How to Get Out of Debt - Free Help

Dave Burke and His Real Talk Network Were Supposed to Help Us But Sent Us to Collections. – Kelly

Steve Rhode — Tue, 29 Dec 2009 23:52:43 +0000

“Dear Steve,

I have read 2 articles by you about people trying to do business with this company and getting sent to collections.

This happened to us also. We were not contacted by RTN, just sent immediately to a collection agency. They refused my husband’s calls and the collection agency representative even told us that we shouldn’t do business with them.

This company is unethical and immoral. They just want to build their own wealth at the expense of others. You had mentioned in one the articles that the writer (Stan, I believe) file a suit in small claims court. Is it possible to to get other people in this situation together to file a class action suit?

Kelly”

Dear Kelly,

Can you tell me more about how you became involved with Dave Burke and his Real Talk Network?

How much do they say you owe them and did you pay them anything upfront?

What services were they supposed to give you?

Was it the collection company that told you not to do business with Dave Burke and the Real Talk Network?

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Dave Burke and His Real Talk Network Were Supposed to Help Us But Sent Us to Collections. – Kelly

My Photo of the Day – The Colorful Alley

Steve Rhode — Tue, 29 Dec 2009 23:11:48 +0000

One of my greatest joys, is my photography. It is something that I love to do. It is an extremely personal part of me that I thought I’d share with you.

Even if you are facing difficult financial times, find something you love to do as well. Read my previous post “Don’t Let Your Debt Consume Your Life. Take Advantage of Free Beauty Around You” for more information about this philosophy.

The Colorful Alley

I suppose the thing I love most about this alley in Old San Juan, Puerto Rico is that it is brightly painted even though not a lot of people would see it.

The cobblestones and yellow curbs draw your eye to the pink painted garage when the van is waiting in the shadows.

Best viewed large.

From: Steve Rhode Photostream

@GetOutOfDebtGuy

Source: My Photo of the Day – The Colorful Alley

How Do I Pay My Credit Card Bills and Still Have Money for Day-to-Day Expenses? – Maria

Steve Rhode — Tue, 29 Dec 2009 23:11:47 +0000

Maria wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty. If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help.

“Dear Steve,

I am a teacher. I have enough for mortgage and bills but not for credit card payments anymore and I am going crazy with debt. I was paying my minimum payments on credit cards but then was left with no money left over for day to day expenses so I would use the little amount available on the credit cards again.

How do I pay my credit card bills and still have money for day to day expenses?

Maria”

Dear Maria,

One possibility to not being able to pay the day-to-day bills is that you are just so in debt that you’ve reached the end of your financial rope. Otherwise, the answers are not difficult to spot but they are difficult to implement. In order to change the amount of money you have leftover each month you will need to increase your income, reduce your expenses or a combination of both.

If you don’t have a good idea where your money is going you can track it yourself with pen and paper or use a more high-tech approach like Mvelopes, an online service that can really help you.

You’ve actually been in this “insolvent” position for a while now. It’s just that you’ve masked the reality of your situation by using borrowed money to get by.

Outside of adjusting income and/or spending the most logical solutions to consider would be debt management or even bankruptcy. Bankruptcy might seem extreme to you now so try a debt management solution first (click here for debt management information) and see if the consolidated monthly payment using that approach works for you.

Big hug.

@GetOutOfDebtGuy

Source: How Do I Pay My Credit Card Bills and Still Have Money for Day-to-Day Expenses? – Maria

Frederick J. Hanna & Associates is Trying to Collect an Old Capital One Debt From Me. – Ann

Steve Rhode — Tue, 29 Dec 2009 23:11:46 +0000

“Dear Steve,

I am in debt with Capital One credit card company. I’ve been unable to pay them for the past year. I just recived a letter from FREDERICK J. HANNA & ASSOCIATES, P.C. ATTORNEYS AT LAW.

It states I need to contact them to make arrangements to pay the unpaid balance. If I don’t notify the office within 30 days they will send me a Judgment. It also states at this time, no attorney with this firm has personally reviewed the particular circumstances of your account. However, if you fail to contact this office, our client may consider additional remedies to recover the balance due. The blance due is $857.02

Is Capital One Credit going to sue me of 857.02

Should I notify this law firm?

What should I do?

Ann”

Dear Ann,

If you believe the debt is correct, then yes, you should contact the law firm and come to some agreement on how to pay the old debt.

If you don’t feel you owe this debt then send a letter to the law firm within 30 days of the letter and ask for a copy of the written agreement you signed and statements to show you owe the debt. Send this handwritten letter to them by some type of traceable method like certified mail return receipt requested, UPS, or FedEx.

Can you be sued over an $857 debt, why yes you can.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Frederick J. Hanna & Associates is Trying to Collect an Old Capital One Debt From Me. – Ann

Should I Take Out My 401K to Tide Us Over? – Dwight

Steve Rhode — Tue, 29 Dec 2009 23:03:16 +0000

Dwight wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

“Dear Steve,

I am a software salesman to the car wash industry. With the slowdown of the economy I have taken an almost 50% decrease in pay ($100K down to $50K). It looks like my income this year will be in the $40K area. I have a family of 4 beautiful kids (all girls) and a wife who works part time ($800 per month). Also, I am coming into the slow period of the industry which means my income for the next 3 months will only be enough to cover my primary mortgage (it is automatically deducted with my paycheck). I am slowly getting behind in my household bills (not my mortgage). I have about $15K in my 401K.

Should I take out my 401K to tide us over? I don’t have any equity in my house to borrow against.

Dwight”

Dear Dwight,

Absolutely not.

The 401k option is such a bad idea on so many levels. See a question I just answered for more information, “Would it be Wise to Pull the Cash Out of the 401k and Pay Towards Our Debt? – Brandy“.

The 401k money would only be a temporary solution and what will you do once that is gone and things have not improved?

I think what you should do immediately is cancel the automatic deduction of your mortgage payment to prevent any wave of bounced checks that can cost hundreds of dollars in fees and penalties if the mortgage check hits and bounces everything behind it.

If anything, it would be better at this time to talk to your mortgage company about what options may be available to you to lower your mortgage payment.

I think you see what the cause of this situation is, a 60% reduction in income. It sounds like you are at a break even or less point and unless you can see a way to increase income then you’ve got bigger troubles ahead than the 401k money would solve.

Big hug.

@GetOutOfDebtGuy

Source: Should I Take Out My 401K to Tide Us Over? – Dwight

We Have Good Credit But Too Much Debt. – Devin

Steve Rhode — Tue, 29 Dec 2009 23:03:15 +0000

“Dear Steve,

My wife and I are now back on our feet after years of unemployment problems and housing investment loss due to previously living in Michigan. We lost most of our savings and retirement paying back debt, and now stand with $33,000 in credit card debt left.

Our jobs are going very well, and our earnings are good, but we cannot afford the $900/month minimum payments and we will never get out of this debt at this rate. We have been able to also maintain a good credit rating through this financial ordeal, with a score of 675, and I hate to lose it by defaulting but we cannot keep paying,

If our older cars finally die we will not have the extra money to repair and cannot afford anything beyond essentials. My wife is so distraught she is ready to quit work and file bankruptcy, but aside from the credit card debt we have managed to rise above our challenges so I hate to give in but the stress is just too much. I have been looking for a program that will apply to me, but find nothing – PLEASE HELP! I am a home owner, with a child in college and one in high school.

Do you recommend debt consolidation in our situation?

Devin”

Dear Devin,

Please pass on this message to your wife for me, “Don’t Panic!” We can work through this situation.

Since your credit is still good I think we could explore some less drastic avenues first. Your first stop should be to follow this link and learn more about LendingClub.com. LendingClub is a peer-to-peer network that actually does lower interest debt consolidation loans. I’d like for you to check it out and get a rate quote so we can see if actually consolidating the debt will be of a benefit to you.

If the LendingClub debt consolidation loan actually gives you the breathing room you need then you can payoff most of the credit card debt and it will help to improve your credit even more. That’s Plan A.

So that’s your homework. Once you do that and get a rate, come back and report in and let’s see if that alone will do it or we need to move to a more drastic Plan B. Regardless, tell you lovely wife there will be a solution that will resolve this situation one way or another. Don’t quit the job.

