Kerthunk! That’s the sound of the other shoe dropping on Citigroup. I thought I was ahead of the game when just last week I wrote Citibank to Fire 10,000 Workers And Raise Your Interest Rates . Well at least I got the raise your rates part right. Seems I was off by about 38,000 more Citigroup and Citibank employees that won’t be taking your money anymore. Instead, they’ll be taking their pink slip to the unemployment office for one of those really small unemployment checks. Citigroup, on top of the 10,000 jobs I reported that would be lost last time has just announced further restructuring that kisses goodbye to an additional 18,000 employees by selling their business units to someone else. Another 21,500 workers will just be getting the boot. If you put all these cuts and disposals together, Citigroup in total will have shed about 52,000 jobs in just the past few months. What will be next, $150 credit card late fees and 132% default rate on credit cards to help make up for losses by one of the more brilliant financial groups in the country. Hey, if they couldn’t get this right then what hope is there for the average consumer. I know, for everyone that has a Citibank card in their wallet, let’s fire it. It wouldn’t do much but it sure would feel good. Source: Citigroup to Say Goodbye to 39,500 More Workers Other Related Articles to Read Citibank to Fire 10,000 Workers And Raise Your Interest Rates Bush Administration Rolls Out Wimpy Mortgage Assistance Plan Debt Collectors Buying Bad Debts Make a Killing in a Bad Economy Archeologists Finds 3,000-Year Old Credit Card Bill

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Store cards in good times are a good source of profit with their exceptionally high interest rates but in down times they can be an anchor around profits. Not only are store cards generally easier to acquire by people with lesser credit but they are often the first to go unpaid when there isn’t enough money to spread around. Target Chief Financial Officer Douglas Scovanner, on a recent conference call, said credit cards are the company’s “second-largest challenge.” In the past year, the net charge-off rate on retail cards has jumped 2.4 percentage points to 8.1 percent. The charge-off rate on general-purpose cards has risen only 1.7 percentage points to 6.08 percent, according to industry newsletter Nilson Report. [ Read More ] Source: More Bad News For Nordstrom and Target Credit Cards Other Related Articles to Read Sears, Home Depot May Lose 8% of Holiday Sales on Credit Limits Wal-Mart de Mexico Plans 100,000 Credit Cards by Year-End — With Interest Rates of 59% to 75% Navy Tells Jonathan to Contact Me For Advice Charlotte Writes In, “I’m Desperate To Get Out of Debt” MJ - “I’m Ill, I’ve Got Bills, And I Don’t Know What To Do”

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A question I am getting asked more and more is about what programs the government offers to help you get out of debt or to eliminate credit card debt. These questions usually involve inquiries about government grants and loans that people hear whispers about that they believe will dispose of problem debt as well. Up until this point there has not been any interest or benefit to government to eliminate credit card debt through any sanctioned or legal process other than bankruptcy . The elimination of debt seems like a public service that government could fill to help remove the weight of burdensome debt from the backs of consumers in trouble. But there is little logic behind the idea unless the government wanted to offer a bailout of consumer credit card debt in order to encourage consumers to resume their enthusiastic embrace of shopping and consumption. Our capitalistic society operates in a symbiotic relationship between banks and consumers. Consumers consume, that drives orders, orders drive production and loans and credit cards help to fund both production and consumption. The only remote connection between government and help to eliminate debt I guess would be the IRS recognition of non-profit credit counseling groups that offer debt management programs that make an attempt to assist consumers with problem debt. Outside of that, let me be perfectly clear, the government, in particular the Office of the Comptroller of the Currency (OCC) actively blocks any government programs to eliminate debt. You can read more about recent efforts and blockage by the OCC here . There are good reasons why the OCC blocks these attempts at consumer debt reduction since recently suggested plans have favored banks and have not been transparent to regulators and investors. A government sponsored plan to eliminate debt and eliminate credit card debt could be crafted, I do see a way that it would be possible, but not only is there no such program but there is nothing on the drawing table as well, yet. Steve Source: Government Help With Credit Card Debt Other Related Articles to Read Government Kills Debt Write Off And 40% Debt Elimination Plan April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?” Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out. Complaints About Bill Collectors Rocket as Debt Collectors Get Tough Therapist: Financial Infidelity Can End Couples

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Julie 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 and I have been married for seven years now. We have two kids. He travels a lot and when he comes home he says he is tired and just needs time alone. I’ve discovered that he is ordering a lot of pay per view porn movies when he is home and last month is cost us almost $400 just for that. He does not let me look at the bills but I got a peak at a recent one and I noticed some charges on it that looked like they might be porn. We struggle to get by even though he makes good money. I know he works hard but I think we will go bankrupt because of his addiction to porn. Julie” Dear Julie, Let’s recognize this for what it is, an overuse of a thing, to fill a void or create a desired feeling or escape a mental state. For your husband, his imbalance is in looking at pornography. For other people it might be spending more than they can afford on baseball cards, shoes, cosmetics, or whatever. The issue here is that this is not first a financial problem. It is an emotional imbalance that needs to be treated by a counselor that is experienced in these matters. I would urge you to ask your medical provider if they know someone local that can help and then you can talk to them by yourself first to come up with a game plan on the best way to approach the situation. I had a client once that had a similar situation. When he would come home on the weekends from driving a truck, he would purchase hundreds and hundreds of dollars of porn movies that he and his wife really could not afford. And while there is no doubt that he was seemingly addicted to porn I persuaded him to call his local cable company and see if there was a package deal for porn that would save him from paying for every movie. He was able to reduce his porn bill by $300 a month. I’m not advocating that you help to continue his addiction but what I am saying is that if he is not willing to get help or not ready, at least by taking some actions you can help to reduce the financial impact of the porn abuse. If the credit card he is hiding is a joint account then you deserve to see the statements. Contact the credit card company and see what you can do to get online access to all your joint accounts so you can see what is being charged. If you find a lot of online charges, then I think you should have a frank conversation with him about how you feel his porn addiction is impacting you and your family and that you want to immediately lower the cost of porn by shopping around for better online deals so it minimizes the cost of porn online. Let me be perfectly clear, his addiction to porn, strippers, hookers, or whatever is a real psychological situation that needs to be treated by a professional, if he is willing to get help. If he is not ready to get help yet, then for the sake of your monthly finances, do everything you can to be a frugal porn shopper and lower the costs immediately. Big hug. Steve Source: Julie Says “My Husband Is Addicted To Porn And We Are Going Broke Because Of It” Other Related Articles to Read Using Porn And Sex to Help You Get Out of Debt Even Porn Is Not Recession Proof. See What I Mean.

