How do/did you handle severe debt?

[ArtisticAspie]

So for a long time now, I've been struggling with massive credit card debt and it seems like an uphill battle. Since January of 2015, I have come very close to filing for bankruptcy numerous times, but never did. For one thing, I don't want to be haunted by that stigma even for a short period of time, and secondly, even though the debt has been high, it has never really felt unbeatable to me. I have always felt like I could pay it down just fine and eventually get rid of it the old fashioned way.
Has anyone faced this type of situation before? Did you pay it down until it was gone or did you go the bankruptcy route? Did you regret your decision or did it feel like the right thing to do?

 

[Momo]

Me? I just moved all my money to an offshore bank, left the country and became an international criminal *joking*

One thing you could do is create a better financial plan and set a stricter budget, or ask for outside financial help in managing your money. Not that I can say I'm the best at managing money But if you think you can beat the debt then it's worth sticking it out. Some old-fashioned elbow greese might just be what you need.

 

[xudo]

Welcome

I don't have any personal experience of debt, but is there anywhere in your area that is available to give advice about debts? I know in the UK, we have organisations who can offer help and advice about debts and financial planning for free, so maybe look for something like that.

 

[WereBear]

I would advise you to stop worrying about the "stigma" of bankruptcy. Business people don't... they open and close companies and end with a bankruptcy with the ease of changing their underwear. In addition, credit card companies charge rates that used to be illegal. Why should you pay them for bribing their way into cheating people out of money?

In our case, using credit cards to pay for Mr WereBear's treatment that his insurance refused (and thank goodness, it worked!) we would have our due dates switched around and then they would jack them up more. That's not right, either.

This is in the US, so adjust for your situation, but usually consulting a bankruptcy lawyer will give a free consultation and tell you their professional opinion about how best to handle it. Yes, you borrowed the money, but the interest -- the loanshark level of interest -- is probably not what you agreed to.

Who would know? Who would care? Don't be a sucker again, all I'm saying.

The level down is known as "Debt Consolidation" where you get a non-profit (this is very important) group to negotiate with the credit card company to lower interest rates, and come up with a monthly budget that includes paying them down, and it actually happens in a couple of years and you come out of it with stellar credit ratings. That is what we wound up doing.

Money is a rigged game these days. Use the few tools we are still allowed to use

 

[Suzanne]

By taking over the accounts actually, which I honestly thought would be beyond me, since I am terrible with numbers, but with the help of my God, day by day, I learn something new and get better and better, to the extent that no longer are we in the red and thus, no charges for spending the overdraft. Hubby is pretty good in some areas, but certainly hopeless when it comes to recognising to have a successful accounts going on, one must be constantly on the ball. He bemoans that our password of online banking keeps needing changing, because I go in every day, but well, one has to go in every day, when direct debits are coming out and we spend on top of that.

I venture to say, that if we need to take out another loan, we will get a better deal, because of constantly being in the green, which shows that we are capable of holding our own with finances.

I admit to feeling very proud of this, because when you are hopeless with maths, it is some achievement.

 

[The Penguin]

I would advise you to stop worrying about the "stigma" of bankruptcy. Business people don't... they open and close companies and end with a bankruptcy with the ease of changing their underwear.

Depending on the type of ownership of the business, this might not effect the person personal credit score. For those people fall in that category, they don't worry as much.

But I'm assuming this post is a about personal credit, so if this is the case, it takes many years to get credit score back to normal if the person ever to archive this after going bankrupt.

 

[WereBear]

But I'm assuming this post is a about personal credit, so if this is the case, it takes many years to get credit score back to normal if the person ever to archive this after going bankrupt.

Except... as soon as a person declares bankruptcy, they are inundated with credit applications. Ironically, they are now seen as an excellent risk because they cannot declare bankruptcy for several years.

 

[Keigan]

Everyone I know has filed for bankruptcy except for myself. It is old news.

 

[Judge]

But I'm assuming this post is a about personal credit, so if this is the case, it takes many years to get credit score back to normal if the person ever to archive this after going bankrupt.

