurance expense). Maybe it's a one bedroom
in an undesirable neighborhood. Perhaps that means you or
your teenager has to sleep on a couch. Many people in this
world live in much worse conditions.
- Stop paying for college. Your kid needs to either find
work/loans/scholarship money or to Community College.
They'll definitely learn the value of money and will
probably become more determined than ever to avoid getting
into the same financial predicamet that you are in when
they get out of college.
- See if you can do a transfer of your credit card debt to
a 0% interest card. I know these are teaser rates, but at
least it'll reduce your interest expense for 6-12 months.
Keep doing that for as long as the CC companies are willing
to take you.
- I'm assuming you haven't saved any money and retirement
is far from your mind, but it needs to be part of your
plan. Your goal should not be to get to breakeven. It
should be to get to a point where you can save money every
month to a 401k and savings account.
I know the first two suggestions are brutal, but unless
there are some assets or income you didn't mention, I'm not
sure if you really have a choice.
A concerned financial planner
I'm sorry about your troubles and commend you for having two teens on
own. I'll tell you what has helped me. First, I recommended to my mom
was having trouble with mortgage to share and rent one or more rooms.
mom rented two for $650 each, but she was in Texas. The rates are higher
here). This will save you a lot of time and help you make your mortgage.
one child is in college, then maybe you have a spare room... but these
depending on amenities, a second bathroom that can be dedicated to the
renter, etc. anywhere from 650-800... If you are close to UC or BART,
boon. Does your home have a good walkscore? If so, this is a factor too.
may offer it furnished or unfurnished.
2) Another helpful thing is
Anonymous. It helped me personally very much. Specifically they have
help reduce your credit card debt and pressure relief groups where you
two hours with one man and one woman and talk about your money issues
and they give ideas and solutions. You bring records and any
and tally your debt and come up with a viable repayment plan to keep
sanity, home and quality of life. The meetings are also a big help in
sanity and practical ideas from people who are in the boat with you, or
been in the past.
3) There is a woman from D.A. who goes to Alta Bates
cafeteria on a Friday night, I believe from 6:30 to 8:30 and sits there
up expenses. Anyone can join her. This is a great exercise and can help
come out of denial about where your money goes. Even if you have a
good handle on this, there is always fine tuning to be understood and
with. It can be helpful to put these ideas on paper and consult the
relief group. If it's hard to make time to actually sit down and do it?
there are others to do it with you, check your math, answer questions.
There is a good book, How to Get out of Debt, Stay out of Debt and Live
Prosperously by Gerrold Mundis, a good book. He took some of the 12-step
ideas and went to press with them. Still, it's helpful. 5) Look for
others. Is your college child working 10 hours a week to contribute to
of schooling or cost of living? Are you sure that dad cannot be held
accountable? Have you consulted with anyone about that? These are my off
the cuff ideas. Also, willing to chat. Hang in there!
I can completely relate to your situation, as mine is
almost identical. I was so looking forward to reading the
advice given to you, but it didn't address retirement
funds. I realized that my situation was getting bad when
I had to withdraw funds from my IRA every year for the
past few. The money is vested, but there are still tax
implications and I realize this isn't a smart way to
live. So I have been trying to sell my house and downsize
for over a year. During this time, I have had to run up
credit card debt to fix the house up to sell. Now I have
credit card debt similar to yours, and the selling price
of my house has decreased so much that I will have to pay
a few thousand to sell it. That being said, getting rid
of my mortgage will be a huge relief.
However, I am still going to be stuck with Credit Card
debt and I am afraid that my excellent credit rating will
be damaged. So I am planning to withdraw more money from
the IRA to pay off the CC debt. I would love to hear what
the Financial Planners on the list have to say about using
retirement funds to pay off Credit Card debt. I have
another 401K plan from my current job that has some money
in it, but I imagine that I will never actually retire as
I am single with 4 kids, and only the first in college.
I hope that you consider selling your house, even though
it has been a big hassle for me. It will really take away
a lot of the stress. I know how it feels to spend 1/2 your
income paying for your home.
I can't afford a financial advisor. Basically, we bought a house
in the east bay before our house in SF (bought 4 y ago, 100%
financing) sold. Then the market took a down turn and it didn't
sell. It's being rented, but we recently had to stop making
payments on our mortgage, as we simply didn't have the money.
It's still on the market and we hope to get an offer for a short
Meanwhile, we also have managed, somehow, to rack up close to
$100,000 in credit card debt, much of it at high interest rates
(some of it was used to cover closing costs for our new house).