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Dayna 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 an upside down auto loan that I owe about $27,000 on a Mazda car and my monthly payments are $500 per month for 7 years with about 12.45 percentage interest rate. I am unable to refinance my auto loan because my credit is not that good and I owe too much debt. I am trying to figure out options on how to lower this car payment or get rid of the car - since I am upside down- selling the car is probably not going to help. If I did not have the car, I think I would have enough money to get myself out of other credit debt I have. Do you have any suggestions or can you help? I have no savings either and it is getting check to check for myself and my family. What can I do to either lower my car payment or get rid of it without heavy penalties and repossessions? Dayna” Dear Dayna, Sadly your situation is experienced by thousands and thousands of people each day. It is a sad and unfortunate situation for which there are only a couple of good solutions. One solution is to do an auto loan refinance . But this depends on credit being available and you having a reasonable credit score and good credit. Doing an auto loan refinance in that situation can lower your car payment by extending your auto loan out for a longer period of time, but then again, your loan is already fairly strung out so it is doubtful if a lender would go further than seven years. At this point it is not going to do any more damage to your credit to see if you qualify for an auto loan refinance so click on the link and see what they’ll offer you. The other solution is to sell the car and take cash that you have in the bank to pay off the remainder of the loan, after the sales price, to get a clean title to then transfer the car to the buyer. But then again, you don’t have any extra cash and that isn’t really a possibility for you either. So what are we going to do here? You probably need the car to get back and forth to work so we’ve got to prioritize your other credit debts. If those debts are credit cards or unsecured loans then the most logical thing to do is to look into a debt management program to see if they can reduce your payments on that credit, or stop paying it altogether. If you stop paying it and you think your financial situation is going to improve in the next few months, you can then go back and make a plan to repay your debt. If you don’t think you will be able to repay anything then you can consider bankruptcy now or wait until the collection pressure gets to be intolerable and then consider bankruptcy . I wish i had better news for you but it is a tough situation to be in with few good options. Big hug. Steve Source: Dayna Can’t Afford to Keep Her Car Or Get Rid Of Her Car, Even By Repossession Other Related Articles to Read Lower Your Car Payment. Skip It, Lower Your Interest Rate and Get Cash Back Josy Writes “My Real Estate Business Is Going Down The Drain” April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?” Bank of America Offers “Clean Sweep” Debt Consolidation Loan Up to $50,000. Let’s Look at The Facts And See Who Is Really Cleaning Up. Bob Was Injured And Is Now Behind On His Credit Cards

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MJ 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’ve been able to work very little because of severe health issues. Sadly they are on going, with uncertain prognosis. Medical bills mounting as well. (about 5K). I’ve been living off of credit cards and can no longer keep up with payments. Approx 2k per mo. in credit card payments. I’m not late on anything yet. I’m wondering if you have any tips or tricks for relief? I’m working on selling my “stuff” to raise money but the state of the economy is a hindrance for that. MJ” Dear MJ, If I had a magic wand to wave to make your situation repair itself, I would wave it for you. To be ill with an uncertain future is stressful enough, but to add about $40,000 of credit card debt on top of that, only compounds the stress and potentially shortens your life. I know you have tried to do what is right for you, your obligations, your sense of right and wrong and what you have been taught. But I’m afraid that trying to meet the goal of not falling behind on your bills has left you in a worse situation. At first, I bet you used the credit cards to make ends meet in an uncertain time but latter the cards got used more and more just to get by. And before you knew it, the balances were so high and so out of control. You might have actually found yourself taking a cash advance or two from one card to pay another. And then when that day came, when you had no more money on hand to pay your bills, you started selling stuff to help make ends meet. But let me ask you, what is your plan to make ends meet when all your stuff is sold and the money is spent? Selling stuff and draining assets to perpetuate a path that does not lead to a resolution is a comfort only while the money lasts. When all the cash has been spent and at the stuff has been sold, you will have nothing and nothing to give. You will discover that all that you have accomplished is to postpone the difficult day of reckoning and not made the actual problem go away. Before we turn to solutions to euthanize your debt we must first set our attention to making sure that without reliance on credit, credit cards , and selling stuff, that you will be able to make it from month to month and live a life worth living. It does no good to eliminate your financial responsibilities, which you can no longer meet, only to leave you unable to afford food, shelter, utilities and clothing. From what you wrote I can only assume that your severe health issues are not only ongoing but also may lead to your death. Unless you take bold action to eliminate your debt your struggles to repay debts that you can not afford my linger to your absolute last living day. I would suggest that you take a long walk or go to that favorite cafe or restaurant that brings you joy. Order something to drink, maybe a hot cup of delicious coffee and and tuck in to a tasty treat. I want you to sip the coffee slowly and concentrate on the wonderful flavor of your edible gift and as you enjoy that moment, I want you to visualize how you want your remaining days to be. Ask yourself the following question, “Do I have a greater responsibility to fix my financial past or create a safer financial future for the time I may have left to live?” If you decide that the next hour, the next day and the next year are most precious to you, then I would urge you to click this link and go see a bankruptcy attorney and seriously contemplate bankruptcy to eliminate your credit card and medical debts. It certainly sounds to me as if there is no reasonable expectation that you will be able to live both a life where you can heal and a life where you can repay your debts, without sinking further in either health or debt. Big hug. Steve Source: MJ - “I’m Ill, I’ve Got Bills, And I Don’t Know What To Do” Other Related Articles to Read Teresa Writes In And Asks “What Should I Do Next?” Tina Says “My CPA is Under Investigation For Fraud” I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do? Kayte Has Drained Her Savings And Can’t Pay The Bills Anymore Tanisha Wants to Cash Out 401K To Get Rid Of Debts.