These days credit problems apart from declaring bankruptcy don't preclude someone for accruing even more debt, depending on who is willing to extend credit to them and under what terms. Unfortunately the economy has come full circle. Not in terms of prosperity so much as with lenders willing to extend credit to those who have no business seeking it.

Subprime lenders won't likely care what your credit score may be. Bankruptcy won't necessarily be a "deal-breaker" either. For them it's just a matter of whether you can carry the interest or not. Based on your existing net income and little else.

History is poised to repeat itself. Especially with lame constraints like Dodd-Frank and a repealed Glass-Steagall Act which should never have been repealed in the first case.

Wells Fargo edges back into subprime as U.S. mortgage market thaws

 

[WereBear]

History is poised to repeat itself.

Little did I know when I was studying the previous Gilded Age that I would be living through the next one

 

[Judge]

The longer one agonizes over accrued debt they mathematically cannot overcome, the more interest that goes into a lender's pocket.

The only way to get out and stay out is to declare whatever form of bankruptcy fits your needs and to refrain from obtaining any line of credit no matter what the terms. To learn to live solely on your actual rather than perceived needs.

 

[The Penguin]

This was a period of my life I had trouble having stable employment and once reached to $25,000 of credit card debt at 20% interest. When I got this full time job 6 years ago, I was able to get a loan from the bank at 8.6%. To get the loan, the bank said I need to give up all my credit cards with the exception of the credit card from their own bank. I told them I want a lower interest rate on my credit card since the competitor credit card account they want me to close have a lower rate. They was able to match close to the competitor rate. With this loan, it was a 5 year term making a payment of $500/month.

I have managed to pay off this debt in full at the end of the 5 year period. If I would have made the same $500 monthly payment on the credit cards at 20% interest, it might taken at least 15 years to pay things in full.

Though I have got myself into new debt, because I never missed a payment and did paid my loan in full, my rate for my credit card is now 7.5%. The new debt was cause by another gap of my live not having stable income. I'm happy I have a stable income again and ensuring my best my life stays this way.

One thing I learned that got me into more debt is the credit card insurance that will cover minimal payments for you during a period you don't have an income. Many banks charge you 1%/month for this service. What they don't tell you, your paying an additional 12% interest per year on top of your credit card rate. So if you have a credit card of a rate of 20%/year and you get the 1%/month insurance, your now paying 32%/year on interest. If I didn't opt in for this insurance, my debts could have been paid off sooner.

I'm very glad I was able to prevent bankruptcy even though I was at risk of this many periods of my life.

 

[The Penguin]

Subprime lenders won't likely care what your credit score may be. Bankruptcy won't necessarily be a "deal-breaker" either. For them it's just a matter of whether you can carry the interest or not. Based on your existing net income and little else.

True. But wow

These days credit problems apart from declaring bankruptcy don't preclude someone for accruing even more debt, depending on who is willing to extend credit to them and under what terms. Unfortunately the economy has come full circle. Not in terms of prosperity so much as with lenders willing to extend credit to those who have no business seeking it.

Subprime lenders won't likely care what your credit score may be. Bankruptcy won't necessarily be a "deal-breaker" either. For them it's just a matter of whether you can carry the interest or not. Based on your existing net income and little else.

History is poised to repeat itself. Especially with lame constraints like Dodd-Frank and a repealed Glass-Steagall Act which should never have been repealed in the first case.

Wells Fargo edges back into subprime as U.S. mortgage market thaws

Yes but I was talking more about restoring a good credit score to get good rates for loans and credit cards and more so the traditional way. But you did brought up interesting elements.

 

[Pariah Dog]

I would recommend listening to personal finance guru, David Ramsay. He has a radio show which I often listen to as my job involves a fair amount of driving. It's mostly a call in radio show. He teaches with the heart of someone who wants to help everyone he can and does so with an armoury of knowlede. There is a Christian element to the show which may turn some off but he is not preachy about it. That only comes up when relevant or is directly asked something in relation to it.

It's the way I live my life. I am debt free and I will never finance a car or anything at all asides from a mortgage.

I think his show has a pod cast or some way to stream if your interested. He often mentions questions on Facebook or twitter. I use neither of those because it's just so... social.