We own our own business and it's incorporated, but not enough
money is coming in lately as the economy has slowed.
My question is: has anyone used one of those debt consolidation
services before? I know it lowers your credit score, but at this
rate we'll never be buying another house again, so that may not
matter too much. We only have one car, paid for, so we won't be
buying another one for awhile, either.
Thanks for any and all experience and advice. And please, we are
humbled enough as it is; no 'I told you so's''. Thanks.
Super Stressed Mama
Time to start over. Bankruptcy is the answer. Debt consolidation
will only prolong the inevitable. Plus, you'll have to delay
filing since it would probably be a presumption of abuse if you
filed right after. And you risk losing your primary home in
foreclosure if you're not protected by bankruptcy and can't make
the payments. Since you have an income and own homes probably
chapter 13. We don't own one and had low income so we qualified
for chapter 7. Attorney made us wait months to file since we had
taken out an unsecured loan and he didn't want us to be accused
of abuse. The wait really hurt us. You probably don't want that
to happen which is why you shouldn't consolidate. Start
interviewing bankruptcy attorneys now would be my best advice.
There is light at the end of the tunnel. It feels great not to
have to pay any more credit cards. Good luck.
Since there are a lot of charlatans in the debt consolidation
business, you may want to read the FTC's page on what questions
to ask and what to be aware of when you're looking for a
service provider in this area. The link to the FTC site is
Due to some financial irresponsibility, a sudden job loss and a
couple of other factors, we've built up some CC debt. We cashed
in a 401k to pay off a big chunk of it, but we still have some
left. We used up most of our savings during my job loss just to
support the family. Now that we're up and running again in the
employment arena, we need to start figuring out how to get our
finances under control. We have to *quickly* save in order to
pay the lovely property taxes due in Dec, as well as pay down
our remaining debt. How do we do it? We can definitely save
enough in time to pay for the tax bill, which is good, but that
is putting all of our extra money every month into savings and
not paying down any of the debt. I've gotten a 0% interest for
12 months card, so at least I won't be accruing interest during
this time. Then what happens after we pay the bill? Do we split
our monthly residual into two? Half to the cards and half
towards savings? How have others done it? My goal is to have
all the cards paid off by the end of next year, but I really
don't know how realstic this is. Just as a point of reference,
we're talking about $11.0k in credit card debt. How have others
gone about organizing their finances in order to 'kill two
birds with one stone'?
fiscally responsible in '09!
I just wanted to recommend the book The Total Money Makeover by
Dave Ramsey which outlines the best way to take care of your
debt and finances. He has these 7 steps to follow, but the
first couple pertain to your situation now. Setup an emergency
fund of $1000 (or at least $500) before paying any credit
cards. This will help eliminate the need to fall back on credit
cards in the future. Then start paying off your credit cards
starting with the smallest balance first, not the lowest
interest rate. That means all extra income possible goes toward
that balance while the rest get paid at minimum balance. The
website is www.daveramsey.com but I suggest just
finding/borrowing the book and not worry about all the extras
they try to sell. It's a sensible plan to get you back on
Needing to be debt free too!!
Well, firstly, building up the money you will need to pay your
property taxes is not ''savings.'' That's a housing expense. For
the future, divide the total amount of your annual tax bills by
12 and make sure you put aside that amount every month. (You may
need some surplus to account for the fact that the installments
are due 4 months apart or whatever it is, rather than evenly
spaced in the year.) The fact that you keep it in a ''savings
account'' until you have to pay the installment doesn't make
Second, if you have to choose, it's almost always better to pay
off debt than to build up savings -- because typically you pay
more interest on debt than you can earn on savings. But you do
need to have a bit of a savings cushion for emergency use, which
most financial planners say should equal three to six months'
living expenses. So if you don't have that, you may want to
take the 50/50 approach or something for a while until you do.
Third, get rid of your credit card debt faster by reducing the
interest rate on it. Do you have a home equity line? Do you
have any equity in your house? You'll qualify more easily for a
HELOC now that you're employed; the interest rates are generally
low and you can usually deduct the interest you pay from your
taxes as mortgage interest. And it gives you some emergency
borrowing power too, which reduces some of the urgency for
rebuilding your savings. Even if you can't get an equity line,
perhaps it makes sense to get a personal line of credit or a
consolidation loan, or at least to shop around for a credit card
with a low rate and a free balance transfer, so you can get the
best possible deal while you pay down your outstanding debt.