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I understand that the Federal Trade Commission has been looking into regulating the debt settlement industry. I feel the time has come to finally address the needs of consumers for representation in credit counseling and debt settlement matters. I have provided a statement to the FTC in order to support the acceptance and regulation of for-profit credit counseling and debt settlement groups, nationally. Nobody has paid me to do this. I offer my testimony of my own free will based on my experience and what is right. It is important to share my statement with you so you can better understand the lack of proper representation that consumers are getting under current regulations that favor or only allow non-profit groups, paid by creditors, to represent consumers. As the founder of a non-profit credit counseling group and after having served on the board of directors of a Consumer Credit Counseling Service office I have observed the debt settlement and credit counseling industry from the inside. Wrongly, many in the non-profit credit counseling world make every effort to keep out for-profit groups that want to provide help and assistance to consumers. I am afraid that the primary reason for this is so that the non-profit groups can protect market share and not to improve the service and assistance given to debtors in trouble. There is not one thing that a non-profit credit counseling group offers that could not be better offered by a for-profit group. For-profit groups should be regulated by a federal statute to provide one set of licensing and regulatory instructions to operate under. Trying to operate under a patchwork quilt of various state laws only increases the hardship on any group wanting to help consumers and does not provide a single additional tool to allow any third-party to have better solutions to offer consumers to deal with their debt situation. The economic cost of compliance with so many various regulations is one of the primary reasons why my group decided to stop providing assistance to consumers and to close our non-profit organization. Not-for-profit credit counseling is severely handcuffed by current funding schemes. They are forced to please the funding sources which are the exact entities that they should be standing up to in representation of their client, the debtor. In other parts of the world, groups that provide help are for-profit and it does not destroy the industry. The minority of help in the UK, for example, is provided by non-profit groups who appear to be even more closely bound to the creditors with former creditor executives even engaged in the management of the credit counseling groups. It is time that people begin to focus efforts on serving the very person that requires the best representation that we can give, and that is the consumer. Consumers deserve options. If a consumer wants to go to a non-profit clinic and receive non-profit limited services, that’s fine. But a consumer should not be prevented from seeking professional representation and advanced services from another group, even if it is for-profit. Ever since I first started helping debtors, in 1994, there has not been one single law passed that gave consumers, who want to repay what they can reasonably afford, an opportunity to do so. But there are solutions that we can pass to level the playing field and to give consumers a fair chance at debt solutions other than bankruptcy. But consumers have not been properly represented by non-profit groups. Non-profit groups have almost no record of standing up for and defending consumers against banks and creditors. While they may make statements about budgets and finances, you will find little to no outspoken comments about the inequities of the non-profit debt management solutions because the non-profits don’t want to risk their funding and thus do not fairly or properly represent the consumers best interest. A for-profit debt counseling or debt settlement industry in the U.S. would give consumers the opportunity to have groups want to move forward with new solutions, to lobby against creditor abuse, to fight for the consumers that are not well or properly served now, and to allow profit to attract the best and most talented staff. There is legal aid and their are lawyers that charge for services. There is medicaid and their are doctors that charge for services. It’s about choice. Please give consumers a chance and allow for-profit groups to exist, be creative, to fight for new solutions, to raise excellence through competition. This can be safely done with one federal set of licensing, bonding and regulatory guidelines and your action will for once, give good people with bad debt a real fighting chance at a better life. Source: Federal Trade Commission Should Allow For-Profit Credit Counseling and Debt Settlement Firms to Assist All Consumers Other Related Articles to Read Would You Like to Be a Debt Collector? Five Inside Truths About Debt Management Plans (DMP) You Need to Know Peter Is Trying to Find Shelter In These Uncertain Economic Times South African Consumer Debt Spinning Out of Control. Half Of Work Force Can’t Pay Their Debts. Debt Collectors Buying Bad Debts Make a Killing in a Bad Economy

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This weeks personal finance brain trust question was a tough one that caused many of our bloggers to not contribute because there really isn’t a good answer to it. I knew it was going to be a tough one. DHL just announced massive layoffs that will cripple the town of Wilmington, Ohio and the surrounding area. What advice do you have for the DHL employees, businesses and people of Wilmington, Ohio to be able to deal with this? WC - A 27-year-old writer living in Chicago and writing about personal finance through The Writer’s Coin . This is a tough one because I don’t know that I have an answer for the people who are now out of a job at DHL. My answer is more about what you can do before this happens, and I think it has to do with what’s happening in the auto industry and in Detroit. You have to diversify your skills. If you’re really good at something, then by all means go out there and do it well and you should be fine. But always make sure you’re expanding your skills. Don’t let this