Sally 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, My husband almost died due to an abscess on his liver. Medical bills piled up. Then he lost his job. Then I lost my job due to budget cuts. Currently my husband is unemployed, and I am working, but for less than my last job. Credit cards were used for everyday items such as food. Had been paying them off monthly at more than minimum. Then, credit card companies raised APR percentage and minimum payments to even more than had been paying them off at more than minimum. Could no longer afford monthly minimum. The credit card has spiraled out of control due to finance charges of $400 a month. How do I get the credit card company to lower payment to what I want. I can afford $400 a month to pay them off. That is it. There is no more in the budget than that, and that is even with cutting down on food, electricity, etc. I am more than willing to close the account. I have been talking to them for 3 months now to no avail. I want to get rid of this debt!!!!! Sally” Dear Sally, Actually, while you think it makes good common sense for you to enter into a repayment plan that you can afford, sadly the creditors don’t really care. Creditors look at acceptable repayments as what they want, and not necessarily what you can give. If you’ve already been communicating with them and they have not proposed anything substantial that will work for you then you have three options. Credit counseling or debt management programs may reduce your payment if you are currently behind. Click here for debt management information . Your payment will be calculated by the creditor formulas that the creditors dictate to the credit counseling groups and not what your budget allows. Talking to a debt management company is a good first step to take to see if it is a solution that will work for you. Bankruptcy is a legal and logical option if you just can’t get by each month anymore. Sure bankruptcy is painful but so is just making it from month to month without getting ahead at all. Talk to a bankruptcy lawyer and find out what your options are in bankruptcy . Keep paying the minimum payments or pay the cards off in full. Sure, this approach just leaves you on a treadmill and does not change anything but it is an option if you are not ready to take more drastic action like a debt management program or bankruptcy . As it stands now, you are perfectly situated to make the creditors a maximum amount of money from jacked up interest and fees. They’d rather see you do that than let you jump down to a payment to better fits your budget . One thought is that they try to extract their pound of flesh, and as much as possible, before you stop paying or go bankrupt so they are going to push you as much as possible before you eventually default. Big hug. Steve Source: How Do I Get the Credit Card Company to Lower My Payment to What I Want? - Sally Other Related Articles to Read Karen Writes In. “My Interest Rates Are Going Up. My Minimum Payments Are Going Up. Help!” Government Help With Credit Card Debt Lauren is Searching For Ways to Get Out Of Debt And Make Her Bad Credit Go Away John Had a Knee Operation And Says “I Can’t Pay My Bills” Is Debt Management and Credit Counseling An Effective Way Out Of Debt?

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Laura 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 have recently hired a bankruptcy attorney and am in the process of making payments to him to file my case, which unfortunately he cannot do until I make the last payment. I should have this taken care of by May, 2009. I am now just starting to become delinquent with my credit cards. Would it make sense for me to send a letter to my creditors notifying them of my intent to file bankruptcy and let them know that they need to contact my attorney regarding my account from here on out as it will be several months before my case is actually filed? Laura” Dear Laura, You could send a letter but it will probably be just an effective/ineffective to tell the collections people on the phone what your intentions are. Don’t be surprised if it makes no difference to them. The reason I’m not enthusiastically supporting the letter writing option is that creditors are notorious for never getting written correspondence properly entered or linked to the client account. If you rely upon sending the letter as full notification to your creditors and then dodge the calls, that’s probably not a smart idea. If the bankruptcy attorney has been retained and has advised you to tell them to call the bankruptcy attorney , I would do that. But be sure you get the permission of the bankruptcy attorney first. The last thing you want the creditor to be told when they call the attorney is that they don’t represent you until you make the final payment. So, call your bankruptcy attorney and ask the office the best way to handle this situation in coordination with them. Once you do file bankruptcy then be sure to write down you filing number and give that to the creditors if they call you. Big hug. Steve Source: I’m Just Starting to Become Delinquent With Credit Cards And Going to File Bankruptcy. Should I Tell My Creditors? - Laura Other Related Articles to Read Do I Tell My Creditors I Am Going Bankrupt? Tina Says “My CPA is Under Investigation For Fraud” John Had a Knee Operation And Says “I Can’t Pay My Bills” Ryan Writes In Looking For His Lifestyle Back Mark Writes In “I Need to Go Bankrupt in the UK”