Glad we had the equity line when we needed it
Save your money. Eleven thousand dollars is not a lot of credit
card debt. But I'd advise not to charge any more. After you have
saved enough to pay your property taxes and cover future periods
of unemployment, then start paying the debt down. Otherwise, if
you pay off the debt right now and lose your jobs, you'll have no
money to live on.
Treat the credit card debt as a FIXED EXPENSE like gas or insurance. We
one time a $22,000. balance on a high interest card account. I found
alternatives that involved balance transfers to either no interest or
interest cards (even tho there were balance transfer fees) & paid off a
sum every month on those accounts. It took 1 1/2 yrs. but it got paid
that time we have never run a balance on a credit card unless we got an
of one year of no interest if the balance was paid off completely (like
appliance purchase). We have a terrific credit score now, one of the
credit card person said he had ever seen. Paying off the credit card
a steady, timely manner will not only save your money; it will increase
score so that if money ever becomes available again, you can have some
in borrowing. But make a real effort to cut expenses; going out to
getting take-out food (try planning having leftovers for really busy
get a good commuter cup instead of $3. lattes. These things really add
end of each & every month.
Been there; done it
My understanding is that it is almost always better to pay off
credit card debt before applying the money to savings, since the
interest on the cc amount is so high. If you have a 15%
interest rate on your credit card, for example, think of paying
off your credit card debt as earning 15% on that money -- that's
a better return than you'll get in any savings account or CD.
See points 1-3 in this article from the Motley Fool for more
Help! Has anyone been sued by a credit card company? What should we
do? Our house is being foreclosed on and we have sooo much debt. A
few months ago, we had credit scores in the 700s. This is so crazy.
We have a baby due any day now. Any recommendations for lawyers? Is
that what we need?
I'm so sorry that your financial situation is so stressful. A
friend was in a similar situation and I'll share how she
eventually handled it, but, first, are you sure that credit card
companies are suing you, or are they pursuing you aggressively,
turning your debts over to a collection agency etc.? If you're
being sued, I'm not sure if what I'm writing will be helpful...
Our friend had debts up the wazoo to many credit cards, loan
sharks, you name it, and each of these companies used collection
agencies. I went with her to discuss bankruptcy with Patrick
Forte http://www.patforte.com/ in Oakland, and he seemed to be a
very competent lawyer, but she didn't use him in the end, because
she negotiated reductions of her debts as low as 20% with some of
the agencies, and then she was able to handle the payment plans.
Mr. Forte described bankruptcy settlements at 10%, but then the
settlement folds in his fee ($3500 at the time) and some court
costs, so my friend came out more or less even.
It sounds as if you're in a much more serious situation so I'd
recommend a consultation with Forte since there's no fee for
that. I don't know if Forte handles lawsuits, but I'm sure he
can refer you to someone. If you're able to and decide to work
with collection agencies, be very polite but assertive in your
negotiations. I held my friend's hand through many of these
stressful phone negotiations, and they all went the same way: The
agent was almost always business-like but quite nice, actually;
he/she would begin with a high figure (50%-80%), and, each time,
my friend would reply with honesty that there was no way she
could handle the payments, and the bartering continued until
they'd reached that company's bottom line.
Best of luck to you. You can get through this!
If you are in the East Bay, run, do not walk, to
http://www.cccsebay.org/. (If you live
somewhere else, you can find the affiliate closest to you at
www.nfcc.org. These folks
are legitimate, not charlatans who will take your money and leave you
can work with your creditors on payment plans, etc., and their services
are free or low-
cost. Good luck!
I just saw a documentary by errol morris where he interviews an
agressive lawyer who has made it his mission to take on the
credit card companies who try to sue consumers. the name of the
3 disc series is Errol MOrris: The first person. Sorry I don't
have the name of the lawyer, but you can find it online somehow.
I think you should watch the documentary and see if you think you
can benefit from a lawyer. Good luck.
Call one of the big law firms they will give you plenty of free advice.
But in my
experience the CC companies all threatened me but none ever followed
costs them something like $15,000 to take you to court.
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!
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
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
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.
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...
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.
Before paying ANYONE besides debtors please consider talking with a
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
you would be out the money you paid the lawyer. Sounds like a double
If that fails consider consolidation, maybe it would be cheaper than
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.
My husband and I bought a house 1.5 years ago, when I was 8
months pregnant. We thought it'd be a financial stretch, but
that we would make it work. My husband works in construction
and has had several slow periods. Then we've had unexpected
major expenses. I'm already working 2 jobs. We are extremely
frugal, but still we've been using credit cards to make ends
meet. We often talk about selling, but we'd probably lose $. We
are a family of 5 in a 2 bedroom, so renting a room is not
really workable. Building a studio is so costly. I feel trapped
and I can't seem to figure out what to do. Who do I turn to for
advice? I need some creative solutions. Or maybe we need to
sell and just cut our losses now? Any suggestions, would be
greatly appreciated. Thank you.