happen to you where a shipping company says “You’re fired” and all you can do is something related to shipping (or the auto industry). Picture yourself doing something else—if you can’t then you need to re-evaluate what you’re doing. This is another reason to always push yourself at your current job (another being that it makes you a better worker), so that you get better as time goes on. This makes you less expendable and, if you do lose your job, better positioned to find a new one. Patrick Bryan - Living in Northern Ireland, Patrick helps people in a very different environment and economy but yet, much is universal and much is the same. Visit Patrick’s Northern Ireland blog on debt . It is the sheer scale of the job losses in Wilmington that is staggering – 7,000 jobs in a town of just 12,000 people. It is hard to imagine how a small community manages to recover from a shock like this, and I’m afraid that there could be some hard times ahead for both the former DHL workers and the local shops and businesses which rely on the money they spend with them. If you have lost your job my advice is to first do a serious appraisal of your financial situation and where possible cut out all unnecessary expenditure immediately. Cut back on Christmas, sell the second car, hold off booking the family vacation for next year. Second – consider if you should relocate elsewhere – is there a job you can do in another country/state? It might be tough moving away from your friends and neighbours but you must at least consider this option as it could be the quickest route back to financial security. For those who want to stay (and I can’t blame you, I believe Wilmington is a beautiful town with a close-knit community) then you need to think about what you can do to make yourself employable again. Can you retrain for another trade or profession? What service do people need right now in your local area and are willing and able to pay for? If you have always harboured a desire to do something else with your life then this is your chance – to go back to school or learn a new trade, or start a business. Bear in mind that there might not be a lot of money being spent in your town for a while so perhaps there is either something you can do which involves selling your product or service on a wider scale? The internet and ecommerce is a great liberator in this respect and enables many businesses to operate without any major constraints on location in relation to their customers. I live in Northern Ireland which over the past 40 years has gone through the cycle of suffering a large number of job losses from a number of large employers (shipbuilding and heavy engineering), through to a period of economic regeneration to create the relative prosperity enjoyed now, and the best solution for job creation (which took a lot of trial and error to arrive at), was for the government to provide relatively small but numerous sums of grant money to encourage local people to create small to medium sized businesses which created jobs in their community. This spread the risk of one business or sector going into decline, and also avoided the prospect of multinational companies such as DHL cutting off limbs in an economic downturn as has happened in this case. Let’s hope the new administration has some grant money available to help towns such as Wilmington, Ohio rebuild their shattered economy and in future provide more local control over job creation. Steve Rhode - A personal finance blogger and founder of the Myvesta Foundation, a global social enterprise that helps people find solutions for money troubles. You can ask Steve your debt related question through GetOutOfDebt.org and he’ll help you for free. The DHL cuts create an economic dust bowl like that faced by the residents of Oklahoma and the High Plains back in the 1930s. The Dust Bowl exodus was the largest migration in American history within a short period of time. People had to move because the ground was no longer fertile and food and income were scarce. It didn’t rain in that part of the country for nearly a decade of blowing dirt and dust storms. In hindsight one can see that a region or town that is so dependent on one employer is playing with fire. It is one thing when ten local businesses fail that employ a total of 100 people but it is catastrophic when one employer fails and takes 7,000 jobs with it. This is a time and opportunity for government to provide assistance to local residents to allow them to create small business opportunities in the soon barren community. It is the good side of government and a role that it can play to make a real difference in the area. The thought that another similar employer is going to be located and enticed to fill the now missing jobs, is an unrealistic expectation. While residents may want to stay and fight for a better future, at some point the reality of having to put food on the table, make the car payment and pay the mortgage become a reality. And at times like these, these emergency days, this is the time that people, rightly or wrongly, turn to credit cards to make it through. Payments will be expected, life goes on and income must be replaced. Such a mass exodus out of town creates other problems as well. With so many homes going up for sale as people leave the Wilmington, Ohio area, housing prices will plummet. There will not be enough buyers for the homes on the market. Homes will languish and eventually be foreclosed on. The largest mistake people in Wilmington will probably make is to use up their credit and spend down their savings in hopes of finding a good solution to stay. That will only leave people broke and trapped in a dying community. There is no good answer for the people of Wilmington, Ohio that will leave them without the need for sacrifice or loss. With the drying up of DHL it is much like the Dust Bowl drought. It would be best to learn from history and not repeat the same mistakes learned by the residents of the Dust Bowl or those from economically ravaged steel towns that have yet not come back. With unemployment rising all across America it may no longer be a choice of finding work where you want to live but living where you can find work. Like the Oakies of the Dust Bowl that loaded up the Model T Ford for the drive west in pursuit of jobs, so will many Wilmingtonites migrate to other corners of the country, in search of jobs and in search of financial dignity. Wilmington, Ohio can come back in the future but it will first go through a period where it will wither and die back. Government intervention may be a solution to revitalize the area but those programs will take time. Spring does not come immediately. But in the future where there might not be hope right now, opportunity will rest in potential. What one person sees as an empty town, another creative soul might see as a blank canvas of new and better things. Downtown storefronts might turn into unusual residences with character. Local pizza shops, service and craft stores may open and from the ashes a future new Wilmington may be born. Source: What Do You Do When The Town Is Laid Off? - Personal Finnance Bloggers Question of The Week Other Related Articles to Read Good News - Post Office to Layoff Only 40,000 Workers. Bad Time to Be In Delivery Business. So What If GM Goes Bust. Let’s Just Hope You Don’t Own a New GM Vehicle. Your financial questions answered - Dallas Morning News David Writes In “I’m About To Lose My House” Charlotte Writes In, “I’m Desperate To Get Out of Debt”