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Frank 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, Recently divorced and trapped in an upside down mortgage. Living off credit cards to get by. I am recently divorced and bought out my ex wife during the up market for my current home. My mortgage is now upside down and I am not making enough money each month to even break even with my expenses. I have a FICO of 750 (was 810), but my debt in credit cards is nearing max. I have been using credit cards to keep up with the negative income hoping I would clear the divorce and start with a positive income by now. This has happened, but barely. I now make just enough money to make my expensive mortgage, make my child care payment, and pay a little over my minimums for my credit cards. I can’t go much longer like this. Any ideas? Frank” Dear Frank, I’m glad that you recognized that you’ve been using the cards to make-up for the shortage each month. Being aware of that is helpful. The reason that it is so hard to dig out of this kind of debt is that in order to have $X each month to repay on top of the minimums you’ve got to have an increase in income or a reduction in expenses. And when you are just getting by each month it is darn hard to find those extra dollars to use for the next six years, month-after-month, to get totally out of debt. There are some short-term things that you can do, like talking to your mortgage lender about giving the house back with a deed in lieu of foreclosure or finding a buyer and asking the lender to accept a short sale, a sale for less than is owed. You could also consider entering a debt management program ( click here for debt management information ) to consolidate your credit cards into one monthly payment that you might be able to afford. All of these things will hurt your credit and unless you can confidently make repayments in a debt management program for the next six years, then you might simply be entering a path that will lead you away from today but not out of debt. Any repayment strategy needs to fully repay the debt for you to be debt free. I know that sounds obvious but not everybody understands that. If you launch into a debt repayment program for the next year, you’re just getting by each month, and if an unexpected event happens that causes you to stop making payments then it could be argued that you’ve just wasted a year of payments and a year you could have used for rebuilding your credit. In that case bankruptcy might have been a smarter move for you. It would give you a fresh start and allow you to start over on what you can really afford today. Of course you’ll still have to pay the child support payment, you can’t get rid of that in bankruptcy . Frank, if you are not mentally prepared to think about bankruptcy then go into a debt management program and see if you can get some breathing room that way. But I would still suggest that you talk to a bankruptcy lawyer just to be fully informed about what bankruptcy would mean for you. Talking to a bankruptcy attorney does not mean that you are going to go bankrupt. It just means you’ll be better informed. With your credit cards nearly maxed out they are quickly turning into ticking time bombs. As you near your limits you become a greater risk and that puts you higher on the creditor radar. These days creditors are lowering limits or closing cards to minimize their credit exposure to people who might be risky. Also, maxing out your cards also lowers your credit score . If you get to be too big of a risk your creditors could significantly increase your interest rates and that will sink you for sure. The absolute fact is that unless you change something here, either increasing income, reducing expenses, or potentially going bankrupt, next month isn’t going to be any different than last month. You will never break free from this situation as long as you keep repeating the same thing over and expecting a different result. Big hug. Steve Source: I’m Recently Divorced and Trapped in an Upside Down Mortgage - Frank Other Related Articles to Read Crys Writes In And Asks “We’ve Been to Credit Counseling But Should We File For Bankruptcy?” Sally is Divorced and Ex-Husband Has Stopped Paying Mortgages Mortgage Lender List of Loss Mitigation Contacts That Can Help You Avoid Foreclosure Listen to the Story of Dan and Mary “They’ve Asked Me To Take a Pay Reduction. What Do You Think?”

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Eric 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, Six years ago - had a unplanned child with my wife (still married). A Pediatrician put a $50.00 collection on my credit report (not my bill - total mistake). This triggered universal default 29% interest rates on me and my wife’s credit cards. I got it removed but could not get the card companys to reduce the interest rates.Thought I could get cards paid down but have been fighting a losing battle. Could I have taken legal action against the doctor?? It has been 5 years of Universal Default Hell. In Chapter 13 bankruptcy - What % of unsecured debt are you liable for? Eric” Dear Eric, It is very unfortunate that you had to live through this episode with the credit report error. I am not a lawyer but I think it would be very hard to go after the doctor that may have placed a comment on your credit report in error. There was nothing intentional about it and the error was corrected. The real issue seems to be the actions of the credit card companies in response to the error. While stranger things have happened, I find it hard to believe that the error alone triggered rate increases on all your cards and your wife’s cards. Experience tells me that when things like that happen that it typically involves the convergence of other events at the same time. For example, a rising debt to income ratio, late on a credit card account, etc. The $50 collection account all by itself is generally not enough to make all your cards explode. Typically after 6 months you can reapply for a rate reduction but that sounds like a moot point now since you are in a Chapter 13 bankruptcy and all the interest is frozen on those cards. You asked about the percentage of unsecured debt you would be responsible for in your Chapter 13 bankruptcy and that is really a question for your bankruptcy lawyer . They can tell you what they estimate you will have to repay with your filing. It really depends on your confirmed plan and you stated income. For everyone else, if you are faced with a small bill that is going to go to collections, it is better to pay the bill under protest and then fight for a refund than risk having it appear on your credit report and then have to deal with the consequences it can create. Steve Source: I’m Struggling With High Interest Rates on my Credit Cards From Universal Default - Eric Other Related Articles to Read Bre Wonders Why Her Credit Report Still Shows Negative Items That She Thought Should Have Been Removed By Going Bankrupt Terri Wants to Know “Is There a Way to Get Out of Debt Without Ruining Our Credit?” Sonia Wants to Know How to Get a Free Credit Report Without a Credit Card Lorena is Worried That Having Multiple Banks Accounts Will Hurt Her Credit John is Worried His Debt Will Scare Away His Fiancee