In fact, now that we are a path towards resolving this, do me a favor, take yourselves out for a treat, be it a movie or meal out. Just let yourselves relax for a few hours. I’m on it.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: We Have Good Credit But Too Much Debt. – Devin

How to Buy a House With Marks on Your Credit

Steve Rhode — Tue, 29 Dec 2009 22:21:24 +0000

If you have any negative marks on your credit such as a late payment, default, repossession, lien, judgment or bankruptcy you probably think you’ll never be able to buy a house. Not so. If you have a steady and secure income that is high enough so you can afford to make the monthly payments, and you have a sufficient sum of money saved up for a down payment, you will probably be able to buy a house.

Think of it this way. For most lenders, making a home loan is a very safe investment. For one thing, the loan will be secured by the house. If you don’t make the payments, the lender can foreclose. In addition, in today’s economy, house values are rising or remaining steady that is, they are not going down. The $125,000 house you buy today may be worth $135,000 a year from now, simply by virtue of the economy. Even if you do default and the lender must foreclose, the lender could make back its investment.

Before You Start Looking

Nothing will frustrate you more than finding your dream house and then being denied a loan. Before you go house or loan shopping, do a little preparation.

Estimate how much house you can afford

As a general rule, most people can afford a house worth about two or three times their gross annual income, assuming a moderate amount of other long-term debts and payroll deductions. If you have no other long-term debts, you may be able to afford something a little more expensive.

Gather your paperwork

Make sure you have a copy of a recent pay stub; last year’s tax return; names and account numbers for your car lender, student loan holder, credit card issuers and other creditors; checking, savings and money market account numbers, balances and bank names; a list of your assets (other real estate, retirement plans, vehicles, etc.); and a copy of your credit report. The lender will get their own copy of your credit report, but it’s very important you know what your credit report says about you in advance.

Get a loan prequalification letter

This is a letter stating that you have been “prequalified” for a loan up to a certain amount, based on your income and credit history, and how much you’ll need for a down payment and closing costs. It stops short of guaranteeing ultimate loan approval, but it makes it clear that loan approval is all but certain. Any house purchase offer that comes with a pre-qualification letter will be that much more attractive to a seller who might be worried about the buyer’s ability to get a loan. For someone with compromised credit, a pre-qualification letter is often a must. A letter will state that you have been approved for a loan of up to “X” amount of money at an interest rate of “Y” or less.

To get such a letter, make an appointment with (or call) several lenders, discuss your financial situation and find out if you can prequalify. You are not shopping for the best loan with the most competitive rates, you simply want to make sure you can qualify for a loan. If you don’t have the time or inclination to call around, consider working with a licensed mortgage broker, a person who specializes in matching house buyers with mortgage lenders. Mortgage brokers subscribe to different computer systems that list various mortgages available in an area.

Conventional Loans

As you learn about available loans, you may be overwhelmed by the range of terms. Down payment requirements, interest rates, loan application fees and points (a fee charged by a lender for the privilege of making you a loan, expressed as a percentage of the loan amount) can vary tremendously among lenders and even with the same lender. One reason is simple competition. But another reason is that different types of loans are made available to different types of borrowers. What separates one borrower from the next is often each person’s credit history.

A loans

For many years, mortgage lenders wrote only “A” loans. An A loan was available to a person with flawless credit someone who had paid every personal loan, student loan, credit card and mortgage payment on time. Occasionally a person with a minor credit blip, such as a one-time late payment on an otherwise perfectly-paid loan, would still qualify for an A loan. A loans typically require little money down and charge the most favorable interest rate. Anyone who didn’t qualify for an A loan had only two choices: forego buying a home until all the negative marks came off the credit report, or borrow from a lender who required a huge down payment and charged near-credit-card interest rates.

Many mortgage lenders now write “B” and “C” loans for people with somewhat marred credit histories and “D” loans for people with very bad credit histories. The following describes B, C and D loans.

B loans

Some lenders require clean credit for the previous 12 months, but allow a few missed payments before that. Others permit one or two late mortgage payments, one late personal or student loan payment and few late credit card payments during the previous year. Late payments cannot be more than 60 days past due. B loans usually require more money down and interest rates are usually one or two percentage points higher than A loans.

C loans

Some lenders require clean credit for the previous 12 months, but allow a serious credit problem, such as a bankruptcy or foreclosure, a few years before. Others permit three or four late mortgage payments, five or six late loan or credit card payments or late payments more than 60 days past due. C loans usually require even more money down; interest rates are usually one to three percentage points higher than A loans.

D loans

D loans are available to people with very bad credit histories bankruptcy or foreclosure in the past year, or habitual late payments on loans and bills. D loans usually require lots of money down. Interest rates are usually at least 100 percent higher than for A loans.

Improving Your Qualification

If you don’t currently qualify for a conventional loan, consider doing any of the following to improve your chances.

Wait a while In the meantime, you can save more money to make a larger down payment, watch some of the older negative comments on your credit report drop off and get more positive recent information into your credit report.
Move to a more affordable area If what’s holding you back from qualifying for a loan is that you have too little money saved for the down payment, move to an area where your savings will go further.
Buy with someone else You can improve your chances of qualifying for a loan if you’ll apply with someone who has excellent credit. I am not suggesting that you marry (or move in with) the first available person to come your way! But perhaps you have a friend who is house hunting, too. You can buy a duplex and apply for one mortgage for the entire purchase.

Other Ways to Finance a House Purchase

Obtaining a conventional loan from a mortgage lender is not the only way to finance the purchase of your house. Consider the following alternatives:

Private financing Consider approaching a financially well-off friend or relative for a loan. Propose a written business deal. Ask to borrow the money at a rate less than you’d pay a conventional lender but more than your friend would earn on his money invested conservatively. For example, if the bank would charge you 7.25 percent for a mortgage loan, but would pay your friend Allan only 5 percent on his certificate of deposit, ask Allan to lend you the money at 6.5 percent a deal for you both.
Seller financing Some sellers don’t need or want the money from the sale quite yet. Perhaps the seller will owe taxes on the profit or be concerned about losing the money to a long-term health facility. No matter what the reason, suggest to the seller that she “carry the note.” This means that you pay her your down payment and monthly mortgage payments a mortgage lender is not involved. While the seller should do a credit check and request a copy of your pay stub, her qualifying standards will be far less rigorous than a conventional lender’s.
Mortgage buydown These are generally available to people buying a new home in a new house development. The developer prepays part of your mortgage payment for a few years to help you qualify for a loan. Some conventional lenders have provided buydowns for people buying existing, not just new, homes.
Public financing Many state, county or local governments provide mortgage financing to first time homebuyers willing to buy in a “target” area, typically a low-income area, some of which have serious social problems. If this is an option you would consider, you may be in luck. These programs are generally available to people with moderate incomes who can afford a low down payment and closing costs, and can afford the monthly payments. Credit requirements are often relaxed somewhat.

The Lesson

Don’t despair. As one mortgage broker once said, “Find me someone with bad credit and I’ll find her a loan. Mortgage loans are safe and secure to a lender, who makes money by making loans, not by turning people down.”

@GetOutOfDebtGuy

Source: How to Buy a House With Marks on Your Credit

How to Buy a Car With Marks on Your Credit and Not Get Taken for a Ride

Steve Rhode — Tue, 29 Dec 2009 18:42:55 +0000

If you have any negative marks on your credit such as a late payment, default, repossession, foreclosure, lien, judgment or bankruptcy you probably think you’ll have a hard time buying a car (or truck or van). Think again. There are many options available to you, but you’ve got to understand the advantages and disadvantages of each.

Consider the following:

You can buy a car using the dealer’s financing.
You can buy a car using an alternative source of financing.
You can pay cash for a car.
You can lease a car.

Before You Start Looking

Unless you plan to pay cash for your vehicle, get your ducks lined up before you go shopping for either the vehicle or your loan. If you have poor credit, you will want to have on hand the following:

A copy of a recent pay stub
A statement from your employer verifying your employment and income
The names and addresses, and the account numbers, of your creditors, including your mortgage lender, student loan holder and credit card issuers
The bank name and address, and the account numbers, of your checking, savings and money market accounts, and
A copy of your credit report be sure you know what’s in your credit report, as anyone to whom you apply for financing will pull a copy.