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Anonymous sources in Citibank are leaking that Citibank expects to cut another 10,000 jobs, bringing the total jobs slashed this year at Citibank to 33,000. In addition, Citibank is going to announce steep increases in the credit card interest rates and I’m sure we’ll also see higher credit card fees as well. The goal will be to place more “innocent” land mines in front of consumers that they can step on to increase revenue for Citibank. Source: Citibank to Fire 10,000 Workers And Raise Your Interest Rates Other Related Articles to Read Bush Administration Rolls Out Wimpy Mortgage Assistance Plan Debt Collectors Buying Bad Debts Make a Killing in a Bad Economy

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All I’ve got to say is, Good ! The plan would have done more damage than good and while some people might have hoped that the government would accept the creditor based plan, it was shallow and not enough to make a real difference to help people avoid bankruptcy and get out of debt. Recently I wrote an article, New Concerns About 40% Credit Card Debt Reduction Proposal and Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out where I laid out my concerns over this plan. Well as of today, the proposed 40% debt elimination plan is dead. Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt. The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don’t qualify for existing repayment plans. An agency official said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program. The agency “does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us,” Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups dated Monday and made public Wednesday. “The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels, provide the public with … confidence” in the banking system, Long wrote. The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will “continue to look for ways to help consumers in these extraordinary times,” said the group’s senior vice president, Scott Talbott. Forgive me for being cynical but this plan was never designed to “help consumers”. The plan helped creditors by making the plan non-binding on all creditors, letting banks not report huge losses in a timely manner, and punish the consumer with huge tax bills for the debt forgiven. It was a stinker from the word go and I’m glad it’s dead. Maybe now we can get to work on putting together some real solutions that truly are designed to help consumers. Source: Government Kills Debt Write Off And 40% Debt Elimination Plan Other Related Articles to Read New Concerns About 40% Credit Card Debt Reduction Proposal Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out. Searching For a Debt Consolidation Loan or Credit Card Counseling Service Tanisha Wants to Cash Out 401K To Get Rid Of Debts. April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?”

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Tanisha 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 recently recieved $137k into a 401k account from my ex-husband due to a divorce. I’m 35 years old, 2 kids, unemployed stay at home mother for past 8 years. I will receive spousal support until 2012. I no longer own any property or assets and I have $33,000 in credit card debts with interest rates ranging from 10%-18%. With the stock market the way that is, I feel the need to cash out a portion of my 401k to pay off all debts. I understand that there’s a 20% tax penalty for cashing out and the 10% for early withdrawal is waived due to divorce. Do you think that I’m making the right decision to cash out the 401k to get rid of the $33k in debts? The monthly credit card payments total approximately $750-$800 per month. If an emergency happens, I feel afraid that I don’t have extra cash around every month due to high credit card bills. Should I cash out the 401k to get rid of the debts? Tanisha” Dear Tanisha, Normally I am dead set opposed to using retirement money to pay off debts. But in your case, i may be willing to make an exception to that position. Your situation is a little bit unusual in that you are an unemployed mother. It appears you have no money coming in except for spousal support and then this $137,000 401(k) windfall. Normally I would suggest not touching the 401k money since it is there for your retirement and will grow to provide savings for you in the future. However, as an unemployed stay-at-home mom there is little chance of you repaying the $33,000 worth of credit card debt without finding a job and going back to work. By paying off your $800 worth of credit card payments each month it will make it easier to get by on what little income you do have coming in, especially since that money will only continue for four more years. The best case scenario is that you are able to find gainful full time employment and repay your credit card debt that way. Then you will be able to leave the entire $137,000 in the 401(k) and since the stock market is currently at very low levels, by the time you retire that investment will be worth a lot of money. Outside of that you could consider bankruptcy , go bankrupt, discharge your credit card debt and leave the entire $137,000 in your retirement account. That would get rid of your debt and protect your 401(k) funds. I think before you decide what to do you should discuss your options with a bankruptcy attorney . You can ask for a free bankruptcy review and use the session to become better informed about what your options are under bankruptcy to eliminate debt you cannot afford and protect money that is designed to take care of you when you get older. After talking to the bankruptcy lawyer you will truly be able to decide which path is best for you. Big hug. Steve Source: Tanisha Wants to Cash Out 401K To Get Rid Of Debts. Other Related Articles to Read Kayte Has Drained Her Savings And Can’t Pay The Bills Anymore April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?” Diana Is Struggling to Make Credit Card Payments And Afraid Peter Is Trying to Find Shelter In These Uncertain Economic Times Is Debt Consolidation a Viable Debt Solution For Unsecured Debt?