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Anna 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 own a t-shirt printing/embroidery co. I used credit cards to expand because I couldn’t get the money I needed for cash flow. I was doing well and seem to be turning around but last year was difficult and I fell behind on a few payments & had late pays. I am collecting things to sell also making my lists of “to do”. We are changing our biz. strategy for 09. But I feel like I am going in circles just paying interest and late fees. I would liquidate my company but I have a lease obligation that I can not get out of (3 more years) and I have a great client base and staff. I’ve been paying at least the minimum and a few hundred more on each card when possible. I have mistakenly paid the wrong card at the wrong time (I have 3 AMEX cards) making 1 a late pay. I now only use 1 card and I pay it off each month. How can I lower my interest rates, and or eliminate or consolidate my credit cards, I am not behind but I’m paying high rates on a few cards. Anna” Dear Anna, Being a busy entrepreneur it is easy to mess up juggling the bills. It happens to a lot of people in the same position. Don’t beat yourself up over it. I’m wondering if you could sell your company and let the new owner take over the lease obligation, with the consent of the leasing company of course? A thought you might want to explore with them. Ask them if they will consider transferring the lease if the new owner qualifies with the leasing company. I’ve seen it happen before. Lowering your rates isn’t as easy today as it once was. In the past you could call up your credit card company and ask your current company to lower your rates, and they would. These days, in these uncertain economic times, the credit card companies appear to be doing more to turn customers away than want to retain them with lower rates. You can always call American Express and ask them if you are eligible for lower rates and see what they say. It won’t hurt. Now depending on your credit report and credit score , you can still get some decent balance transfer deals. Click here for credit card deals and see what is currently available. I just took a quick look and there are some interesting offers that will allow you to transfer the balance at 0% and then charge you a low rate of interest moving forward. Since your primary creditor is AMEX and they are usually the most difficult to deal with in a debt management program , I think you’re better of switching two of your cards over but keep the one AMEX that you’ve had the longest so the length of credit boosts your credit report . Big hug. Steve Source: How Can I Lower My Interest Rates or Eliminate or Consolidate My Credit Cards? - Anna Other Related Articles to Read Ed Is Scared But Courageous In The Face Of His Debt Fred Owes AMEX $40,000 And Can’t Pay American Express Back Bank of America Hit With Class Action Suit Over Credit Card Fees And Charges Chloe Ruins Credit of Daughter With American Express Valerie And Her Vanishing American Express Card Business Account

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Steven 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, A hard working blue color man, worked for 30 years before getting injured on the job May of 08. I am now considered disabled. Besides trying to save my home from foreclosure, Capital One is suing me for nonpayment; I received papers from the sheriff saying I have 20 days to respond. Seeing how I am disabled and was injured on the job and not able to work , am I still libel for these payments or is there some kind of insurance on credit cards? Steven” Dear Steven, It sounds like you are in a really difficult and tough position but there are some options. Generally I’m never a fan of credit card insurance since I don’t think I’ve ever seen one of those policies pay off. But if Capital One has been charging you insurance then you may be eligible for some type of coverage. The best way to check would be to call Capital One customer Service and ask them if you are eligible for payment protection. They’ll let you know. Additionally you can look at some of your old statements to see if there was a line item charge on there for payment protection insurance. Since you were injured on the job and disabled there are a number of avenues you can follow. I think your best bet would be to immediately contact a personal injury lawyer and let them know what happened. A good lawyer will also be able to tell you what else you are eligible for because of your injury. Not only may you have a claim against the employer but possibly Work Comp. But in order to protect your rights you should contact a lawyer right now. When you contact the personal injury lawyer let them know about the Capital one lawsuit and ask them for specific legal advice on how to handle it in conjunction with your injury claim. If you don’t contact a lawyer right away then regarding the lawsuit by Capital One I would suggest that you call Capital One first as I mentioned to to see if you were eligible for payment protection coverage. Then I would make sure that you respond to the papers you were served with, stating your case and situation. You will get a court date for the suit, be sure to go to it. You can explain your situation to the judge at that time also. You may still lose the case but if you don’t respond and don’t show you will be guaranteed to lose. Big hug. Steve Source: Steven is Disabled, in Foreclosure, and Being Sued by Capital One Other Related Articles to Read Mohamad Wants to Pay His Creditors If Only They’d Let Him Credit Card Companies Are Coming For You. Protect the Wife and Children. James Wants to Know If Capital One Will Take His Car If He Stops Paying His Credit Card Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out. Christine Writes And Asks Me “Should We Liquidate The IRA to Pay Off Debt?”