Also, take some time to figure out how much you can afford to pay each month. Total up your monthly expenses including your rent or mortgage, utilities, food, clothing, transportation, education, insurance, taxes, loans, savings and subtract that number from your monthly income. What’s left over is the maximum you have to put toward monthly car payments.

Buy a Car Using the Dealer’s Financing

Most people want to be able to walk into a showroom, pick out a car, sign a few papers in the back and drive away. But does “most people” include the folks with bad credit? And even if it does, is that the best way to go about buying a car?

Maybe. Car dealers want to move the vehicles on their lots to make room for new ones so they advertise heavily. Open a newspaper or turn on a television and you’ll see ads screaming low financing, such as 1.9 percent. These ads are often aimed at people with low income or poor credit who can’t afford high priced deals. They probably sound like a bargain, especially if you are paying 20 percent on a credit card. But ironically, low financing doesn’t always come cheap. Before applying for a low-rate loan, answer the following questions:

Are you being charged a higher price to qualify for the low rate than you would be charged if you paid cash or used an alternative financing source?
Are you required to make a larger-than-usual down payment, such as 25 percent or 30 percent? This is often required of a person with poor credit.
Will you be required to make a balloon payment possibly for several thousands of dollars at the end of the loan period?
Is the loan limited to a set number of months, such as 24 or 36? Many more traditional car loans give you up to 60 months to pay for the vehicle.
Must you buy special services or merchandise, such as an extended warranty, credit insurance or rustproofing, to qualify for the loan?

If the loan seems unfavorable, ask the dealer about more traditional financing at a higher rate but with fewer restrictions. Because of your credit history, you may be required to make a larger-than-usual down payment, or you may be asked to provide a co-signer, a person who agrees to make the payments if you default. If you go with dealer financing, read the contract carefully. Make sure you understand all terms and that they reflect the agreement you made with the dealer. Don’t sign if you don’t understand or agree with any item in the contract.

Buy a New Car Using Alternative Financing

A car dealer may lead you to believe that he’s your only source of financing. Nonsense. All financial institutions banks, savings and loans and credit unions make car loans. While these loans aren’t as low as the low rate dealer financing loans, especially for used cars, they don’t have the hidden charges. If you have a long-term relationship with one particular financial institution, consider applying there first. If you’ve never bounced checks or defaulted on a loan, you might be pleasantly surprised that you qualify for a loan, even with marks on your credit report. Alternatively, the financial institution may require a large down payment or a co-signer. If you can’t afford the large down payment or don’t want to use a co-signer, try proposing either of the following:

That the interest rate begin at a point higher than the financial institution initially offers you, if the institution agrees to reduce it to that rate after you make six consecutive payments.
That you will maintain a minimum balance in a savings account that the institution can use as a setoff that is, to take money from the account to apply toward the amount of any missed loan payments.

Another alternative source of financing doesn’t involve a financial institution consider friends or relatives.

Propose a written business deal. Ask to borrow the money at a rate less than you’d pay a bank but more than your friend would earn on her money in a savings or money market account. For example, if the bank would charge you seven percent, but you would pay your friend Mavis only three percent on her savings deposit, ask Mavis to lend you the money to buy the car, and offer to pay her five percent a good deal for you both.

Pay Cash for a Car

If your credit is very bad, you can’t afford a large down payment, you don’t have a cosigner, or no one will give you a loan for any other (non discriminatory) reason, you will have to change your expectations if you want to buy a car. You need to save up money to pay cash. This will require discipline.

Your first step will be to trim your expenses as much as possible so that you’ll have a little bit left over each month to put aside.

To get a handle on where your money goes, you could also take a month to make lists of every outlay of cash or cash equivalent, such as check or ATM card, used to make purchases. At the end of the month, look carefully at your lists. Chances are you’ll find places where you are spending money unnecessarily for example, bringing your lunch to work rather than going out, even going out cheap, will save you a bundle each week. So will using the public library to read the daily paper or to take out books, CDs and videos instead of buying or renting. Look for other ways to save.

Your second step is to look for things around the house you can sell, such as sports equipment, electronics, large appliances and anything else that’s just taking up space. Let your friends and co-workers know what you have, hold a garage sale or run an ad in the local freebie paper.

Granted, raising money to pay cash may not be your first or even second choice in buying a car, but it will teach you discipline. And you can use the same technique to save up your money so that you can apply for a secured credit card and begin to rebuild your credit. And imagine how it will help you when you go to raise money to buy a house.

Lease a Car

The number of people leasing cars has skyrocketed for a very good reason leases can seem cheap. Lease agreements usually require a low or no down payment, and lease payments are usually lower than loan payments for the same vehicle. This means that people with poor credit may have an easier time qualifying for a lease than for a loan.

But leasing is rarely a good option. First, you don’t own the car, you are renting it. You are paying to drive someone else’s vehicle. If you want to own a car at the lease end, you will have the pay a bundle for it far more than the vehicle is worth. Your alternative is to enter into a new lease for a different vehicle, meaning that you make perpetual car payments.

If you’re still lured into a lease, read the fine print carefully. Be sure you understand all of the following:

Whether the lease is open-end or closed-end. In an open-end lease, you must pay the difference between the value stated in your contract and the vehicle’s appraised value when you return the vehicle. A close-end lease allows you to walk away, but you may be responsible for certain charges.
Closed-end lease charges, such as excess mileage (you’re usually limited to 12,000 to 15,000 a year), abnormal wear and tear (is a “ding” normal or not?) and the disposition of the vehicle.
The price if you were to exercise your option to purchase the car either at the lease end or earlier.
Lease inception fees, such as a low down payment, security deposit, acquisition fee, first month’s payment, taxes and title fees.
Charges for terminating the lease early. These are usually very high and often hard to understand, based on a complex formula. Be sure you know exactly how the fee for terminating the lease early is calculated.
The warranty coverage it should cover the entire lease term and the number of miles you’re likely to drive.
The availability of gap insurance to cover the difference between what you owe under the lease agreement and what the car is worth if it’s stolen or totaled in an accident. The difference can be many thousands of dollars.

So, what are the lessons here?

First, don’t assume that marks on your credit report will keep you from getting a new car.

Second, do your homework in advance present yourself in the best possible light and be upfront about your problems.

Third, shop around. Remember that car dealers are in the business of selling and lenders are in the business of making loans. They don’t make money by saying no.

And finally, beware of deals that seem too good to be true. Read the fine print. If the offer is questionable, pass it up.

@GetOutOfDebtGuy

Source: How to Buy a Car With Marks on Your Credit and Not Get Taken for a Ride

My Credit Reports Are in Such Bad Shape That I Can’t Get Credit Anymore. – Mariana

Steve Rhode — Tue, 29 Dec 2009 17:27:53 +0000

Mariana wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

“Dear Steve,

My credit reports are in such bad standing that I can not get any more credit. I suspect identity theft on my credit report from Equifax but can’t obtain a copy of it bc of all the fradgulent claims such as a mortgage on a home – I dont own a home.

How can i get a copy of the report if they wont give it to me since i cant verify the mortgage on it – I never took out a mortgage!?

How can i dispute this once i finally get a copy of the report?

Mariana”

Dear Mariana,

You need to get a copy of your consolidated credit report. This consolidated credit report is the same one I use. It contains information about you from all three major credit bureaus. A single bureau credit report is not going to do the job to find out what everyone is saying and reporting about you.

Order your credit score with the consolidated credit report when you order it online.

Once you download your report it will be in an easy to read format. Dispute instructions will be included with the consolidated credit report. The credit score section of the report will show you exactly what you need to do to improve your score.

It is a very straightforward process once you get the consolidated credit report in your hands.

Steve

Source: My Credit Reports Are in Such Bad Shape That I Can’t Get Credit Anymore. – Mariana

Ohio AG Goes after Barclays Capital Real Estate, HomeEq Services for Unfair Loan Modifications

Steve Rhode — Tue, 29 Dec 2009 17:27:52 +0000

The Ohio Attorney general has gone after Barclays Capital Real Estate operating under HomeEQ Servicing for several issues but one of them was an attempt to get Ohio consumers seeking loan modifications to sign agreements that included provisions for the borrower to:

Waive all defenses, claims or offsets with respect to the unpaid principal balance as adjusted by HomeEQ to reflect any unpaid interest, late charges, fees, costs, and advances for property taxes and/or insurance premiums.
Release HomeEq from any claims, damages or liabilities of any kind which are in any way connected with the origination and/or servicing of the loan and/or the events which resulted in the borrower entering into the Loan Modification Agreement.
Waive any rights under federal or state statute or common law providing that a general release does not extend to claims which are not know to exist at the time of execution.

