Who has gotten out of massive debt?

rhodesign

I remember awhile back some people mentioning that they were able to pull themselves out of debt of 20k or more, etc. How did you do it?

My friend is considering filing bankruptcy, and I'm trying to help her find ways to do debt consolidation or something else instead. She's 26 and just finished grad school. She's trying to find full time work but it's hard in her field, so right now she's a nanny a few days a week and an occasional waitress.

Any advice? What were some of your approaches? Good debt consolidation companies? What to avoid?

Mrs_AF

I'm only helpful in getting into debt. I will be watching this thread closely.

TurtlesAllTheWayDown

I'm not sure about good debt consilidation companies, but has she actually talked to her debt collectors? Is she in collections? Is this credit card debt or student loan debt? Student loan debt can sometimes be put in forebearance. Credit cards? All debt consolidation companies do is settle with your CC company for a lower amount and then bill you monthly. She can call and explain she's ready to file for bankruptcy and see if they can cancel her cards, perhaps lower the interest, and maybe give her a lower set monthly payment.

FutureMrsTR

I don't have a lot of debt, but Dave Ramsey's Total Money Makeover book has really good plans for getting out of debt without bankruptcy.  I read it to learn how to live debt free once I pay off my car.

laurenclaire1386

What kind of debt is it? Also, some "consolidation" companies negotiate with your creditors for you to pay less than you owe, which I think REALLY negatively impacts your credit score. I have about 5k (down from 6k over the last couple months, yay!) in CC debt, and I used CareOne Credit Counseling. They're not negotiating for me to pay less than I owe, I just pay them every month and they disburse (right word?) the payments to my several creditors. So it's lumped into one payment every month.

BecW2be

Does she own or rent? I'm pulling myself out of pretty steep divorce debt, but I bought a shitty house in a great neighborhood for a steal, knowing I could live there for a couple of years and fix it up myself and be out of debt when it sells.

Other things I did to raise wedding money (not the same, but she could apply it to her debt) were selling things on eBay and never touching my PayPal account until there was enough in there to transfer and pay for large costs, do some freelance design (same as another part time job) and bank that, and cutting way back on my expenditures, like eating out or shopping.

Her best bet is to sit down and write out every single thing she brings in and pays out every day, then cut all that's possible, then see what's left over and how to bridge the gap between owed and owned.

pinkpinot

Well Salt is off getting married but I remember the debt thread from before and she mentioned a great company she used to consolidate credit cards, I am trying to remember the name...

danieliza1127

Debt consolidation companies can't do anything for her that she can't do for herself.  They  usually just charge you money for things that you can easily do on your own, like calling credit card companies and asking for a lower interest rate or transferring credit card debt to just one card so you're only paying one interest rate.

My recommendations (as a financial investigator, not an advisor or anything), would be for her to try to transfer all of her credit card debt to one card with a really low interest rate, or even 0% if she can find an introductory type offer.  Then pay as much over the minimum payment as she can afford.  If she has student loans, request a forbearance on them until she gets a full-time job with a steady salary.  The forbearance still accrues interest, but she won't have to make monthly payments.   If she cancel anything, do it.  Cancel cable, get the cheapest cell phone plan she can, cancel gym memberships or any other monthly membership things she may have.  Call the credit card companies directly and ask for lower interest rates or for any special programs or rates that she may qualify for.  They might say no, but it never hurts to ask.

Tell her to read Suzie Orman and do some internet research on how to get out of debt.  She shouldn't have to pay anyone to help with her with this though, that's usually a scam.

SarahPLiz

My ex and his ex went through a credit counseling/consolidation company. It worked for them, and they got quite a bit charged off, but they had to stay on top of the company to make sure their records were right.

Remember that a charged off debt is income, so it might be a big relief to settle for "pennies on the dollar" as advertised, but in most cases the amount charged off is taxable income, so it might bite you in the ass later. http://www.irs.gov/newsroom/article/0,,id=201876,00.html
Its a definite cost/benefit analysis situation, especially with how it looks on your credit report.

I had quite a bit of CC debt from my last relationship and selling that house. The card companies kept raising my rate, even though I was steadily paying it off, so I got a loan to consolidate it. I will be done with it in less than 3 years for half the interest rate that was on the card.

If she needs strategies, I'd recommend a Dave Ramsey book. His methods have helped quite a number of my friends get out from under a lot of debt.

ohwhynot

Have her talk to someone at greenpath.com

They are a good, reliable, trust-worthy (non-scam) debt service agency.   Greenpath counselors will help her get a debt consolidation plan in place and will negotiate with her creditors so that she can pay one monthly payment to them and they distribute it among her creditors. Typically, they put her on a 4 or 5 year program, after which she'll be debt-free.