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Sonia 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, Why do all the web sites you go to say you can get a free credit report but all of them ask for a credit card. I don’t have a credit card so where can I go to get a free credit report? Sonia” Dear Sonia, You can get a free copy of your credit report online at AnnualCreditReport.com without a credit card . Just to make sure you still could get a free copy this way I went to the site and got mine. And thanks to you I found a couple of items I needed to dispute. Using the online links I was able to do that online. You can also get your free credit report by telephone. Call 1-877-322-8228 or by mail . You’ll need to print out this request form and send it to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281 Big hug. Steve Source: Sonia Wants to Know How to Get a Free Credit Report Without a Credit Card Other Related Articles to Read Lorena is Worried That Having Multiple Banks Accounts Will Hurt Her Credit John is Worried His Debt Will Scare Away His Fiancee Bre Wonders Why Her Credit Report Still Shows Negative Items That She Thought Should Have Been Removed By Going Bankrupt Bob Was Injured And Is Now Behind On His Credit Cards Soon, Where You Shop Will Control Your Credit

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Labp 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 have gone into debt with credit cards because of my husband who has not financially helped me and I have been told that there is nothing legal that I can do. He wont leave and I am afraid if I do he will file abandonment. We have 3 kids. I can barely pay my mortgage and household bills and all of the other debt that I have. He is mentally and emotionally abusive. I don’t know what options I have. I cannot afford a lawyer or anything. What can I do? Labp” Dear Labp, I’m so sorry to hear about your struggles. It must be unbelievably difficult to make it through the days. Hopefully he is not being physically abusive with you as well. These types of marital issues are way beyond my scope of expertise but I would urge you to call your county welfare, social service, or health department and ask them who can provide you support and assistance with those issues. If they can’t help, call the non-emergency number of the local police department and tell them you need to find help for you and your children to break this cycle of abuse. The irony is that there is a lot of specific help for women who are victims of physical abuse but it is hard to find direct programs for emotional or financial abuse. On the financial front, you’ve been using the credit cards just to make ends meet and that is a difficult issue. If you stop using the cards you won’t be able to pay for the basic expenses, you’ll probably wind up homeless. But in order to break out of this abusive relationship you’ll probably have to seek shelter through a woman’s program anyway. Unless you break this cycle at some point, this is only going to continue. The abuse and debt easily lead to depression and the depression only furthers your inability to take action to change the situation so the downward spiral continues. Honestly, the debt is the least of your worries right now. You must seek help for the marital issues first and undoubtedly the answer is going to lie in either him changing or you and the kids leaving. Once you can locate a support network for the marital issues, then without an income in your life, bankruptcy will probably be in your future. The good news is that you are reaching out for help and while I can’t provide you with expert marital help, maybe I’m just a signpost along your journey and I’ve been able to point you in the right direction. Don’t stop asking for help now. You’ve taken a big and brave step. Keep moving forward. Please. Big hug. Steve Photo: stucklo6an Source: Labp’s Husband is Mentally, Emotionally and Financially Abusive. What Should She Do? Other Related Articles to Read No Related Post

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Sally 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, My debt was caused by something totally different. I am 48 years old. Six years ago, the youngest of our three children moved out. My husband works swing shift and I found myself lonely and depressed. I didn’t know what to do with myself. But then I found the casino. A place I could go by myself. I made a lot of friends there. I felt happy and content, that is until the gambling addiction took over. I didn’t realize it at first. I had excellent credit and could get any card I wanted without my husband knowing about it. I have my own business, I make my own money. I was using the cards when I ran out of cash to gamble. Then when I could not make my payments I took from the cards to pay it. Everything snowballed. I heard that if your debt was caused by gambling, there is help to get it payed off or half off or something. Have you heard of this? thank you Sally” Dear Sally, Thank you for visiting the site and sharing your question. Your situation is a classic example of how debt is often the symptom and not the problem itself. It’s a bit like a pain when your arm moves, the pain is the symptom but not what is causing it to hurt, that’s a different matter entirely. The things that lead you to escape gambling are classic as well. I wouldn’t be at all surprised if you told me that a lot of your money had been spent on slot machines as your venue of choice. Slot machines attract people who are loners, depressed, older, want to “zone out” and those that are looking for action without having to interact. It is nice to hear that you did make some friends while you were at the casino as well. A positive maybe? Your gambling seems to have grown into an addiction or addictive disorder. It won’t be until you seek specific treatment for your gambling addiction that we can even really begin to tackle the debt situation. Unless you seek help for the gambling problem the chances of you falling off the wagon and returning to gambling again are very high and that will just run up more debt for you. I have never heard of a formal program that allows anyone to get their gambling debt paid but I have witnessed some people enter into debt settlement agreements with a casino to payoff money owed to the casino. If you’ve borrowed money from credit cards to fuel your gambling then that does not involve the casino at all. In that case probably bankruptcy or a debt management program would be a good solution, but only once the gambling is being addressed. Please, you must go and seek professional counseling for your gambling addiction. Maybe a good first step would be to begin to attend local Gambler Anonymous meetings in your area. To find a local GA meeting, click here . Big hug. Steve Source: Sally is in Debt Because of Slot Machines and Gambling Other Related Articles to Read No Related Post