For some borrowers who were suffering with money troubles, HomeEq wanted them to sign a Forbearance Agreement which required the borrower to:

Agree that HomeEq can recommence foreclosure proceedings without providing the borrower and further demand/notice or intent to accelerate if HomeEq determine that borrower is in default of the Forbearance Agreement.
Agree in advance to pay any additional foreclosure fees for property inspections and/or broker price opinions charged at HomeEq’s discretion.
Permit HomeEq to advance any pending foreclosure action to prevent its dismissal during the term of the Forbearance Agreement.
Waive the statute of limitations associated with the acceleration of the loan.

The Ohio Attorney General states that HomeEq is also guilt of providing horrible customer service to the very same people they had sign these grossly unfair agreements. HomeEq is accused of:

Losing documents submitted by borrowers requesting loss mitigation assistance leading to a delay in processing borrowers’ loss mitigation request and resulting in the borrowers having to resubmit documents.
Failing to respond, or timely respond, to borrower requests for assistance.
Filing foreclosure actions against consumers while those consumers were in active and ongoing loss mitigation negotiations and/or discussions with HomeEq.
Verbally offering and implementing a repayment or forbearance plan without putting the agreement in writing with all of the terms and conditions.
Failing to offer, or timely offer, affordable loss mitigation options to borrowers.
Requiring borrowers to sign loan modifications with unfair and unconscionable provisions that are unconscionably in the favor of HomeEq.
Purchasing forced-placed insurance to cover homeowners’ dwellings when such insurance was not necessary or justified and where such insurance was duplicative of valid insurance that already existed to cover homeowners’ residence.

You can read the original complaint against HomeEq, here.

The irony is that the level of service the Barclays customers got sounds about in line with what others are reporting from a wide range of mortgage companies.

@GetOutOfDebtGuy

Source: Ohio AG Goes after Barclays Capital Real Estate, HomeEq Services for Unfair Loan Modifications

Will the American Mortgage Company Chase My Son to the British Channel Islands? – Linda

Steve Rhode — Tue, 29 Dec 2009 16:43:49 +0000

“Dear Steve,

I am trying to help my Son/Daughter in law with their American Mortgage

My Son/Daughter in law got caught up in a Florida buy from plan scheme and ended up with an American mortgage for $350,000 They live in Jersey in the Channel Islands, both have lost their high paying salaries and now have a third of the take home pay they had when taking out the mortgage. I have been trying to negotiate with the finance co – the second to have bought the debt after the bank went bust, but am getting very frustrated. Will they chase the debt to the CI if they walk away?

(the house is worth about $150,000) They are debt free at home, can we just give back they keys – I have offered $180,000 to short buy but been refused. We don’t want a Florida house, but do want them free of debt. – what would you do?

Linda”

Dear Linda,

I don’t get many questions from people living in the Channel Islands and the baliwicks of Guernsey and Jersey, so thank you for this opportunity.

I can certainly see how handing back the keys would be an attractive solution. interestingly just yesterday I was writing about the process of strategic default.

The reality is that if you let the bank foreclose on the home they could attempt to collect on the debt remaining using a foreign debt collector. But I can’t see how the mortgage company could go after your son and daughter-in-law in the Channel Islands, they have no jurisdiction nor is it likely they would attempt to perfect the debt in court to pursue them legally in the Channel Islands.

A perfect solution to this would be for you to be able to complete the short sale as you had intended. At least in this approach you could close the door on the debt and not have it uncomfortably chasing them.

My advice would be for you to retain a real estate attorney based in Florida to represent you in this matter. Authorize the attorney to just to keep nicely offering the settlement on the house to get a clear title to it. If the mortgage company doesn’t accept the offer, don’t do anything.

Just let the house flow through the natural process it is in now. The mortgage company will either eventually accept your fair market offer or take the house back and the debt will remain open in the U.S. But that will not block your son from entering the U.S. again on holiday or a business trip.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Will the American Mortgage Company Chase My Son to the British Channel Islands? – Linda

Is Taking Money Out of My IRA to Pay Off Credit Card Debt a Smart Thing to Do? – Sarah

Steve Rhode — Tue, 29 Dec 2009 15:58:58 +0000

“Dear Steve,

I have about 25k in my IRA and about 2k in my 401k. I owe about 11k on credit cards and every month I go more into debt because I make less money then all of my bills. If I were to pay off my credit cards, I would have enough money to live on and wouldn’t need them anymore. I would cut all of my credit cards up. I also own my house. I bought it in 2007 for 200K and put 40k down. I’m only 25 years old and I graduated from college last year, and don’t have any school debt.

Should I take the money out of my IRA and pay off my credit cards?

Sarah”

Dear Sarah,

This is a question I get asked a lot. I understand how you feel you have money at hand that could pay off the debt but the IRA is not a savings account, it is funds you are saving for retirement.

And once you take those funds out you will never be able to get back into the same financial position as if you had left them in. Here’s what I mean. Let’s say you take out $11,000 now plus the money tp pay the 20% tax and 10% penalty on that. If you left the money in you would have enjoyed the growth of those invested funds as the stock market grows. So for you to get your retirement account back into the same financial position you’d have to inject maybe as much as $20,000 within a couple of years to make up for the ground and penalties you lost.

On top of that, you need to see draining the IRA for a short term need for what it is, draining your retirement you’ll need latter. If you could flash forward and speak to your 80 year old self, what do you think she’d say to you as she is worried about not having enough money to last the rest of her life?

Once funds go into creditor protected retirement accounts they need to stay there for their intended purpose. You might want to shift around how they are invested, but NO, do not take the funds out.

So let’s look at the immediate issue. You have $11,000 of credit card debt which gives you about $220 a month in minimum payments. That $220 is more than you can afford and your expenses are more than your income. I would not be surprised if regular and routine expenses have been landing on the credit card in an effort to help you make it through the month. When this happens however, your debt goes into turbo and without intervention the downhill slide gets faster and faster.

So Sarah, how short are you each month from making ends meet? Do you have any money in an emergency fund or saving account?

Poll – Vote Now

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: Is Taking Money Out of My IRA to Pay Off Credit Card Debt a Smart Thing to Do? – Sarah

First American Debt Solutions Apparently Lying to Debtors to Scare Them

Steve Rhode — Tue, 29 Dec 2009 15:24:31 +0000

Bankruptcy attorney Dan Nunley in Oklahoma gets the credit for breaking this story.

“It seems that a debt settlement company by the name of First American Debt Solutions (FADS) of Deerfield Beach, Florida, is mailing solicitation letters to Chapter 13 bankruptcy debtors across the USA. In the letter, FADS blatantly lies to the debtors by telling them that their Chapter 13 case has been dismissed when it hasn’t. And I’m sure that it won’t surprise you that FADS then encourages the panicking debtors to call none other than FADS itself to discuss how FADS can help the debtors to resolve this terrible situation.

If you’re a Chapter 13 debtor who has received such a letter from First American Debt Solutions, please don’t fall for this trickery. Instead, contact your bankruptcy lawyer or your Chapter 13 trustee and provide them with a copy of the letter.”

@GetOutOfDebtGuy

Source: First American Debt Solutions Apparently Lying to Debtors to Scare Them

My Wife and I Are in the Military and Need to Get a Consolidation Loan. – Andy

Steve Rhode — Tue, 29 Dec 2009 15:04:30 +0000

I apologize in advance for the short response. I am currently away on vacation with limited internet but wanted to give you an answer as soon as possible. Steve

Andy wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

“Dear Steve,

My Wife and I are in the Military and have 3 or 4 credit cards and a few loans. My wife had identify theft and we tried to consolidate her past debt and still have collection agencies calling us for more debt we need to settle.

My Question is with all our debt adding up to close to 30,000 or so is it possible to get a consolidation loan to pay this off, and would it affect her
credit and mine?

Andy”

Dear

Let me be blunt, but clear, no respectble lender is going to give you a loan to pay off these cards. If someone is promising you a loan to consolidate it is almost guaranteed to be a scam and they will ask you for money up-front as a processing fee and you will not get the loan.

