Debt Consolidation

**sv2007** · 07-31-2016, 08:22 PM

Hey, if you can't handle it, just file bankruptcy again while it's fresh in your mind. Then just repeat the cycle every few years. Don't get scared? Why even get scared? Or did you borrow from the mob/peer-to-peer?

There's no reason to get scared or lose sleep. Think of it this way, nothing will change when you are scared or can't sleep; so why not live happier and not be scared and sleep well.

**NewBeginning** · 08-01-2016, 09:44 AM

I guess that's a possibility. I just didn't want a judge looking squirrelly at us for doing it a second time. We had to before due to our previous divorces from our other spouses and this time I've had to have 2 surgeries in the last year and my hubby lost a very good job due to downsizing. I guess I just wanted to try to be decent about it and work with debt consolidation companies but if I can't pay that back what's the use? Just frustrating to know we're at this stage again. Thanks!

**disneysteve** · 08-01-2016, 09:59 AM

Are the student loans eligible for deferment based on financial hardship? What about income-based repayment?

You said, "the debt is climbing" which concerns me. Are you guys still taking on new debt to cover expenses?

So you have 11K in CCs and 18K in student loans. That's 29K. How much are you earning at this point? Is there any other debt? 29K isn't a horrible amount of debt if you both have stable jobs at this point.

**bjl584** · 08-01-2016, 10:09 AM

We need more info.

Income? Expenses? Own or rent?

Remember, there is no debt prison. Your score will get trashed, but if you must, then prioritize who gets paid. Keep a roof over your head and food in the pantry.

Can either of you increase income? Cut expenses back?

Listing a total monthly budget with all income and expenses would be helpful.

**NewBeginning** · 08-01-2016, 02:00 PM

Hi! Right now our jobs are stable yes. Thanks for replying. This is what I was looking for. My student loan is not eligible for dismissal - I wish. We are not taking any new debt no. Just trying to pay down the old. I brng home about $1200 monthly hubby about $1800. Rent is $700. He has a car payment and I have about 3 months left on a titled loan for my car which will be a clear title. Our expenses are rent, water, electric, food, pet expenses, gasoline (hubby works out of town plus we have 7 acres to mow), car insurance, health insurance, payment on washer\dryer that blew up, WIFI\Cable bare minimum, trash pickup, fuel oil in cold months, fireword as well, student loan, and credit card payoffs.

This is why I'm asking about debt consolidation and if it works. We are barely above our heads and if the debt can be reduced I was asking for tips about it and if anyone has done it. Like if there is a massive fee to do it and how soon would they begin working? I'm behind on 2 cards about 2 months and the calls are starting.

Our expenses are running about $2800 at full capacity. We cringe when we know we may have car trouble coming and when the grandkids come over there isn't much planning on our parts for entertainment due to budget and we have 11!

Any thoughts are greatly appreciated. Doing our best to keep afloat and after having the medical problems I did - shoulder surgeries - and hubby getting laid off a better paying job it's put us paycheck to paycheck. Just looking for advice. If we can reduce the debt and pay less monthly that would be great. I just need to know where to start.

Or IS bankruptcy the best bet?? Thanks all...appreciate it more than you know.

**disneysteve** · 08-01-2016, 03:48 PM

Originally posted by NewBeginning View Post

I brng home about $1200 monthly hubby about $1800.

Our expenses are running about $2800

The good news is that your income exceeds your expenses. That's a big deal and shouldn't be underestimated.

I wouldn't file bankruptcy. I also wouldn't get involved with debt consolidation which is mostly a scam.

I would attack the budget and trim anything I could possibly trim to reduce spending. This doesn't have to be permanent but at least until you get the debt situation improved. Even freeing up $50 or $100 per month would make a big difference.

What about the income situation? Do either of you expect to advance at your current jobs? Can you get second jobs? Are you searching for higher paying jobs?

You own a lot of property. Is there anything that can be done to monetize that? Can you sublet a couple of acres for farming or something? Think outside of the box. Maybe someone would pay you to park their RV there when they're not using it. Again, even $100/month makes a big difference. Just make sure whatever you do is legal where you live and doesn't require any special permits or licenses.

**Jluke** · 08-01-2016, 04:21 PM

You may want to look into Dave Ramsey's approach.

I think you can manage your way out of this.

Your #1 job right now is to minimize spending and payoff debt.

**snafu** · 08-02-2016, 06:11 AM

Welcome to SA. Not even bankruptcy removes student loans. You need to get in touch with SL lender, give them income figures to determine if the monthly payment can be reduced.
It's important to get control of your money. I suggest giving every dollar a job. Revert to cash for day to day expenses, each using a cheque journal or small notebook to write down every purchase item and sum spent. For the short term, there is no money for extras.

My best money saving trick is menu planning. Starting with items already in pantry/fridge/freezer, list possible entrees on left of page, list what needs to be purchased on right side of page. Do not go into any store/order anything not on the list. It takes a lot of discipline to stick to the system but it's short term to get through this difficult patch.

What interest rate on CC? I suggest putting CCs in the back of your fridge freezer, until you get through this period of high debt. Your children need to know you are having some financial issues and while it's wonderful to see all [11] grandchildren, there is no money in the budget for entertainment, gifts, extra food/treats.

Act on your own behalf with CC companies. Are they adding fees/penalties for late payments, low payments etc? It will take several calls to reach an individual who can help with CC payments. Explain you're trying to pay off debt instead of bankruptcy. It's imperative to make payments by due date without missing. Make extra payments with any extra dollars you can free up. Any extra income, from any source would be so helpful. Adding to suggestions...selling any items you no longer use or need, overtime work, boarding animals,???