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Sally 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, My debt was caused by something totally different. I am 48 years old. Six years ago, the youngest of our three children moved out. My husband works swing shift and I found myself lonely and depressed. I didn’t know what to do with myself. But then I found the casino. A place I could go by myself. I made a lot of friends there. I felt happy and content, that is until the gambling addiction took over. I didn’t realize it at first. I had excellent credit and could get any card I wanted without my husband knowing about it. I have my own business, I make my own money. I was using the cards when I ran out of cash to gamble. Then when I could not make my payments I took from the cards to pay it. Everything snowballed. I heard that if your debt was caused by gambling, there is help to get it payed off or half off or something. Have you heard of this? thank you Sally” Dear Sally, Thank you for visiting the site and sharing your question. Your situation is a classic example of how debt is often the symptom and not the problem itself. It’s a bit like a pain when your arm moves, the pain is the symptom but not what is causing it to hurt, that’s a different matter entirely. The things that lead you to escape gambling are classic as well. I wouldn’t be at all surprised if you told me that a lot of your money had been spent on slot machines as your venue of choice. Slot machines attract people who are loners, depressed, older, want to “zone out” and those that are looking for action without having to interact. It is nice to hear that you did make some friends while you were at the casino as well. A positive maybe? Your gambling seems to have grown into an addiction or addictive disorder. It won’t be until you seek specific treatment for your gambling addiction that we can even really begin to tackle the debt situation. Unless you seek help for the gambling problem the chances of you falling off the wagon and returning to gambling again are very high and that will just run up more debt for you. I have never heard of a formal program that allows anyone to get their gambling debt paid but I have witnessed some people enter into debt settlement agreements with a casino to payoff money owed to the casino. If you’ve borrowed money from credit cards to fuel your gambling then that does not involve the casino at all. In that case probably bankruptcy or a debt management program would be a good solution, but only once the gambling is being addressed. Please, you must go and seek professional counseling for your gambling addiction. Maybe a good first step would be to begin to attend local Gambler Anonymous meetings in your area. To find a local GA meeting, click here . Big hug. Steve Source: Sally is in Debt Because of Slot Machines and Gambling Other Related Articles to Read No Related Post

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Every single year a new crop of unprepared consumers gets blindsided by the post holiday bills which begin to arrive after the middle of January. It is a predictable phenomena. Credit counselors and debt counselors get really slow before the holidays and then slammed when those post holiday bills roll in. And even though many promised to not overspend this year, they did and even though people spent less due to economic worries, some still spent more than they can repay now, for a wide variety of reasons. So what do you do when the holiday decorations are packed away but the depressing bills arrive and you realize that you can’t pay them? Here is a step-by-step plan on what you do. Don’t Panic Yes, I completely understand that it is easy to say not to panic, but it is really good advice. The moment the holidays bills land in your mailbox and your first instinct is that you don’t want to look at them, please look at them. Not opening the bills does not alter the situation at all. The only thing that accomplishes is reducing the amount of time you have to deal with the situation due to procrastination. If you can’t pay the bill in full, you just can’t. It is what it is. If you haven’t been behind in your bills before you are going to panic, or feel depressed, ashamed or scared. You just are. But those emotions are your feelings and certainly not how others are going to judge you. I’m sure not. From the creditor point of view you are nothing but a number on a screen. Your creditors don’t have time to make judgments about your morality or integrity, they’ve got millions and millions of people that are behind on their bills also. They could really care less about those issues but they love to use them as collection jabs at you because they know you’ll react when they push those buttons. When the bill panic waves over you it will feel as if you are the only person in the world with that problem but you’re not. Deep Breathing Really Helps So when the panic and anxiety hit the best thing to do is the simplest, just breathe. Honestly, taking deep breaths, breathe in for five seconds, hold it for five seconds and exhale for five seconds, really reduces your stress. The stress and panic are intensified by you not taking in enough oxygen and hyperventilating. Practicing this breathing technique will help to minimize those anxious feelings. Don’t Over Promise and Under Deliver The minute a collector calls and asks politely where the payment is, your first reaction is promise the payment they are asking for and that is probably the worst thing you can do. You perception is that by telling them what they want to hear that it will make everything better. It will until the payment you promised is missed or late because it was really not affordable for you. When you don’t keep up with your payment promises then you become unreliable and a liar from a collector point of view. That just inflames them. It is much better to be honest about what you can afford from the start than to make the situation worse by agreeing to an unrealistic promise. In order to get a grip on what you can really afford, don’t make a budget , make a spending plan . A spending plan is based on your real income and expenses and not a wish list on how you would like to spend your money, like a budget . An online tool I like for this is Mvelopes . Calling Your Creditors Before You Fall Behind Is a Waste of Time Even though you are in a panic when you realize you can’t pay those bills, a common instinct is to want to call your creditors and let them know you are headed for trouble, they don’t care. As long as you are current on your bills the creditors don’t offer any real beneficial terms to help you dig yourself out of the hole you are in. Seek Help If you are just a bit short on your bills but can pay about 80% of what it owed, click here for credit counseling information . A debt management company may be able to arrange a payment plan you can meet. If your life circumstances have drastically changed and you just can’t afford to pay your bills, go talk to a bankruptcy attorney . Bankruptcy might be right for you and the sooner you file bankruptcy , the sooner you can get on with your life. I’m Always Here For You When I was living through my financial problems I could not sleep, I was anxious, depressed, lost and confused. The calls from the collectors freaked me out and I just didn’t know what to do. But over the years I’ve worked with so many people in the same situation that it no longer phases me in the least and I’ve learned to see the situation from the outside. It is what it is and that’s all that it is, just bills you can’t pay and emotional misfortune. Big hug. Steve Source: Christmas Bills, Holiday Bills, Kwanzaa Bills, And Chanukah Bills Are Coming. Here is What to Do When It’s Time to Pay Them And You Can’t. Other Related Articles to Read Crazy Things to Do When You Can’t Pay The Bills Robert Says “Please help. I never knew financial burdens can cause so much stress.” A 12-Step Plan to Get Out of Debt Fast! Tony Writes In “I Have Too Much Debt On My Credit Cards” 5 Ways to Cut Spending (without cramping your lifestyle)