If you wanted to make one payment and try to get a reduced monthly payment you should try a debt management company first. They might be able to create a debt management plan for you that makes sense. If you explore that option and don’t like what you hear, come back here and post a comment to update me and we’ll then explore the next step.

@GetOutOfDebtGuy

Source: My Wife and I Are in the Military and Need to Get a Consolidation Loan. – Andy

How a Secured Credit Card Saved Me After Bankruptcy

Steve Rhode — Tue, 29 Dec 2009 15:04:29 +0000

In 1990, after my bankruptcy, I wanted to avoid the use of credit. For me credit was pain because I believed that without credit I would never have found myself bankrupt. Rational or not, that’s how I felt.

It wasn’t too long after that I realized that if I was going to be able to do the things I needed to for work and travel I would need to get a credit card to make reservations and use for routine expenses. It wasn’t until I discovered the concept of a secured card that I found what I was looking for.

A secured credit card allowed me to be able to use the Visa and MasterCard networks to do all the things I needed to do, but with a financial safety net. People that I handed the card to didn’t know I had been bankrupt or that I had lingering bad credit issues, they also didn’t know that almost no other creditor in the world would give me credit at that moment. I was a credit reject for sure.

The advantages of a secured card are that your credit limit equals the cash you have on deposit with the card issuer. And that’s what made me very comfortable in carrying a secured card, in case something happened and I was not able to pay the bill, all of the funds to pay off the balance were already on deposit with the bank! Using the secured card I would never be in debt if something unexpected happened, and that was an emotional relief.

What I discovered next, was an ever bigger relief for me. The bank I selected, which has been bought and bought again and again since those days, also reported my new card use to the credit bureaus and that helped to restore my credit. After the black eye of the bankruptcy I needed help to begin to replace the old bankruptcy negative information with a new positive credit history. And the secured card did just that for me.

It was a real bonus for me to learn that my deposit with the bank also earned interest so while it was protecting me from an uncertain financial emergency it was making some money at the same time.

I will always be grateful for the secured card after bankruptcy and can say that it honestly helped me to get back on my feet in the real transaction world, protected me in case of financial emergency and paid me money on my deposit in interest.

Some people say to me, “Steve, I can’t afford to put up a deposit to get a card”, and my reaction to that is that maybe they should not have any card if that’s the case. When it comes to using credit, remember “Safety First”.

@GetOutOfDebtGuy

Source: How a Secured Credit Card Saved Me After Bankruptcy

How the Washington Post Outed My Bankruptcy Secret

Steve Rhode — Tue, 29 Dec 2009 15:00:09 +0000

I am still amazed when I read ignorant stuff about the reason people are going bankrupt is because there is no more stigma about bankruptcy. No, the reason people are going bankrupt is because creditors are manipulating the system for their own accounting or reporting means and not allowing people to repay their debts with as much enthusiasm as the banks had when the person was borrowing the money.

People want to repay, creditors evidently don’t want the money back over time. Crazy, but true. Frankly, if I was an investor, especially an institutional investor in a major bank I’d ask to take a good look at their repayment policies for people that have fallen behind in their obligations. I think you’d be shocked by the hurdles lenders put in place. But I digress.

This is the story of one person, me, that went bankrupt and felt the stigma of bankruptcy. In 1989 I went bankrupt and in 1994 I founded the not-for-profit that started to help people find good solutions for bad financial problems. After living through the experience I thought there had to be a better way. But it wasn’t until 1999 that I went public with the fact that I myself had gone bankrupt. And it coming out with that story wasn’t by my own volition.

Up until that day in 1999 I had been able to successfully hide the fact that I had gone bankrupt. Only about four people in the world knew my secret. I had not shared it even with friends. You see, personal failure is not something that people want to broadcast. It is not a badge of honor. And certainly not a bumper sticker you’ll see. “Kiss me I’m Bankrupt.”

I kept my bankruptcy quiet for the same reason everyone else does and will, because it hurt and I thought was shameful. I’m sure that each person has their own reason why they want to withhold their bankruptcy secret. Bottom line, most would like for it to be a secret, forever.

Even today when I read all the stories that too many people go into debt management plans (DMP), debt settlement programs, or remortgage the house to pay off the debt, it makes me mad. The reason that people flock to these solutions is because they don’t want to go bankrupt. The reason that so many people turn to alternative solutions is simply because they don’t want to go bankrupt, they want to repay their debts.

Even today, while my bankruptcy has been a great life experience that I have been able to share to help countless others, if there had been another way to reach the same insight I would have preferred to have found another way. It’s kind of like becoming wiser for some reason by getting hit by a car. While the wisdom may help others, not getting hit by the car would have been nice as well.

I have not forgotten the moment my bankruptcy secret became public. I was doing an interview with The Washington Post for yet another consumer debt story and the reporter asked me in passing if I had ever been bankrupt. Crap. A wave of panic spread through me. I had never contemplated coming out of the bankruptcy closet and now I’m being asked by a reporter from one of the world’s leading newspapers. Crap, crap, crap. So I did what many people would do in that situation, I said, “No”.

The reporter left and I turned to my friend and PR Director and said, “Nancy, I just lied to the freaking Washington Post. I did go bankrupt in 1989.” Nancy listened while I shared my story with her and explained the shame and failure that I felt by being bankrupt. I then immediately went and talked to my wife Pam about this situation and while neither of us wanted to come forward with our personal failure, we felt that we had to be honest about the reality and that doing so might help someone else. We really did get dragged out of the closet kicking and screaming.

Latter Nancy called the reporter back and I came out and admitted my reversal on that bankruptcy question and then I sat down and wrote an email to my 35 staff members at the time and came out of the bankruptcy closet to them. The email took forever to write and there was nothing easy about coming out of the bankruptcy closet or sharing my personal failure with my staff, friends, world, clients and especially The Washington Post. All in all, a very uncomfortable experience.

Since that time my bankruptcy story has helped many I am told. A couple of years later, Pam and I made a video about our bankruptcy story to share with others. All of which has helped people.

So for those ignorant people that still insist that bankruptcy has lost its stigma, I say to you, “The hell it has.” But the lesson I did learn from the entire situation is that on a personal level, my life has been much better by not having secrets and sharing my experience and dealing with the issue of being bankrupt has provided emotional relief from the intense shame and failure I felt.

The tragedy today about bankruptcy is watching people avoiding it for fear of how they will feel about it only to live their lives in worse ways. Bankruptcy is certainly not an aspiration but like a lot of things in life sometimes the things that are best for you and not the most fun.

@GetOutOfDebtGuy

Source: How the Washington Post Outed My Bankruptcy Secret

Bank of America Talks About Sales Approach at Branch Banks

Steve Rhode — Mon, 28 Dec 2009 23:22:32 +0000

In a recent Wall Street Journal article, Bank of America openly discussed the fact they gave out far too many credit cards and now something is going to have to be done about it to reduce continued risk to the bank. Expect to see more Bank of America credit cards closed unilaterally.

But in the same article Bank of America talked about how bank branches sell credit products to its customers.

The old method went like this.

But in its pursuit of market share, Bank of America made poor underwriting decisions and the banking crisis of the last two years exposed many of those flaws. While trying to become the nation’s No. 1 small-business lender it offered unsecured credit lines of up to $100,000 to start-ups, some in business for only one day. Bank of America’s small-business default rate hit 17.5% in the third quarter of 2009.

BofA courted more risk in credit cards by pairing its purchase of MBNA with a customer tracking system known as “Teller Score.” A bank teller would receive a prompt to offer a pre-approved credit card to the customer standing at the window. Weekly acceptance reports were broken down by region, market, branch and individual levels. The bank’s executives would discuss the credit-card approvals on weekly conference calls.

It was a “product-pushing approach,” said one person familiar with the process.

The new Bank of America approach is still going to be to have bank branch employees try to up sell you on another product, but this time with a bit more restraint.

Starting Jan. 1, a spokeswoman said, branch employees and their managers will have some of their pay tied to how many different products they can sell to existing customers, rather than, for example, selling multiple credit cards to the same customers as they did in the past. A more important metric, she said, will be the branch’s “cross-sell ratio,” or how many different products are owned by each household.