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BB 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’m in approximately $80,000 of credit card debt with an unfortunate and sudden drastic change in finances due to situations beyond my control. I owe American Express $40,000 along with other credit card debt. I have never been late on my payments except this month. American Express along with a few more creditors has already begun to call me. I have not as of yet returned the calls. I’m pondering bankruptcy or perhaps some sort of credit counseling or debt consolidation plan? Do I just write each creditor explaining my situation? At this point I only have approximately $500 dollars a month and just one of my American Express accounts requires a monthly payment of $516. Please help, I’m desperately awaiting your advice. What would you suggest I do? I inquired about bankruptcy and was advised I’d need to wait perhaps 3-6 months as bills are behind. Suggestion????? BB” Dear BB, It is amazing how people are really as good to creditors as their last payment. Whatever has caused this sudden and drastic change was not expected or planned for but it has now left you in a very difficult situation. American Express is a difficult company to deal with and their bill collectors have limited tools to use to really help you to get out of debt. The pressure they apply and approach to their debtors actually does more to drive people into bankruptcy as crazy as that sounds. There really isn’t any reason to write to your creditors. If you have been late on a payment, they already know that. Besides a preemptive letter to your creditors seems to go nowhere and vanish into the ether. You are much better off explaining your situation, nicely, to the collector on the phone when they call. If your situation is temporary and you will be able to return to your previous financial standing in a couple of months then you’ve got some other options but from the way I interpret your question it sounds as if this is not a temporary reduction in income and it is more dire and long-term. I am surprised that you were told to hold off on bankruptcy unless you were using your American Express cards up to recently. It would not be the best scenario for you to use credit cards you include in bankruptcy within 90 days of going bankrupt. I would seek a second opinion from another bankruptcy lawyer in your area and ask for a free bankruptcy review . In the meantime you should consider not sending any more payments to the credit card accounts you can’t afford to pay. This will damage your credit report and lower your credit score but there is no upside in draining any money that you may have currently on hand that may be needed to make necessary ends meet or to pay for bankruptcy when you file. With credit card debts of $80,000, your monthly minimum payment on those accounts is about $1,600, and that $500 is not going to be enough to please all of the creditors. Any repayment plan at that level is almost certainly to fail. If bankruptcy is really in your future then throwing good money after bad is not going to accomplish a thing. But that does not mean you can go out and party with that extra cash. Save it up to go bankrupt. Big hug. Steve Source: BB Owes American Express $40,000, She Can’t Pay It, Bill Collectors Are Starting to Call Other Related Articles to Read American Express to Cut 7,000 Jobs. Experience The Freedom Of Joblessness. ML Writes In, “I Can’t Pay My American Express Card.” Bank of America Offers “Clean Sweep” Debt Consolidation Loan Up to $50,000. Let’s Look at The Facts And See Who Is Really Cleaning Up. Diana Is Struggling to Make Credit Card Payments And Afraid Gift Cards, The Gift That Can Stop Giving

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April 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, Mounting credit card debt is getting difficult to pay. I’m thinking of just ONLY taking care of house, car, utilities, food, insurance. I’m a single mother of two kids and get no child support. I’ve worked so hard for good credit and I am losing it. What do I do? Not pay and wait for it to wipe off credit? File for bankruptcy before it’s too late? April” Dear April, First, let me extend to you my biggest hug and deepest feelings of hope to help you through this difficult passage in your life. The pain and pressure you are living with right now, today, must be intense and make it difficult for you to be the strong mother that you want to be. Good credit is an elusive target. You only really have good credit when your financial life conforms to what your creditors are most looking for. Your credit score is in fact a calculated score to allow creditors to identify who is most likely to be the lowest risk and highest profit maker for the creditor. Good credit and a good credit score has nothing to do with what is right for you and your kids at this time. If there was a life score, I’m sure you would excel at it as a concerned mother that is trying to do what is best for you and your kids. Having bad credit does have consequences, but then too does not being able to feed your hungry children, maintain insurance or being able to live in a safe environment. Ultimately, which is more important? As I get older I realize that for me, the credit report and credit score are of lesser importance to me. What is most important in my life has to do more with trying to do the right thing, caring for my family and helping others. In your situation you have wisely prioritized your financial obligations and you have found that after paying those items there is little left over to pay the credit card companies what they demand. As much as you may not like the possibility, it might just be that you can no longer afford to repay the credit cards . In that case you have several options: You could stop paying the credit cards and let the collectors start calling; enter a debt management program and see if you can afford to pay a reduced payment to get out of debt; or consider bankruptcy . Doing nothing is a stalling tactic and not a solution so that’s not really a good approach. A debt management program might be able to craft a monthly payment for you but that payment will be based on what your creditors want and not based on what you can afford. Additionally, if you are living that close to the financial edge then I think you need to make sure you are able to put money each month into a savings account to protect your and your children in case of a financial surprise. Being in a credit counseling or debt management plan may not give you any room to save money each month. That leaves us with bankruptcy . Bankruptcy is a legal solution you can use but before you make up your mind that bankruptcy is right for you I urge you to schedule a free bankruptcy review with a bankruptcy attorney and discuss your specific situation. April, promise me this, that while the financial current situation is regrettable, promise me that you won’t loose sight of the fact that those small and loving faces that look up at you at night need you to be their protector and to care for them in a safe and healthy way. Do what is right for them, even if it is hard for you to face. I’ll always be here for you. Big hug. Steve Source: April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?” Other Related Articles to Read Diana Is Struggling to Make Credit Card Payments And Afraid Jeannie Already Went Bankrupt And Is Now With CCCS But Can’t Afford to Feed Her Daughter Bad Credit Debt Consolidation - Brutally Honest Advice I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do? John Had a Knee Operation And Says “I Can’t Pay My Bills”