Bank charges annoy me, they keep increasing while cutting back services and staff. Don't let anything go to NSF as charges multiply. Check and re-check figures. Control transaction numbers to avoid higher charges. The dryer is the most expensive appliance to operate. Can you hang some clothes on hangers to air dry? There are long lists of 'hacks' and small savings on line which cumulatively save noticeable sums over a few months. Does your power provider charge a lower rate after 7 PM?

Hoping something is helpful and sending best wishes to move you through this phase.

**GoodSteward** · 08-03-2016, 04:51 AM

I won't state the same that others have, but I will give you the basic idea of debt consolidation. There are two ways of doing this that I am aware of (was in your shoes years ago as well).

The first is a traditional style fixed rate loan, typically unsecured. However, with your income to debt ratio I doubt any bank will touch you. That was my problem as well. Also, this method is the most likely to enable you to get deeper in debt by giving the false impression you are now in good shape. People usually spend the card back up if they just "pay if off" by transferring it. (Guilty of this myself a couple years before bankruptcy. Doubled my debt in the end.)

The second way is where you call a debt consolidation company that makes the payments for you. This way only helps if you have higher interest cards, and I don't think student loans can be included. Basically, it works like this. You sign up for them to pay your payments, you pay them one payment to cover the accounts you include, those accounts are closed out day one (you have to cancel any card you include), and they give you a payoff time just like a loan, adding in a 15-20$ a month processing fee. Most do allow you to pay extra to pay it off sooner. They implement the debt snowball formula. This way can actually help depending on your situation. It's good if you have bad credit and no other options, can't get a lower rate on your own from the credit card company (out of 5-6 accounts I only had 1 work with me on the side), or have trouble managing several payments on time. There are legit companies that do this, but it is really just a debt management and not so much a debt consolidation(payment consolidation?). When you include the fee it also isn't as helpful month to month, unless you have a lot of cards with high interest. It is treated like a fixed loan, and the last time I checked they usually get 7-9% on your cards when they get involved.

There is another way you may hear about called debt reduction. Stay away from this. They try to get you to stop paying your accounts, and force the credit card companies to settle with you before it goes to collections. This can ruin your credit worse than bankruptcy because you have to continue to not make payments on any account for months before they will start working with you. In bankruptcy you miss one payment, then the account is closed and late payments don't count for that account from the bankruptcy forward. The other side of this is that you have to have the money up front to offer for settlement. You can't take a 5,000$ card, do this method and settle for 2,000$ in monthly payments. They want a lump sum. If someone can't afford what they have now, how do they expect to have that much built up by the time they can offer a settlement?

For what you are facing, slow and steady might be the best option. Even bankruptcy will only take out the 11k$ in debt. Do you have medical bills also? I don't remember seeing that, but if you do that would be in bankruptcy too and could make it more beneficial. I wouldn't forfeit a bankruptcy only to leave me with still having debt AND now bad credit. If you already have bad credit, paying off the debt monthly will actually help you. Also, bankruptcy around here is 2000$ last I checked. Do you have the money to even file? if you do, then you should try to use that as an emergency fund and sustain as best you can while you pay off debt. I made the call when I was out of money and options. I asked the lawyer if I could pay with credit card. haha

**NewBeginning** · 08-03-2016, 04:59 PM

Thanks for the advice? Can you give me an idea of some of the up and up debt consolidation companies to start looking around? Thanks!!

**disneysteve** · 08-03-2016, 05:30 PM

Originally posted by NewBeginning View Post

Thanks for the advice? Can you give me an idea of some of the up and up debt consolidation companies to start looking around? Thanks!!

Can you explain why you want to go that route. I think Good Steward spelled out very nicely why they aren't really a good thing. They don't do anything that you can't do just as well on your own and save yourself the fees involved.

**GoodSteward** · 08-04-2016, 04:53 AM

Originally posted by disneysteve View Post

Can you explain why you want to go that route. They don't do anything that you can't do just as well on your own and save yourself the fees involved.

Right, this was only going to save me 20-30$ a month to include 5-6 cards, but I forgot to mention this also ruins your credit. Because you have to close out the credit cards, your debt to credit card limit hits 100% and stays there until you are paid off completely. This will bottom out your score like late payments and even bankruptcy can do. Go to Credit Karma and use the simulator to max out credit cards. Same results, but add to that the accounts are removed from history.

There is no easy way out of debt when you are stuck in it.

You must do the math and see. I doubt this will save you hundreds a month. If your credit card debt is 15-30% interest then yes, this could clear up a lot, however, continue reading to weigh the options. It also depends on the card you have. Each card company has a predetermined interest rate for these companies. Some are better than others.

11k @ 20% = 183$ / month interest (compounded daily so might vary a tad)
11k @ 9% = 82$ / month interest + 20$ fee = 102$

So it saves you 82$ a month in interest in this case, but you lose all access to the credit card for emergencies because the account is closed and lost. This also removes the history for the age of your credit which hurts. Thinking about this I remembered they also control what you can and can't do with credit. It's meant to help you avoid more debt problems, but if you have a legit need you have to get permission from them.

I really don't recommend them unless you are willing to loose credit, credit cards for emergency (you need cash for this, but until you do you need SOMETHING), and control over future credit decisions until paid in full.

In my situation my credit was in the 500s, credit cards maxed, and couldn't get approved for anything. It wasn't going to bother me since i couldn't do anything anyway. However, due to the recession, I also ended up losing income so I couldn't maintain even minimums anymore. That's why I ended up in bankruptcy. Ran out of savings and couldn't get a better job. Never did go with the company because of that.

Debt Consolidation