Man, I need your guys help. Credit card debt is out of hand.. Suggestions?

coltyhuxx

coltyhuxx

CAGiversary!
First time in my life. My job cut my hours and there were some other problems. Sucks. I need to get on a payment plan. Have any of you had a successful run in reducing your debt? I was told if I get on a payment plan with my bank (Bank of America) I will take a significant hit to my credit history. Up until now, I've never missed a payment and I have good history. I'm wondering if there are any good agencies that can help with this sort of thing? Is it better than going through my bank?
 
You're gonna hafta make a lot of sacrifices* but yeah, it can be done. Google "debt snowball effect". But a lot of people aren't willing to make that choice and just go further downward in a spiral of self-destruction. Don't be one of them.

*sell non-essentials such as expensive clothes (except for a suit if you have one since you can use it in job interviews), flashy cell phones (you can get by w/ prepay phones), big screen tvs (sorry, but HD is still a luxury) and yes, even video games (you can find games to play on your laptop).

*learn to live on a cash-basis; if you can't pay for it in $$$$, then you don't buy it. Simple.

*if you've got a family to take care of, tell them they'll have to make due w/o a lot of goodies. Only critical survival items such as food (and buy in bulk) & toiletry (and not the expensive shit) will be bought until your debt is managed.

*keep your laptop/computer as it's essential in our networked world (especially for updating resumes & searching for new jobs) and it can stream shows, movies & games so you can still get your HD entertainment fix if need be.

*shop at a salvation army or a 2nd hand clothing store & make friends w/ someone going to school for clothing design & above average fashion sense; you'd be surprised at how fashionable you can still look wearing tailored pants for $2

*if you work out, use a public park's jungle gym (when kids aren't aren't around cuz then you'd be seen as the creepy park pedo) or basic calisthenics/pylometrics you can do in your basement

There's a lot more stuff to tell but that should be sufficient to get you going.
 
My experience taught me that there is no "easy" way to get out of credit card debt. All of those debt consolidation places turned out to be a farce, most of which couldn't reduce our interest rates. Even worse, these supposed "non-profit" agencies charged a monthly service fee. Frankly, I'd rather use that money to pay down my balances.

In the end, my wife and I paid off the debt on our own. We cut back on our spending and luxury items and sent every possible penny to our creditors until our debt was paid off. We also planned special rewards at various intervals (every $2,500 in debt paid off for example) so we would be motivated to continue working hard. We also closed our credit accounts as we paid them off and only kept one card. It was hard work (took over a year to pay off 20k in debt) but the sacrifice was definitely worth the reward.

EDIT: As JayKrue mentioned, the Snowball effect is the way to go. That is how we paid off our credit card debt.
 
contest everything on your credit report. they can be removed if the creditors dont respond within the allowed time.

if that doenst work, call them and ask how much they will settle a debt for, right now is a great time for that, they will settle for a fraction of the actual debt. especially if youre dealing with collection agencies.
 
jaykrue's advice is hard, but very sound. Listen to him. And he knows his financial stuff, so if he offers more advice, do that too.

Do stay away from debt consolidation. Just start putting whatever money you can towards the debt. And don't fall into the trap of, "Oh, this is such a great price! It will never be that cheap again." or "This won't be available by the time I'm out of debt, just this one time is okay..." There will always be things you want, if you do it once, you will keep justifying purchases here or there that you can't afford.

And I have heard of companies that buy up people's debt, then pay it off in bulk at (i.e.) 25% of the value (since most people would just file bankruptcy eventually anyway, most creditors are happy to get any money back) and then the company only charges you (i.e.) 50% of what you owed originally. It's a win-win. But I think you have to have the reduced amount (50%) up front, and I'm not sure if that's an option for you.
 
Thanks for the responses thus far. It's a fairly embarrasing topic to post, but I figure who better than my miser-loving community to ask.

I've never had significant debt before so I'm a little freaked out right now. Something someone mentioned to me is that I may be able to borrow against my retirement. (I work for a University)... I'm less worried about my finances down the road as I will have some monies gifted to me by that point. I wonder if this is a bad idea though? I hear it's heavily taxed. If I could pay off a chunk of my CC debt, I feel like I could make double the minimum payments, instead of the minimum.