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Anne 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 in credit card debt for $25k. I am making the minimum payments on each card, but it’s killing me. Should I focus on paying more on one card at a time and ignore the others? And then continue on the next card and so on? Or should I just continue to make the minimum payments even though I am getting no where with this method? Anne” Dear Anne, In order to start reducing your debt the secret is that you need to have enough money to send each month for the minimum payment plus some extra. Let’s say that all your minimum payments together equal $550 a month. If you want to start knocking down this debt then you’ll need to add an extra $100 a month on a consistent basis. With a total of $650 a month to use towards reducing your debt you can apply the extra $100 a month above the minimum payment to either the credit card with the highest interest rate or the card with the lowest balance. Many find that by paying off the lowest balance credit cards first they get great emotional satisfaction out of eliminating some of their creditors faster. Once the lowest balance creditor is paid off then you can roll that minimum payment plus the extra $100 to the next creditor. Using the debt snowball method will accelerate your debt elimination. The snowball method is a very effective way to get out of debt. The basic steps in the debt snowball method are as follows: List all debts in ascending order from smallest balance to largest. This is the method’s most distinctive feature, in that the order is determined by amount owed, not the rate of interest charged. However, if two debts are very close in amount owed, then the debt with the higher interest rate would be moved above in the list. Commit to pay the minimum payment on every debt. Determine how much extra can be applied towards the smallest debt. Pay the minimum payment plus the extra amount towards that smallest debt until it is paid off. Note that some lenders will apply extra amounts towards the next payment; in order for the method to work the lenders need to be contacted and told that extra payments are to go directly toward principal reduction. Once a debt is paid in full, add the old minimum payment (plus any extra amount available) from the first debt to the minimum payment on the second smallest debt, and apply the new sum to repaying the second smallest debt. Repeat until all debts are paid in full. In theory, by the time the final debts are reached, the extra amount paid toward the larger debts will grow quickly, similar to a snowball rolling downhill gathering more snow (thus the name). The theory works as much on human psychology as it does on financial principles; by paying the smaller debts first, the individual, couple, or family sees fewer bills as more individual debts are paid off, thus giving ongoing positive feedback on their progress towards eliminating their debt. A first home mortgage is not generally included in the debt snowball , but is instead paid off as part of one’s larger financial plan. As an example, many financial plans pay off home mortgages in a later step, along with any other debt which is equal to or greater than half of one’s annual take-home pay. Simple Example An example of the debt-snowball method in action is shown below. A person has the following amounts of debt and additional funds available to pay debt (the debt is listed with the smallest balance first, as recommended by the method): Credit Card A - $250 balance - $25/month minimum Credit Card B - $500 balance - $26/month minimum Car Payment - $2500 balance - $150/month minimum Loan - $5000 balance - $200/month minimum The person has an additional $100/month which can be devoted to repayment of debt. Under the debt-snowball method, payments for the first two months would be made to debtors as follows: Credit Card A - $125 ($25/month minimum + $100 additional available) Credit Card B - $26/month minimum Car Payment - $150/month minimum Loan - $200/month minimum After two months (presuming the person has not added to the balances, which would defeat the purpose of debt reduction), Credit Card A would be paid in full, and the remaining balances as follows: Credit Card B - $448 Car Payment - $2200 Loan - $4600 The person would then take the $125 previously used to pay off Credit Card A and apply it as additional payment to the Credit Card B balance, which would make payments for the next three months as follows: Credit Card B - $151 ($26/month minimum + $125 additional available) Car Payment - $150/month minimum Loan - $200/month minimum After three months Credit Card B would be paid in full (the final payment would be $146), and the remaining balances would be as follows: Car Payment - $1750 Loan - $4000 The person would then take the $151 previously used to pay off Credit Card B and apply it as additional payment to the car loan balance, which would make payments as follows: Car Payment - $301 ($150/month minimum + $151 additional available) Loan - $200/month minimum It would take six months to pay the car loan (the final payment being $245), whereupon the person would then make payments of $501/month toward the loan (which would have a $2800 balance) for six months (with the last payment at $295). Thus in 15 months the person has repaid four loans, with two of them being paid in a mere five months and three within one year. The primary benefit of the smallest-balance plan is the psychological benefit of seeing results sooner. People with more financial discipline can get ahead quicker by paying off the credit cards and loans with the higher interest rates first. This will minimize costs to become debt-free faster than the smallest-balance approach. The Debt-Snowball method is only for those on high enough incomes to be able to meet all the minimum repayment requirements on their debts. This method could instead lead to problems for those who are struggling to meet these minimum payments demands. In this circumstance, an individual should not be advised to pay creditors differing amounts as this could count as non-equitable repayment, leading to problems (e.g. with going bankrupt, or with maintaining non-equitable repayments over longer periods). Big hug. Steve Source: Anne Has $25,000 of Credit Card Debt And Making Just Minimum Payments But She Wants to Get Out of Debt Other Related Articles to Read Bank of America Hit With Class Action Suit Over Credit Card Fees And Charges Jairo Wants to Stop Paying His Bank of America Clean Sweep Debt Consolidation Loan Credit Card Companies Are Coming For You. Protect the Wife and Children. Karen Writes In. “My Interest Rates Are Going Up. My Minimum Payments Are Going Up. Help!” Pam Asks “Does a Deferred Student Loan Lower Your Credit Score”