If bankruptcy is a better option for her, they'll let her know that, too.  And honestly, bankruptcy is not the end of the world.  It exists for a reason and it may be better for her, in the long run, to declare bankruptcy than to try to dig herself out.   

laurenclaire1386

Pink, Salt and I used the same company.

TheSaltyPeanut

The company that Salt went through was CareOne... I have a few friends who have went through them and were really happy with them.  They are in good standing with the BBB too.

[Deleted User]

greenpath.com

rhodesign

Thanks ladies. She's already under the thought that bankruptcy is what she needs, but *I* just wish she could do something else because of my own thoughts!

I think most of her debt is CC and student loans. She's not worried so much about the loans because she knows they'll work with her. It's the CCs that are the problem.

I'll let her know all of this advice! Thanks again

pinkpinot

Dani & Bec gave great advice.  I had some credit card debt and I tracked all my spending for a few months and eliminated tons of crap I didn't need to buy, I changed my cell phone plan to something cheaper, I switched my car insurance and found a company for HALF of what I was paying before.  I transferred all my debt to a 0% interest credit card, shredded the card when it came in the mail as to not keep spending and figured out a monthly payment I could commit myself to each month.  The extra money I managed to make appear each month was applied to the card and I was able to pay down almost 6K of debit in about 1.5 years.  I began a better job in that time frame and was able to apply my quarterly bonuses to it and 2 tax returns, I think.  I still saved money too but not much I just made an effort to pay into my savings account as if it were a bill. 

SarahPLiz

While bankruptcy might be an option for her, it may also not be in her best interest for her future.
I know in my line of work, that my credit is checked when I am hired anywhere (with my permission of course). Bankruptcy and bad credit are indicators of fraud risk, so if she is seeking a job where she has access to money or other marketable assets, she may not be able to find anything with a recent bankruptcy on her record. I'm not saying this is right, but it is an evaluation tool that is used.

goheels05

EEk.  Bankruptcy is scary.  Mr. Heels has a friend who is filing for bankruptcy for a second time.  He was still in college the first time.  I have no idea how he was approved for a mortgage. 

tannymcgee

as dan mentioned already, if you settle your credit card debit for less than you owe, you are going to have to pay taxes on whatever the remainder is.  it's really not the most ideal choice.

about 7 years ago I was about 25K in debt (I put a ton of credit cards and took out a personal loan in college).  I put all the credit card debt onto one card that had a really low interest rate.  I called my loan company and asked them to lower my interest rate, which they did.  Then I just worked my butt off to pay it off, which I did in about 3 years. 

now i pay my credit card off every month.  debt blows.

*edit* and be sure to tell your friend to never, ever ignore her credit card companies.  they will work with you if you are honest about your situation.

missy68

I once had quite a bit and used debt consolidation. They negotiated lower interest rates, but not lower amounts owed. It took about 4 years, but I got it all paid off. They had a suggested monthly fee, and as one of the few things ex-h did right, he "suggested" we not pay that, and they were okay with it.

They were a company in good standing, we kept up (I, since it was my debt and I was the one holding the steady job) the payments, and it was good to see it go away.

It took about 3 years for my good credit to be restored, but J and I are very careful (that's why we aren't going to the Stanley - see Confessions) about debt - we've both had issues and have overcome them.

jlmarks83

Dave Ramsey's "Total Money Makeover"

quotequeen

In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-boards_etiquette_gotten-out-of-massive-debt?plckFindPostKey=Cat:Wedding%20BoardsForum:9Discussion:7304bb3a-8e51-45c8-9f21-c2bde2db9de6Post:c75cc43a-607e-4f4a-bd34-4e3989210f02">Re: Who has gotten out of massive debt?</a>:
[QUOTE]Thanks ladies. She's already under the thought that bankruptcy is what she needs, but *I* just wish she could do something else because of my own thoughts! I think most of her debt is CC and student loans. She's not worried so much about the loans because she knows they'll work with her. It's the CCs that are the problem. I'll let her know all of this advice! Thanks again
Posted by rhodesign[/QUOTE]

The student loans are not dischargeable in bankruptcy anyway.

katiewhompus

We got rid of Dh's Amex because they were charging him a $200/month inactivity fee. Not cool!

We're just plugging away and putting whatever we can into our bills. We're almost to the point where (with the exception of my car and his bike) we have the potential to get rid of our current debt within the next two years. If we managed to get the housing credit we may be out in 1 year (not including a house mortgage of course)

The thing that was an eye opener for me (and I'm not sure if this will help her or not) is making a detailed list of every little expense. Food, gas, entertainment, bills (electric, rent, etc) and looking at the list and seeing what can go. When Dh and I both worked retail we were spending $300 a month on groceries, and an additional $200-$400 a month on fast food. Once we caught that we stopped eating out, started cooking more and started saving money. 

If she hasn't started cutting things (cable, xm radio, subscriptions, etc) then she needs to do those before she gets into bankruptcy.