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Sohail 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 debts and collection agencies had been contacting me about them, but not anymore. I want to pay off all my debts and make an excellent credit. I want help in (1) to find out how much I owe and who? (2) I want to pay you very fast and you deal with my creditors. How can I get your help to pay off all my debts and have a clean excellent credit very soon. Thanks! Sohail” Dear Sohail, It is very easy to find out who you owe, and while there is no guaranteed way to find everyone, if they don’t report to a credit bureau, this is the best way, order a copy of your consolidated credit report . I am a huge fan of the consolidated credit report and this is the report that I use to check my credit . The consolidated credit report will show you information being reported about you to the three major credit bureaus. Each report can contain some similar but some different items so it is critical to get a consolidated report. I favor ordering this report since you can order it online and download it right away, it is combined in a way that makes it very easy to read and spot who is reporting what about you, and it has a nice section with contact information to reach those creditors you still owe. The credit report will show you outstanding debts but it is important that if it shows a debt by a collection agency, that you instead contact the original creditor, and not the collection company, to find out where you can make payment. Just because it was with the collection company reported on the credit report , that does not mean it is still with that collection company. By paying your old and lingering debts off and then obtaining new credit that you pay on time, it will go a long way to helping to rebuild your credit as fast as possible. Big hug. Steve Source: Sohail Wants to Pay Off Old Debts to Improve His Credit Other Related Articles to Read Clinton Wants to Know “Am I Doing The Right Thing By Repaying My Debt?” ML Writes In, “I Can’t Pay My American Express Card.” Bob Was Injured And Is Now Behind On His Credit Cards Complaints About Bill Collectors Rocket as Debt Collectors Get Tough Tina Says “My CPA is Under Investigation For Fraud”

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In this time of great economic worry and stress, Bank of America is sending out an offer they call their Clean Sweep ® - Bank of America ® Debt Consolidation Plan. I thought it would be beneficial to take a close look at this offer and use it to help educate readers about what to look for and how the marketing message and reality can be two completely different things. Once we finish reviewing this offer you will find that rather than a great tool to help you to get out of debt, the offer actually encourages you to use the line of credit to go even further into debt. “Or think about taking that well-earned vacation or remodeling your kitchen. Then request any amount up to $50,000.” - From debt consolidation offer. The Debt Consolidation Offer Envelope It was the envelope that caught my eye and made me wonder. I could see from the back of the envelope that the mailer was from Bank of America but the front had some interesting statements: One Phone Call One Predictable Monthly Payment One Fast Way to help you get out of debt. Bank of America CleanSweep Offer Envelope Of the marketing inducements made on the envelope I knew that only one of the four items was probably true, “One Phone Call”. The rest were probably very stretched statements at best or just simply outright deceptions. The envelope says “ One Predictable Monthly Payment ” but the details on the inside tell me that the interest rate offered is variable and can be adjusted regularly and go way up. “We may adjust your APR on a monthly basis due to changes to the Prime Rate.” “Repayment term and payment amount are estimates which may change if, for example: your APR changes, you make late or partial payments, we access fees, you enroll in Credit Protection, or you take additional advances.” So how can my monthly payment be predictable if the interest rate is variable and we already know that the Prime Rate will almost certainly go up from the low today? It would be ridiculous for Bank of America to say that the supporting fact for their statement is that the monthly payment can be predictable because they have a formula to calculate it. The statement is obviously designed to make you believe that it will be a fixed monthly payment in the enclosed offer. Is the statement “ One Fast Way ” true? I’m honestly not sure because while taking Bank of America up on their offer by filling out a few lines or calling them might get you approved fast, it would be a bold stretch of the imagination to say that this loan will get you out of debt faster unless you are currently being charged much higher interest rates. The issue here is that when we get to the stuffer inside the envelope you will see that Bank of America is advertising an 8.99% interest rate but they also say that the rate could be up to 21.99% interest. It is likely that the higher interest rate will be extended to someone that has a poorer credit report or a lower credit score . That means that for the person that might already have higher interest rates because of their credit, then they will most likely get an initial interest rate that is higher, or up to 21.99%. Making a blanket statement that taking advantage of the Bank of America CleenSweep debt consolidation plan is going to get you out of debt faster is grand hyperbole. There is no way of knowing if you would even get out of debt faster even with the initial minimum APR since the rate is variable rather than fixed and it is impossible to