Could your husband get a flexible job that pays less and would allow him
to go back or that he could combine if the construction jobs kicked in?
I am so sorry to hear you and your family are crammed into such a small
space. Life in the Bay Area is harsh forcing many of us to live in
spaces smaller than we ever thought we would have to settle for. Add
work instability, rising mortgages as interest rates fluctuate, and
unforseen costs and life can sometimes become unmanageable.
Please don't sell your home unless you are in at least one or more of
the following situations:
1) Selling your home will keep you from declaring bankruptcy
2) Rent for a 3 bedroom is less than your mortgage and there are plenty
of 3 bedroom rentals to choose from
2) Moving to another area in the state or country will increase your
income and lower costs
Otherwise, you may worsen your situation by selling. My only other
suggestion is that your husband take a part time job during down periods
or consider changing careers. Make sure you pat yourself on the back for
working so hard to make ends meet and enduring numerous sacrifices by
holding down two jobs. Best of luck.
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.
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
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.
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''
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....
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.
There's a single mom in my neighborhood who has run into some
financial trouble and is at risk of losing both her car and her
rental home. She works full time, plus weekends when her
children are with her ex-husband (aged 5 and 9), but is unable
to make ends meet. Her ex-husband had another baby with his
new wife, and her already-inadequate child support has been
reduced. She's extremely hard-working, but still falling
behind. Are there any resources out there to help someone in
her situation - and to stop the downward economic slide that
would likely occur if her car is repossessed? (i.e., trouble
getting to work, job loss, etc). Are there agencies that can
provide her with emergency grants, money for groceries, etc?
She earns approx. $1,800 per month; is that too much to qualify
for TANF or other public services? Any advice or leads you can
provide to help her would be greatly appreciated.
My husband teaches for a non-profit that trains economically
disadvantages adults computer skills so they can get jobs that
pay a living wage. It's called OPTIC - actually they just
changed the name to Opportunnity Junction since it has nothing
to do with eyes. Its in Antioch.
They have a 3 month training session which teaches computer
skills, resume writing, how to dress and behave in a
professional evironment. This is followed by another 3 or 4
months of paid internship in which they work on projects for the
organization and job search. most of them find jobs by the end
of the internship. Some even stay employed. There is a childcare
center across the street (non-affiliated).
If Antioch is too far away for your friend I can't believe
Berkeley and Oakland don't have something similar
She should check out Consumer Credit Counseling Svc - see
http://www.cccssf.org/ or 800.777.7526 if she has no web access.
(She could use web at a library if that's the case...) Please be
aware that there are many entities with similar sounding names.
Back in the day when I worked as a bill colector (don't ask!),
these folks would often come to the rescue of people with
financial problems. They help you deal with creditors, etc
We are having serious financial difficulties, mostly due to a
humongous mortgage. I cannot get our budget anywhere near
being balanced, so even saving a dime is not going to happen.
We have accrued too much debt. SOOO...we are wondering, why
live in one of the most expensive places on earth? By moving,
we could save on a mortgage and therefore all the expenses that
come with owning a home. However, we are aware that income may
not be as high. I'm seeking advice from anyone who has been in
this position and made the decision to move. Are you better
off financially? Are you happy about your decision? Do you
regret your decision? Basically, the only thing that keeps us
where we are is a job. Everything else, we can do elsewhere
(yes, the Bay Area is great...but so are many other places)
Bay Area BROKE
Just wanted to say, be careful what you wish for. We kept
complaining about not being able to get ahead in the bay area,
and so when my husband unexpectedly got laid off from his job
last year, we decided it was time for us to move.
We now live in a house 2.5x our CA house with every amenity we
ever wanted or dreamed of, we have $ in the bank, unlike in the
bay area where we lived mortgage to mortgage, and we live in a
climate that is gorgeous 8 months out of the year.
BUT, my husband is making 20% less than he was in CA, the
political climate is extremely conservative, our neighbors are
non entities as they sometimes don't even wave when they are
taking out the trash, the lack of culture and diversity in
everything from dining to shopping is ridiculous, chain stores
and strip malls are abundant.
We sit and look at each other sometimes and wonder why we did
this. Maybe we chose the wrong place, I don't know, but I do
know that money doesn't equal happiness, and there ain't NO
place like the bay area.