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AK 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, My debt ratio seems high to me and I am thinking about using my credit card to consolidate my debts. I also, need to know how long to keep statements. I want to reduce clutter, but am not sure if I should keep bank statements and other statements since I do online banking and statements. What is the easiest way to consolidate my debts? How long should I shred old paper statement for credit accounts and bank statements? A.K.” Dear A.K., I had to read your question a couple of times to make sure I understood exactly what you meant. Really? You want to use your credit cards to consolidate your debt? I think what you are trying to do is to payoff other smaller debts that you might have by doing a balance transfer to a new credit card . But if you are thinking about paying off some debts by writing cash advance checks from a credit card , that is financial suicide. Don’t do it. If you do I’ll have to hunt you down and personally kick your ass. It is one thing to consolidate your debts by rolling them all into a credit counseling or debt management program . Using that approach your debts are not paid off but the debt management company will make the payments for you, often reducing the interest rate you pay. While you make one payment to the debt management company, there is no actual consolidation of the debt onto one financial instrument. If you would like more information about this credit counseling debt consolidation approach, click here for debt management information . Regarding your statement issue, check with your creditors to find out which ones offer online access to your statements. In fact I don’t even get paper statements anymore and if I need to reference something or get a copy I just go online and print it. Last time I checked the IRS said you need to keep records for seven years. Big hug. Steve Source: AK Wants to Use His Credit Cards to Consolidate His Debts Other Related Articles to Read Diana Is Struggling to Make Credit Card Payments And Afraid Dave is in a CCCS Credit Counseling Program But Feeling Hopeless Eva Has Heard Negative Things About CCCS April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?” The Perfect Debt Assistance Program