The Teller Score system isn’t going away, the spokeswoman said, but it will be applied differently. If the customer is interested in a card, the teller won’t close the deal. Instead, the customer will step out of line and seek out a “personal banker” elsewhere in the branch for a more in-depth conversation.

Source

@GetOutOfDebtGuy

Source: Bank of America Talks About Sales Approach at Branch Banks

What Happens if I Default on My Stock Options Loan? – Joyce

Steve Rhode — Mon, 28 Dec 2009 23:11:41 +0000

Joyce wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

“Dear Steve,

Retired from 5/3 Bank in 2003 I was offered a loan to purchase my Stock Options. These options were at $40.+ and $50.+ per share. I have a loan for $36,300 at prime with quarterly interest with no maturity date. The stock price now is around $2.00 per share. The collateral for this loan is the stock.

What happens if I default on this loan?

Joyce”

Dear Joyce,

I don’t know specifically but I can see it being anything good. Besides some possible tax consequences and personal pursuit for the debt, I’ve seen very few situations where someone was able to walk away with no repercussion.

Before you do anything I would advise you to check with a lawyer licensed in your state for specific advice about what your legal liability for this loan is beyond the collateral.

Additionally, I think you need to speak to a tax adviser and ask if there is a taxable event to you as the result of not paying back this loan. If it is viewed as forgiven debt you could owe income tax on the loan amount and that’s not something to sneeze at.

Big hug.

@GetOutOfDebtGuy

Source: What Happens if I Default on My Stock Options Loan? – Joyce

When I Was Younger I Made Some Silly Debt Mistakes. – Kristina

Steve Rhode — Mon, 28 Dec 2009 23:11:40 +0000

Kristina wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

“Dear Steve,

To go bankrupt or not to go bankrupt when trying to get a loan for a new house asap is the question?

Well to start off I’m looking for answers, answers to questions I don’t even know how to begin if that makes sense?

I was a young stupid kid and decided to take everything for granted credit cards, not paying insurance that now collected on debt, cell phone charges for breaking contracts, and many many more things, not to mention i thought i was in heaven when i found out “”bill me later”" stuff.

So now its all adding up on me and collecting interest. I can’t afford it. The other day a credit card bill collector called me and was basically telling me they were taking me to court. I can’t afford much right now not even 25 dollars a week/month extra then what i got. I don’t have a job i’m on unemployment, trying to get ssi because of medical reasons and my house is falling into the ground.

My bf is looking into getting a VA loan because he’s a vetrain but he has not so great credit either. I guess my question is with bad credit and tryin to get a new home is it wise to cailm bankruptcy? We need this new home asap cause i really doubt my trailer is going to make it through another winter and not to mention its not healthy for my son. I also have a Student Loan not as bad as other people’s loan amounts but its 3 thousand something. I don’t know what else to do. I’ve tried reaserching as much as possible but i really need laymen terms. If this helps as far as laws or whatever goes I live in the state of Maine. Thanks for your help,

Kristina”

Dear Kristina,

That is a bit of a mess, isn’t it.

On the good news side a VA loan is a lot more forgiving of a low credit score. The big factor is to make sure that your BF has been current on his bills in the last year.

His loan eligibility will not involve you. You could go bankrupt right now and it would not hurt his chances of getting the mortgage.

Since you are on unemployment and hopefully benefits, even if you were sued and lost there is little to no money for the creditors to garnish. Most states prohibit the garnishment of unemployment except under a few limited situations.

You may be eligible for free bankruptcy assistance through the American bankruptcy Institute pro-bono project. Click here for a list of places that might be able to help you for free.

I suggest that you consider going bankrupt to clear the old debt, if your student loan is a government backed loan, go into the Income Based Repayment program to get your payment reduced, and then focus on moving forward with your life.

While you admittedly made some silly mistakes in the past, hopefully you’ve learned from them and that will help you to avoid getting into trouble again.

Big hug.

@GetOutOfDebtGuy

Source: When I Was Younger I Made Some Silly Debt Mistakes. – Kristina

Your Searches and Speed Round Answers

Steve Rhode — Mon, 28 Dec 2009 23:11:39 +0000

I was looking through the recent search phrases on the site this morning and thought I’d take a whack at answering some of them quickly so I’m trying a new approach, the speed round.

What happens if you do not answer a debt collectors who is an attorney? If you mean answering the phone, you just flow further down the collection river. If you mean answering a lawsuit, if you don’t respond, you automatically lose.
Is debt consolidaton available by sallie mae? Here is what Sallie Mae says, “Severe legislative cuts made by Congress made federal student loan consolidation uneconomical. This, combined with the credit market deterioration, has caused us to suspend participation in the federal consolidation loan program.” Here are your repayment options.
How to negotiate with credit card companies. Call them and let them know what you can afford, don’t over promise. If you want someone else to see if they can put together a repayment plan for you, click here for debt management information.
I have no money to pay car financing. That’s not good. Sounds like you’ve got two options potentially in your future, repossession or a Chapter 13 bankruptcy to try to restructure your debt. If you simply can’t make the car payment consider a voluntary repossession and give the car back. You’ll get a big bill afterwards, but you can include that in a Chapter 7 bankruptcy and discharge it.
I’m behind on car payment. Time to evaluate your budget and figure out if you can even afford the car. Most people need transportation to get back and forth to work so it is necessary. Talk to a bankruptcy attorney and see if eliminating your other debts would allow you to keep your car. Click here for a free bankruptcy consultation.
(salliemae) AND (aviation OR aviator OR pilot OR plain OR aircraft OR helicopter OR “hair design” OR “beauty institute” OR “hair institute” OR culinary OR cook OR chef OR mechanic OR “interior design” OR landscaping OR “1 (888) 2-SALLIE” OR massage OR therapy OR “culinary institute”). What in the world were you searching for? I hope you find it.
How to get free airline tickets. Have a friend give you one.
They say they can get you a loan but then cant. If that’s the case, it’s a scam.
Loan forgiveness for stay at home moms. Sorry, nope.
Should i pay off my credit cards completely? I’ll go with yes.
“american express” and “credit counseling”. Not a great mix. American Express really doesn’t play nice with credit counseling in general. American express is a “take no prisoners” creditor.
Getting in trouble with bankruptcy court. Ouch. You want to avoid that so you don’t win a free trip, all expenses paid, to Club Fed. You can go to prison for bankruptcy fraud.
401 cashout. If you are taking cash out to pay down debts, don’t.
Credit card debt settlement payment lost. Always send debt settlement checks by traceable means to prove they got it. FEDEX or UPS are the best way to go.

Source: Your Searches and Speed Round Answers

I Want to Get Out of Debt Without Ruining Our Credit. – Melissa

Steve Rhode — Mon, 28 Dec 2009 23:11:38 +0000

Melissa wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

“Dear Steve,

With the economy in such turmoil, my husband who is self-employed has had close to no work for 6 months. I went back to work and that is helping, but our finanaces are a mess. We are living paycheck to paycheck and are barely able to make our monthly payments. We had already had credit card debt and now we have had to use our credit cards numerous times to make it. We now have over $25,000.00 in credit card debt and feel helpless.

How can we try to get rid of this debt without sacraficing our credit? Although we have high limits on our credit cards our credit scores are still in good standing. Where do we start and how so we get ourselves out of this horrible mess?

Melissa”

Dear Melissa,

The only reason your credit scores are good now is because you’ve been borrowing from the credit cards to make ends meet or make the payments. In reality your credit score isn’t so good now, the credit bureaus just haven’t caught on yet.

Trying to get out of this mess without impacting your credit is simple, pay your bills off in full. But if you could have done that, you would have.

Right now you are in a deep and dark hole that is continuing to get deeper and darker each day. Saying you don’t want to do anything that might sacrifice your credit is like saying you want out of the hole without the use of a rope.

Making decisions about what you are going to do to resolve this based on your emotional attachment to “good credit” is understandable, but emotional. Logically it is much better for you to take a big credit hit and solve the problem quickly and then rebuild from it than it is to let the situation linger for years, unresolved, for fear of how it might hurt your credit score.

In a situation where there is no immediate expectation that lost income will be replaced, the most logical solution is to neutralize the unserviceable debt. The only way to legally do that in America that gives you consumer protections from collections and lawsuits is with bankruptcy.