Side note: has anyone done Turbo Tax on-line? I heard they can direct deposit very quickly (a week or so?)
 
I wouldn't borrow against your retirement. There's a dude named Dave Ramsey that you should maybe check out. Basically, he says live off of rice and beans, pay off the little debts first, then use all of that money to pay off the larger debts. I think it's called debt snowballing, or something like that. It sounds like a good plan.
 
DO NOT borrow against your retirement. You are going to pay a massive amount of penalty and tax if you do this.

What kind of debt are we talking about here? Credit card debt?

It's a shame that people feel financial topics are so taboo nowadays, yet have no problem talking about anything else.
 
This depends on so many things.

What's your income look like, obviously cutting hours are bad, but what are you taking home after rent/mortgage, utilities, gas, etc?

How much is your monthly payment minimum? What are you paying now? What's the APR?

And how much debt are you in, and how long have you been accruing this debt?
 
[quote name='coltyhuxx']Thanks for the responses thus far. It's a fairly embarrasing topic to post, but I figure who better than my miser-loving community to ask.

I've never had significant debt before so I'm a little freaked out right now. Something someone mentioned to me is that I may be able to borrow against my retirement. (I work for a University)... I'm less worried about my finances down the road as I will have some monies gifted to me by that point. I wonder if this is a bad idea though? I hear it's heavily taxed. If I could pay off a chunk of my CC debt, I feel like I could make double the minimum payments, instead of the minimum.

Side note: has anyone done Turbo Tax on-line? I heard they can direct deposit very quickly (a week or so?)[/QUOTE]
Don't ever try borrowing money to pay off debt because all you would be doing is creating more debt in a different place. Best thing to do is to work with what you make now instead of your retirement money because in most cases once you borrow it you have to pay taxes on it now which will be at a higher rate then when you use it later. Remember, debt wasn't created overnight so it is going to take some time to get rid of it.
 
[quote name='RAMSTORIA']contest everything on your credit report. they can be removed if the creditors dont respond within the allowed time.

if that doenst work, call them and ask how much they will settle a debt for, right now is a great time for that, they will settle for a fraction of the actual debt. especially if youre dealing with collection agencies.[/quote]

Hi Ram, what do you mean, "settle a debt."?
 
Sometimes you can call them up and say I owe you x, but I can give you y right now. I'm not sure how it works, or what channels you have to go through.
 
This is all credit card debt. I don't have any other type of debt (don't owe for a car or home or anything). As of last month I was able to increase my monthly income by about $500... so I'm pulling in around $2400 or so, after taxes. I had a very rough last year and a half, with massive cutback in salary and we lost a key subletter in our house as well as some other bad decisions that I have to own up to. I also was counting on an inheritance that is going to be held up for many years. (Insert head into palm of hand -- so stupid of me to count on that.) My credit card debt is massive. Around $15-17k. The most I'd ever had before was around $3... I have a lot in retirement, eight years worth of voluntary contributions as well as what the univeristy puts in ... If I could halve my amount I could make double the minimum payments. I guess I need to investigate how bad the penalties are... aren't you paying the interest to yourself, though? So, isn't it not quite as bad as taking out a loan to pay a loan?

I'm clearly not in the know, so just asking. I really appreciate the information guys.

I do have a lot of collectibles I could sell on ebay and we have a post office in my building.. Is it pretty easy to sell on ebay?
 
[quote name='coltyhuxx']Hi Ram, what do you mean, "settle a debt."?[/QUOTE]
For example, say you owe Company A $2000 but you can't afford to pay that much what Company A might do is settle your debt for $1200. Which means once you pay off the $1200 your debt is cleared with Company A.

A lot companies are doing this so they can at least get some money from those that owe them.

Since it is credit card debt you can call them and talk to them about your situation to see if you can get some of the interest knocked off to help pay off the debt to them and if all possible create a payment plan that you can stick to.
 
Never, Ever, Ever, Ever, Ever, Ever, Ever take money out of retirement funds. As was said before, the tax penalties are so extreme you'll be taking out pennies on the dollar.