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Ben 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 read the book called Debt Cures by Kevin Treadeau. It was awesome and it has a lot of tips and help there. What I am trying to do is get an outstanding credit score and it needs to be improved. When you call the credit card company it is pretty darn hard to make them lower your interest rate like it says in the Debt Cures book. I would like to lower my APR and they would say all we can do is wait 6 months and try again. How can I speak them and get them to lower my APR without waiting for to be lowered. Help!!!! Ben” Dear Ben, I read the book by Trudeau as well and while it is filled with some interesting tips, many are outdated in this economic climate. While it is true that creditors used to easily lower your percentage rate by just calling and asking, these are different times. Credit card companies today are jacking the rates up on customers that have never been late, have not missed a payment and have not exceeded their limits. By all outward signs, credit card companies are running for profits in an otherwise horrible economy and are unlikely to reduce interest rates at this time. The six month advice that you got tells me one of two things. Either you have had some credit problems in the last year or the representative wanted you to call back at a latter time in hopes that the economy would improve and deals would be had again. The best way to get an outstanding credit score is not to guess at what needs to be fixed, but to know for a fact what is bringing your score down. Without a doubt the best way to do this is to get a consolidated credit report with a credit score and not only will it identify all of your lines of credit and show your credit history but it will specifically tell you what you need to do to improve your credit score . Click here to get your credit score specific information . While the Debt Cures book and certainly the infomercial about the book with the Playboy Playmate, make you excited about easily improving your credit score and lowering your interest rates it is really dependent on a few factors. Debt to Income Ratio - If your card balances are more than 33% of your limit you will find that can lower your credit score . These days with creditors reducing limits without notice or warning you can easily find yourself maxed out through no fault of your own. You can also get wounded when you carry a number of balances on cards and in total they are a risk based on your current income. How You’ve Paid Your Bills - If you’ve been sloppy or had issues that prevented you from paying your bills on-time then that will be reflected in your credit report . If you have accounts still showing up in collections, that hurts you as well. Creditor Policies - The book and books like it provide good tips but ultimately they can all be worthless if your creditor adopts a corporate policy and does not want to bend. Don’t lose sight of the fact that as long as you carry a balance on your credit cards the credit card company calls the shots. If you don’t like how they treat you then look into doing a balance transfer to another credit card . A credit card company does not have to value you as a customer or want to retain you if you no longer suit their target demographic. Outside of paying your debts off in full, no other trick or tip is going to get you lower interest rates without potentially damaging your credit report further. However, the best way to get the best rates is to pay your bills on time and follow the credit score improvement guide that will come with your consolidated credit report and tell you exactly what you need to do to legally boost your score. Thanks for the question. Steve Source: Ben Read the Book “Debt Cures They Don’t Want You to Know About” By Kevin Trudeau And Has Questions Other Related Articles to Read Bob Was Injured And Is Now Behind On His Credit Cards Rebecca And Her Husband Are Struggling to Keep The Business Going Lisa is Over Her Credit Limit, Unable to Pay the Minimum Payment, and Thinking of Bankruptcy Jay Got Sucked Down With The Falling Real Estate Market Disjointed Use of Your Credit Score Can Leave You Unemployed or Dead

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Misty 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 have a large amount of medical bills coming in from when I didn’t have health insurance. On top of that I have about $2,000 in credit card debt and roughly $10,000 in student loans. I have another $2,000 from a loan I took out. I now have two judgements on my credit and they are starting to garnish my wages. I also have some back taxes I need to pay off as well. Money seems to be getting smaller and smaller and I don’t know how I am going to live if more people start to take more money that I don’t have. All together my debt totals $28,000. My question for you is where do I go for help? I live in West Virginia and I am afraid to trust just anybody. Should I file bankruptcy and just start over or are there other ways out? Misty” Dear Misty, You would have had more options available if you had acted earlier, but obviously this has been going on for a while since it has resulted in wage garnishments. So let’s deal with this where it stands now. The hole you’ve found yourself in is very deep and slippery. While there is a chance that you will be able to climb your way out, I think it is so difficult and unlikely that we need to look at other options. Of most concern are the back taxes . It’s all fun and games until the taxman gets involved. Especially if it is the IRS that you owe. The tax people are the most powerful creditors and they come before anyone else. Probably the most likely approach to changing this situation quickly is for you to talk to a local bankruptcy attorney , click here for bankruptcy information . Bankruptcy will most likely kill the wage garnishments, medical bills, loans and credit cards . It is unlikely that it will get rid of your tax bill. Once you shed the debt you can’t pay then you can use that opportunity to regroup and start a new financial life. My advice would be for you to get some sort of health insurance policy to prevent this from happening in the future. There is no doubt that health insurance is expense but all it takes is one unexpected illness or accident to destroy your entire financial life. After bankruptcy you’ll also be able to make repayment arrangements you can afford to eliminate your tax bill. Big hug. Steve Source: Misty Didn’t Have Health Insurance And Got Sick. Now The Bills Are Rolling In. Other Related Articles to Read Rachel is in Medical Debt, Was Sued And Lost. What’s Next? Trisha is a Single Mom, Separated, and Facing Bankruptcy. What Should She Do? Tina Says “My CPA is Under Investigation For Fraud” John Had a Knee Operation And Says “I Can’t Pay My Bills” Robert is a Farmer, a Contractor and Behind in Bills

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