Lefties trapped in Pleasantville
I am trying to help someone figure out how to get out of credit
card debt. Does anyone know of a good organization to work with
on this in the East Bay or SF?
Are you a member or eligible to be a member of a credit union? My experience is that using the resources of a credit union is no doubt the best way to manage debt. Don't waste your time with debt services or trying to figure it out on your own. Credit unions are the best!
--been there and now I have savings
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.
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
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.
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...
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.
I received a letter from an attorney's office in Stanton, CA about an old
Capitol One Bank credit card bill, from 2001, which I was unable to pay
off due to unemployment, financial desititution, and homelessness. I
usually just throw away these letters, knowing after 7 years (I think)
these debts are null and void, and must be removed from credit reports.
But this I read this one, which threatens a lawsuit to collect over $1100
(more than twice what I originally owe them), under 1033(b)(2) of the
California State Code of Civil Procedures.
My first instinct is, this is another threat, but I wonder if others have
experience with this. I initially presumed this was another threatening
letter to intimidate me into coughing up the money. I know the credit
industry is strengthened by the recent federal bankruptcy law; I wonder if
they really might try to take me to court.
I've been saving my money in event of future financial disasters and
homelessness, don't want to further feed the coffers of capitalist
multibillion corporations. I don't even have a credit card, and pay cash
Does anyone have any experience with this? Thoughts? Suggestions?
(No lectures, please.) Thanks.
I'm no expert, but I think it is three years (not seven). I think seven
years is how long an actual bankruptcy stays on your report. In any
case, the three years doesn't start until the collector writes it off as
bad debt - so if the company is still trying to collect from you, or if
a collection agency is still trying to collect, it will still show up on
your credit report. I have received all sorts of threatening letters as
well, but usually the amount they are trying to collect is not worth the
money it would cost them to file the lawsuit, and they eventually give
Good luck to you
What has happened is that the credit card company has handed the job of
collecting from you to a collection agency (the lawyer).
Adding in interest and fees from 2001 is why it is now more than twice
what the original bill was. The lawyer will get a cut of whatever he
collects from you, so he will keep after you because that's how he makes
Sometimes you can contest these things. I had one where a collection
agency came after me for $100. I showed them a letter that said I had
paid it. End of discussion. In your case, however, it sounds like you
don't dispute the fact that you did not pay the money.
I believe the lawyer can take you to court. Instead of paying the full
$1100, you could offer a deal to pay something less.
Call the credit card company an ask if they'd settle for the original
amount (although I think once they hand off the collecting duties to an
agency, they have basically washed their hands of the issue and won't
discuss anything with you). In which case you can call the lawyer and
negotiate a settlement.
I was in the same situation after a failed business. Only one of my
creditors actually sued me and I went to legal aid where I was able to
negotiate a reasonable payment arrangement which the judge accepted. If
you are actually sued and you can read the below about why that may not
happen, then I strongly suggest you get free help so that you don't
agree to something that you cannot pay or have a lien put on your
I think you're right in believing that your old debt will ''disappear''
after 7 years and it helps to explain why, now, you are getting a letter
from a collection agency/attorney. It's their last chance to get the
money back and your original creditor probably already wrote off most of
Letters threatening suit are very common, but please note that according
to the Fair Debt Collection Act, no agency can threaten to sue. You'll
notice the letter says ''we may consider legal action'' instead of ''we
will sue you''. If they threaten, they must go forward with it. If you
have assets like a house, there is a better chance you will be sued as
the creditor could put a lien on your house if they win and you don't
The attorney may sue you but chances are they won't because lawsuits
costs money, you may not have assets and the original creditor may not
be willing to pay for the fees associated with suit. The lawyer (if in
fact it is a law firm) may decide to go for it. Remember also that there
is a statute of limitations on collection on past due bills. Imagine if
you did not owe the money, how could you prove it 7 years later?
You have rights and options. Hope you get all the information you need.
almost debt free
Call the attorney's office and offer to settle for the amount you
originally owed. I understand that you don't want to ''further feed the
coffers of capitalist multibillion corporations,'' and I know what it's
like to be in deeper than you can get out of. But, when you default on
debts, the rest of us pay--not the corporation (see recent posts on high
Been there too
this page was last updated: Oct 31, 2012
The opinions and statements expressed on this website
are those of parents who subscribe to the
Berkeley Parents Network.
Disclaimer & Usage for
information about using content on this website.
Copyright © 1996-2014 Berkeley Parents Network