Here is what I would humbly suggest that you do. Find a local bankruptcy attorney, make an appointment for a free bankruptcy consultation and just go in and talk to them. Learn as much as you can about bankruptcy from them and then go home, think about it, and then decide if bankruptcy is for you. Don’t exclude bankruptcy as the appropriate solution for your situation solely based on how you think you’ll feel.

Living paycheck-to-paycheck is a volatile recipe for disaster. All it will take is one unexpected expense on maxed out credit cards to sink you.

Big hug.

@GetOutOfDebtGuy

Source: I Want to Get Out of Debt Without Ruining Our Credit. – Melissa

I’ve Had My Wages Garnished on a Judgment for Years and Have Years Left at 23% Interest. – Sandy

Steve Rhode — Mon, 28 Dec 2009 23:11:37 +0000

“Dear Steve,

My wages were garnished for a 15 year old credit card taken to court in a county I never lived in and now I have paid on it for 5 years over $6,000 and they say I still owe almost $8,000 and the bill was only $5,000 with fees and interest. How can i stop them! They are charging me 25% interest per day!!!!

Sandy”

Dear Sandy,

You need to find a local attorney licensed in your state and talk to them about this situation. Something is not right here.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I’ve Had My Wages Garnished on a Judgment for Years and Have Years Left at 23% Interest. – Sandy

I Live in Guatemala and I Can’t Pay My Credit Cards. – Jose

Steve Rhode — Mon, 28 Dec 2009 22:45:51 +0000

“Dear Steve,

Hey, i live in Guatemala and i have a credit card with limit of 1k US dollars, i had use around $800, i have another one with limit of $500 wich has used around $300 i was paying around twice the minimum fee every month but then the construction company that i worked for had a problem with their payments (they work with the goverment) and we, the employees, did not receive our payments for like 5 or 6 months and when we did we received it in small payments until they were paid completely, so i was not paying anything to the credit card company for those 6 months then i made the little payments i could, after that i went to mexico for a few months to work with some relatives and didn’t have much luck making the money i needed to pay my debt so.

i already went to a couple of banks asking for a loan but i get the same answer that i have that bad credit and i can’t get the money to pay my debt, right now all i know is that a different company is handling my account and that they will take my salary if i get a job, i’m 26 and i really didn’t care to much about that not so big debt because i thought i could gather the money to pay in full but i haven’t been able to do so…

i haven’t call the new company because i’m afraid of them… when i got back i found a letter saying that i was being sued and that i couldn’t leave the country until the debt is settle, also that they would take any valuables i have and my paycheck (i’m not sure of the english word for that in spanish is “embargo”) so i’m not working right now but i want to know what i am able to do right now? can i get a job while having that? or do i need to settle that before i could apply for a job?

Jose”

Dear Jose,

What banks are these credit cards with? Were they taken out in the U.S. or in Guatemala?

If you can give me an answer I can give you a better idea on what to do.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I Live in Guatemala and I Can’t Pay My Credit Cards. – Jose

Is It Time to Walk Away From Your Mortgage in a Strategic Default?

Steve Rhode — Mon, 28 Dec 2009 22:29:38 +0000

With homeowners still slipping under the seas of mortgage default more and more are considering that walking away from the mortgage might be a wiser and more logical solution. This approach even has a name, strategic default.

A strategic default might be something to strongly consider if you owe more than your home is worth, property values in your area are continuing to drop, your mortgage company won’t give you a mortgage modification that resolves the situation, or you are running out of money to pay the mortgage payment.

The foundation for this strategic default solution is simple, at some point you need to cut your losses and move on. Think of it like a restructuring a major corporation undertakes when things don’t add up for them. If it’s good enough for the airlines and GM, certainly this approach is sound enough for little old you.

Before you do walk away in a strategic default, talk to a local bankruptcy attorney. Most likely you will need to followup the strategic default with a bankruptcy to eliminate the residual debt from the house. But the good news is that if you find a local bankruptcy attorney you like, you meet with them, and come up with a game plan on the strategic default solution and a bankruptcy, your life can begin again sooner and you can get out from under your current solution for which there may be no apparent solution.

Poll – Vote Now

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@GetOutOfDebtGuy

Source: Is It Time to Walk Away From Your Mortgage in a Strategic Default?

I Am Unemployed and Can’t Pay My Charge Card Bills. – Fran

Steve Rhode — Mon, 28 Dec 2009 22:13:50 +0000

“Dear Steve,

I was laid off a year ago and apply to jobs/agencies daily to no avail. I am using up what little money I got from a slip and fall lawsuit that I had to accept a horrible offer on which is my small savings acct. and I am really scared – once it’s gone, I can’t afford my mortgage for my small condo, car ins., living expenses and a horrible $600/month health ins. cobra pymt!

I was told I can’t modify my mortgage since I am unemployed. I have no where I can go, can’t sell since I owe more. I have not paid any of my charge cards in 8 months, since I can’t afford it. I am afraid to go bankrupt at 50 years old, my mortgage adjusts next May…..OMG….I can’t sleep at night, my phone rings constantly from creditors, I am so depressed, worried, anxious. I am on the ext. of unemployment which ONLY covers the mortgage and soon that will end. What do I do? Help me!

I am unemployed, using my savings to live and unemployment and can’t pay my charge card bills, what do I do?

Fran”

Dear Fran,

First, take a deep breath, I’m here now. We can work through this together.

The stress is amplified by the fear and collection pressure you are under. That stress leads to depression if unchecked and depression leads to inactivity and inactivity leads to you just waiting for all the bad stuff to happen to you.

First, forget paying on the credit cards. They are not a priority debt. Your mortgage, utilities and health insurance is much more important. But even then, you are running out of savings and the unemployment is going to stop soon, you say.

So, everything aside, the number one priority is to find a replacement for the income. If there is nothing available in your area, you need to move to a place their are jobs. Some parts of the country don’t have enough applicants for all the jobs available. Take North Dakota for example. The unemployment rate there is 60% lower than the national average.

At 50 you don’t need to worry about feeling like you are at the end of the road. I hear 50 is the new 30 since we are all going to be working till we are 90.

If you decide that relocating before you run out of cash is the way to go then stop paying your mortgage. The best approach will be to tidy up all this unmanageable debt with bankruptcy so you can get a true fresh start some place else. But the key here is if you’ve waited too long and used up all your available cash. Hopefully you have enough to move and pay a deposit on a rental unit someplace else. You’ll also have to pay for bankruptcy.

And bankruptcy will stop the collection calls and leave this debt behind you. Your credit can get rebuilt once you have income coming in again.

Poll – Vote Now

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I Am Unemployed and Can’t Pay My Charge Card Bills. – Fran

I Had a Western Michigan University Credit Card. I’m Now Getting Sued On It. – Martha

Steve Rhode — Mon, 28 Dec 2009 21:57:44 +0000

“Dear Steve,

I am being sued by a debt collector/attorney’s office on an old WMU credit card account which was closed over 2 years ago. I’ve told them in writing that I have no income other than unemployment and no assets. My court date is scheduled end of January. This week I got a letter from them “subpeoning” me to come to their office and swear out answers to their list of questions as to whether I truly owe the debt. Is this something I am obligated legally to do or is it a ploy to put pressure on me to sign their paperwork before court?

Can a debt collector/attorney “subpeona” you to their office to swear out that you owe a debt to them?

Martha”

Dear Martha,

Depending on where you live, yes they can.

I asked an attorney friend about your question and here is what they said. “Sounds like standard discovery procedures, and my guess is that yes they can do that, just like the consumer is free to do to them. But I don’t know what state it’s in, or what evidence the collector might have, so I would suggest that the consumer either contact a lawyer in their state, or try to look up the state rules of civil procedures on their own, which they will likely have to do since they have no money.”

There is no substitute for good legal advice. Please find a licensed attorney in your state and seek their advice.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: I Had a Western Michigan University Credit Card. I’m Now Getting Sued On It. – Martha

The Car Dealership Wrote Off My Loan I’m Paying On. – Kyran

Steve Rhode — Mon, 28 Dec 2009 21:30:51 +0000

“Dear Steve,

I had an auto loan through a buy here/pay here dealership. Paid way more for the vehicle then it was worth. With just over $6,000 to go on the loan, I noticed on my monthly credit report notifications that the dealership had wrote off my loan, terming it bad debt. This is ridiculous since the last payment I made was done 20 days prior to this.