For now, I would say invest all of your take home money after expenses into your CC bills, and cut any unnecessary expenditures (buying lunch, going to restaurants, going to movies, buying new games/DVDs, etc) until you get your debt back under control.
 
[quote name='lordwow']Never, Ever, Ever, Ever, Ever, Ever, Ever take money out of retirement funds. As was said before, the tax penalties are so extreme you'll be taking out pennies on the dollar.
[/quote]

OP, remember this too.

Right now, your retirement funds are more than likely hurting the most they have ever been, especially if you've been contributing to them for over 8 years. If you are like most other people, you've probably lost anywhere from 25-50% of the balance of these accounts over the past 9-12 months. Now, along with those losses, you are considering cashing out and taking even more of a loss, due to tax and penalties. This is a TERRIBLE move.

First and foremost. Do you have a budget that you stick to?
 
Everyone has sound advice. Here's some of my own:

Talk to the companies you have a relationship with. Cell phone companies and insurance companies desperately need your money so they might be amenable to lowering your rates if you've always been paying on time. Use that extra money to pay down your credit cards.

Pay more than the minimum payment. It'll take you years to pay off the cards if you just make the minimum.

Talk to your credit card companies. See if they'll lower your rates. Let them know that you're having tough times and you'd like to be able to pay them back in full.
 
[quote name='coltyhuxx']Side note: has anyone done Turbo Tax on-line? I heard they can direct deposit very quickly (a week or so?)[/quote]

Yes, I have used Turbo Tax Online for the last five years. The direct deposit for federal is usually in your account between 6-8 business days in my experiences.

Like others said, taking money out of retirement is something that should only be done in EXTREME emergencies, and only when no other option is left.
 
[quote name='cdeener']For example, say you owe Company A $2000 but you can't afford to pay that much what Company A might do is settle your debt for $1200. Which means once you pay off the $1200 your debt is cleared with Company A.

[/QUOTE]


exactly, a lot of companies are more than happy to do this. but its usually something reserved for very delinquent accounts or collection agencies. if youre just a couple of payments behind on your visa its very doubtful that theyll offer much of an offer. but if you havent paid for say 12 or 18 months then they will be more willing to do this because they at least get something out of it instead of nothing like they would if you were to declare bankruptcy.

edit: also, if you have debt collectors that are hassling you a lot, go to walmart, pick up a prepaid cell phone for about 40 bucks and give them that number. that way they only call that phone instead of bugging you at home, work or your personal cell.
 
Yea, I've never missed a payment. In fact they said they were unable to reduce my interest rate... which is pretty high for part of the balance. I wonder if I can get some 0% transfers to rival companies (being that banks are acting fairly guarded right now with those offers).
 
you probably cant settle then. but you certainly can balance transfer and thats not a bad idea at all, you could save hundreds on intrest alone. if youve been making payments i would assume that your credit score is good enough to open a few new cards, transfer, and close the old ones.
 
You can always settle with a credit card company if you don't mind taking a hit on your credit.

All you do is call them up and say "Well I can't pay what I owe you anymore, you can either have a delinquent account on your hands that never gets paid or take half (or 1/4) right now." The only downside is you probably need to have that half or 1/4 right then.

I knew a guy that did this because he didn't mind taking a hit on his credit to get out of paying 10 grand.

Also, balance transfer the shit out of your debt. Keep doing it, indefinitely, to cards with 0% interest promotions that don't charge balance transfer fees.
 
The advice here is very good. Snowballing is working (I have almost $60,000 in debt and am paying it down using this method to good results). Definitely cut down your unneeded expenses, sell off whatever you can that will get you extra money (video games that you don't play, etc.) because think about it. Most credit cards charge like 20% or more in interest. Once you pay off your debt, you can buy back those things you sold (probably for less than you sold them for in the first place). It's hard but having those things you don't need basically is charging you extra interest...so sell what you don't need. You'll get some much needed cash to float you a bit and will clear up space too (it's quite liberating to de-junk).

Oh and Turbo Tax does typically take a week or two to get money to Direct Deposit. Very fast indeed. I've done it the last few years and have been very happy with the results. Best of luck! Be sure to put most of your refund towards those CC's. We're in the same boat :)
 
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