 

[ArtisticAspie]

Wow, some really good answers here. I strongly believe that I am going to find a new, maybe even secondary source of income while I continue to pay my accounts down, in larger amounts this time around.

My reasoning for getting into debt was half due to personal, beyond my control matters, and the other half was due to some investments that I made mostly out of desperation, because I was nearing my 30s and realized that I had not achieved any of my life goals, having been a lifelong prisoner of "Neurotypicalopolis" (though I didn't know it at the time).

And Pariah Dog, I feel the same way about your last point. heheheh

 

[Crossbreed]

We definitely went the bankruptcy route (2004?). Afterwards, we re-evaluated our spending habits and made necessary changes.

We had a single joint account. I paid bills with it and my wife bought household items as she felt that she needed to. We quickly lost track of our spending and got into credit debt trying to bail ourselves out. My wife's memory problems only made our situation worse.

After the bankruptcy, she agreed to let me be the gatekeeper of our pooled finances. I restructured our banking practices by opening multiple checking & PayPal accounts* so we could keep better track of each fund and not both draw them down at the same time. With her memory problems, she doesn't write paper checks. She either deals in cash or uses check cards (that won't let her overdraw her available funds). Only her accounts are joint accounts, so I can add funds to them. (I don't withdraw from them without her permission.) The rest are in my name only.

You can read the gist of it on THIS THREAD. Using online banking, I automate as many processes as I can and tweak them as needed. We are out of the bankruptcy period and our credit scores are now both around 757.

(I have a similar arrangement for my sole-proprietary businesses.)

*It is a very compartmentalized approach.

 

[Judge]

Good to see some success stories over such a predicament, yet clearly different paths were taken in the process. Simple point- whatever works best for you. That there are options, even in the face of financial disaster.

Well done.

 

[Judge]

When she got credit cards it even became worse, as she was spending someone else's money without any thought to paying it back.

That's my brother. He ended up racking up over $53,000 in credit card debt. At one point he was so over his head he said he just didn't care anymore. Eventually he did file for bankruptcy.

Awkward considering how proud I am of my mother who taught me the value of consumerism and saving money on general principle. For whatever reason it just didn't set in with my brother.

 

[Judge]

That's about what my credit card debt-load was when I filed. Fortunately, in Florida I was able to keep my house and car, so the other debts were wiped out. I'm not proud of what happened, but as I said, I probably paid the original principle off three times. I honestly didn't understand how credit cards worked . . . or how crooked they are.

So true. Credit can be a great convenience if one is prepared to routinely pay off the balance monthly. However for some, the idea of buy now and pay later is just too tempting in a society often weaned on instant gratification. Where interest charges can quickly overwhelm most folks and bury them in a balance that just balloons with time. Unfortunately as well for some that the Internet is one tempting marketplace.

The trick to me is simply to never lose track of a philosophy of living exclusively within your means. Kind of like being on a permanent "diet" of sorts.

 

[The Penguin]

Once you are out from under it, you never want to be there again.

Yes that a point I want to reach in a few years. I find the only way to reach this goal is ensure I have continuous employment.

Next year will be a good year for me. After paying off my business loan, I don't need to make $200/month monthly payments anymore. I will then use this extra month to put more money into savings each month, and pay off more personal debts.

We use cash to buy most things, and when the money is gone, it's gone. We still have credit cards, but only use them for big ticket items, appliances and travel and things of that sort.

I do similar. I use my cash back card and ensure the balance is always paid in full to ensure I never pay interest and take advantage of the rewards. Already got $50 cash back within 3 months. I'm very aware what money have access to so I can always ensuring I pay zero interest.

Sometimes I get stuff on a payment plan such as my BBQ and tent I got last year for camping. The monthly payments is $50/month for a year with zero interest and zero admin fee. I ensure this $50/month extra expense will not throw me off with other expenses. In 3 months it will be paid off in full.

I decided I'm avoiding doing financing that haves an admin fee. My laptop for my business was the last thing I bought had that a admin fee. Best Buy Canada use to have a decent admin fee until Desjardins took over the credit line and double the admin fee.