What are my options? I did not receive ANY notification from the dealership that they were doing this. Do I have any rights in this matter?

Kyran”

Dear Kyran,

First we need to start with some questions and then some investigation. Have you always made your payments on-time and at least the minimum amount due? Have you ever missed a payment and not caught up on it?

I want you to call the dealership and ask them why the loan is reported as charged off. Honest mistakes happen all the time and if you are in compliance with the loan agreement then they can simply update the reporting of the loan to the credit bureaus and that will be that.

Make sure you have looked at a consolidated credit report to see which of the three main credit bureaus is reporting this error.

If you’ve made all your payment on-time this issue is unfortunate, but can be corrected.

Big hug.

@GetOutOfDebtGuy

P.S. Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Source: The Car Dealership Wrote Off My Loan I’m Paying On. – Kyran

Dave Ramsey and His Un-Truth About Bankruptcy

Steve Rhode — Mon, 28 Dec 2009 21:23:31 +0000

So here I am, minding my own business and what does divine intervention deliver in front of me, a link to The Dave Ramsey page titled the Truth About Bankruptcy.

I really wonder if Mr. Ramsey actually believes some of the rubbish he prints. Sometimes it seems to me he is so vested in his old points of view that he has not updated and revisited them.

Dave Ramsey says, “If you’re facing the prospect of bankruptcy or in the middle of it right now, you know it’s a living nightmare. It can devastate your job, destroy your marriage and steal your peace of mind.

Bankruptcy is not something I recommend any more than I would recommend divorce. Are there times when good people see no way out and file bankruptcy? Yes, but I will still talk you out of bankruptcy if given the opportunity. Few people who have been through bankruptcy would report that it is a painless wiping-clean of the slate, after which you merrily trot off into your future to start fresh.

Don’t let anyone fool you. I have been through bankruptcy and have worked with bankruptcy for decades, and it is not a place you want to visit. Bankruptcy is listed in the top five life-altering negative events that we can go through, along with divorce, severe illness, disability, and loss of a loved one. I would never say that bankruptcy is as bad as losing a loved one, but it is life-altering and leaves deep wounds both to the psyche and the credit report.” Source

I’ve been through bankruptcy myself, just like Dave has and I’ve helped people since 1994, nearly as long as Dave Ramsey has but my experience is exactly the opposite when it comes to bankruptcy. As far as I can see, most of the negative press and stigma about bankruptcy comes from fear mongering about a process that is legally sanctioned and permitted under the law. In fact bankruptcy is initiated by the consumer with the blessing and cooperation of the courts.

Are some people traumatized by bankruptcy, yes. But the largest source of those fears is the very stuff Ramsey and other debt advisors blurt out without considering the consequences. In my experience, once you make sure the individual is a s fully informed as possible about the bankruptcy process, the fear is greatly reduced and the knowledge that the person is now protected under the law from creditors is comforting.

It is very easy to repair credit after bankruptcy. I would argue that if it takes you years to avoid bankruptcy and limp along paying what you can under the Ramsey approach, that your credit remains worse for longer.

I would no more talk anyone out of bankruptcy than I would talk them into years of on the edge financial living, encouraging themselves to be sued and remaining in the pain and stress of money troubles. Honestly, which is more cruel?

Seriously, people need to stop drinking the Dave Ramsey Kool-Aid at times and investigate all debt relief solutions for themselves so they can make an educated and informed decision.

If someone is looking forward to remaining in collections, being sued, ruining their credit for much longer and struggling for years to repay their debts, that’s their own choice. But if repaying the debts is the end game that Ramsey wants people to achieve, why not recommend people to get the protection bankruptcy has to offer and still repay your debts in full. There is not one thing that prevents that. In fact with that approach the interest rates go to 0% and the total amount paid is much less than with the Ramsey punishment approach.

Let’s look at the individual approaches:

Bankruptcy:

You get legal protection from creditors.
Lawsuits are stopped or prevented.
Judgments and wage garnishments are stopped.
Interest is stopped and goes to 0%.
You can return faster to being able to save an emergency fund.
Your house can be saved from foreclosure.
Your car can be saved from repossession.
A repayment plan can be created based on what you can afford.
Debt collectors not legally able to contact you.
Credit rebuilding starts faster.
Depending on how far you are behind on your debts bankruptcy can actually increase your credit score.

The Dave Ramsey Punishment Method:

Collection calls continue.
Debt collectors continue to chase you and may even call your job or neighbors.
Your credit remains trashed.
Lawsuits can be filed for not paying your debts as agreed.
Your wages can be garnished.
Interest is increased on past due accounts.
Additional fees and penalties are charged on past due accounts.
Original balances can increase significantly due to fees, penalties and increased interest.
Your home cannot be protected from foreclosure.
Your vehicles cannot be protected from repossession.
You can’t effectively rebuild your credit until all the past due credit has been satisfied.

So please, do yourself and me a favor, if you have ruled bankruptcy out because Dave Ramsey has scared you about it, you owe it to yourself to click here to find a local bankruptcy attorney you like. Go talk to the attorney and get yourself educated about bankruptcy and what it is really like. Once you do that then you can make good decisions based on knowledge, not fear.

Poll – Vote Now

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

@GetOutOfDebtGuy

Source: Dave Ramsey and His Un-Truth About Bankruptcy

California Union University Accused of Being Front for Immigration Scam

Steve Rhode — Mon, 28 Dec 2009 17:23:17 +0000

The owner and operator of California Union University – a purported university in Fullerton whose Web page is literally just one page – is due in court today to face federal charges that his school is actually a front for a visa fraud scheme.

Samuel Chai Cho Oh, 65, surrendered to Immigration and Customs Enforcement agents Tuesday morning, after a 10-month investigation into the school, which purported to offer courses in four areas: Biblical studies, English as a second language, Oriental medicine, and martial arts.

California Union University held phony graduation ceremonies as part of a visa fraud scheme, authorities said. Immigration officials blurred the faces of students participating in one of the fake graduations.

The school’s federal certification to accept foreign students was revoked in October, authorities said.
Immigration officials allege that Oh collected $40,000 to $50,000 a month from “students” that received visa application forms in exchange.

At the school, students rarely if ever attended class and there were no teachers seen, immigration officials said.
Oh even staged graduation ceremonies and handed out phony diplomas, authorities said.

In March, immigration agents and officials from the Student and Exchange Visitor Program paid a surprise visit to the CUU campus at 905 S. Euclid St. The school had more than 300 students on its rolls, but Oh could only produce schedules for a few computer and English classes, officials said.

According to an affidavit filed in the case, officials arrested and interviewed more than 30 students, who said they paid from $600 to more than $10,000 for documents needed to get a visa, and never actually attended class or saw teachers at the school.

Source

@GetOutOfDebtGuy

Source: California Union University Accused of Being Front for Immigration Scam

We Are About to Lose Our Home and My Husband Won’t Talk to Me About It. – Jeanette

Steve Rhode — Mon, 28 Dec 2009 16:54:41 +0000

Jeanette wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

“Dear Steve,

We are about to lose our home $10,000 in the hole my husband has not talked to me i just found out in the mail he takes care of the bills he lost his self employment is now working for someone else I know this is a big change for him a big pay cut I know things are on his mind bad he don’t talk just says there is alot on his mind my husband has done things for our family for 32 years I would like for him to know there is help how do we hold on.

Jeanette”

Dear Jeanette,

These are difficult times for proud people. I suspect that your husband is stuck in the first stage of debt, denial.

He sounds like he is working hard to try to make ends meet, probably so he does not disappoint you and let you down.

There are two courses of action you could take. The first would be to sit down with him and let him know you are aware of what is going on. You would like to help to be part of the solution and you are willing to do whatever you can to work to find a solution for the problem.

The second approach would be for you to get a copy of your consolidated credit report. The link is for the one I use myself and love. You could then uncover what the true condition of your financial situation is and sit down with that information and tell him you’ve got the facts and you are going to take over dealing with the creditors.

I prefer the first approach. A solution based on communication and understanding works better than one based in confrontation.

Once you do that, come back and give me an update in the comments section. I’ll help you from there but we need him onboard first before we explore solutions.

Big hug.

@GetOutOfDebtGuy

Source: We Are About to Lose Our Home and My Husband Won’t Talk to Me About It. – Jeanette

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