predict what changes to the interest rate will be during the period of repayment. The bolded statement “ to help you get out of debt ” is a wish at best. Taking advantage of this offer does not mean that you will get out of debt. in fact, if you use the credit to pay off other debts then rather than getting out of debt you are simply trading one debt for another. I am sure that Bank of America would argue that by taking advantage of this variable interest rate offer that is subject to penalty interest rates of 27.99% and other fees and charges, that it is possible for someone to get out of debt. Yes, but not until the entire loan is repaid, and at what total cost? The Debt Consolidation Offer - Front Below you will see the top part of the front side of the Bank of America CleanSweep Debt Consolidation Plan offer. Debt Consolidation Offer Front - Top (Click image for larger.) Let me first start with the asterisks and referenced statements and then we’ll get to specific statements made in the offer. Next to the statement “A loan amount up to $50,000″ there is an asterisk that refers to the following clarification. Approved accounts will have a credit line between $500 and $50,000 based on creditworthiness. Next to “..pay off high interest rate debt” there is an mark that refers you to this statement. We may prohibit use of this account to pay off or pay down any account issued by FIA Card Services, N.A. FIA Card Services is the name taken by MBNA when it became a subsidiary of Bank of America. So this means that even if some of your debt is debt now owned by Bank of America, they may prevent you from paying a debt off owned by Bank of America so this offer can’t be used to shift just any debt. Does this mean that even though I might have a higher interest rate debt with Bank of America that they’d prevent me from consolidating that debt into this offer, why yes it does. So let’s turn back to the offer again. On the left we see a series of bullet points that Bank of America wants to draw your attention to. Even though this offer is sent in the guise of being a debt consolidation plan and a prudent financial tool to help you to get out of debt, let’s look twice at one bullet point in particular. Use The Money As You See Fit So while you may be approved for up to $50,000 you don’t actually need to use the money to get out of debt or reduce your liabilities, you are being openly told that you could use the money to go further into debt. So this statement and inducement does not make this offer a benevolent gesture by Bank of America to help the consumer to better handle their finances in these troubled times. It is designed to allow Bank of America to also extend even more debt, to get you further into debt, even though it is called a debt consolidation plan and promoted on the envelope to help you get out of debt. I’ve highlighted some of the statements on the front that got my attention. Let’s look at those. Bank of America CleanSweep Offer (click for larger image) “There’s never been a faster, easier way to get the extra cash you need to help pay off high-interest debt or to use however you decide” That is just a blatantly false statement. The majority of credit offers sent can be approved over the phone in a short amount of time. How is this offer faster? “…for a loan up to $50,000.” So how is it that I’m getting out of debt by swapping one loan for another and we now from looking at the asterisk that our approved credit limit may be as low as $500. “Or think about taking that well-earned vacation or renovating your kitchen.” Here we are back to the encouragement to not use this credit offer to get out of debt but in fact to do just the opposite. “APR increases or additional advances will lengthen term or increase payments.” So this isn’t even close to being a fixed monthly payment debt reduction offer if when the APR changes, which it will, it will cause my payments to increase and the repayment period to become longer. There isn’t anything that is set in stone that I, as a consumer, could depend on to judge what my monthly obligation would be under this credit offer, even though there is a large and nicely presented table. The table is irrelevant to the final terms and interest rate fluctuations over the life of the loan. “All payment amounts and terms above are estimate based on an APR of 8.99%. Your APR may be higher.” If 8.99% is the best interest rate to be offered then the majority of people taking advantage of this offer will have a interest rate higher than 8.99%. Think about it like this, only the select group, the best credit people will actually get the best interest rate. So all the rest will get a rate between 8.99% and 21.99%. If the majority of people will get a rate higher than the interest rate used to calculate the repayment table, it make the figures used in the table inaccurate and not representative for the majority of new customers. I wonder what percentage of people that receive this offer will actually get the 8.99% rate? Logic would make me believe that that number will be the minority of all acceptances. Bank of America CleenSweep Repayment Table “…the U.S. Prime Rate applicable using this formula was 5.00% and the APR range was 8.99% to 21.99%. We may adjust your APR on a monthly basis due to changes to the Prime Rate. For approved accounts, we also reserve the right to change your APR, fees or other credit terms at our discretion. Additionally, if you fail to pay your minimum monthly payment by its Payment Due Date on any two occasions within 12 consecutive months, we may increase your APR up to a Default APR of 27.99%, which will no longer be variable. I hope you saw what I consider to be on of the most important statements made in this offer, we also reserve the right to change your APR, fees or other credit terms at our discretion . When you take Bank of America up on this offer, you are giving up all control and all future certainty to what this offer will cost you over the life of your repayments. There is nothing that is fixed or predictable about this offer, even though that is what is promoted. Let me be clear, Bank of America is clearly stating that they can change everything about this agreement at any time and for any reason and you will be bound by those new terms. “You will pay a 3% transaction fee on each advance (minimum fee $5; there is no maximum)” If you were approved for the entire $50,000 then you would have to pay a fee of $1,500 to consolidate your debts into this offer. Bank of America CleenSweep Application I must point out a critical and very important part of this part of the application. The Gotcha “ BY SUBMITTING THIS APPLICATION I AGREE TO THE CONDITIONS ON THE REVERSE SIDE OF THIS FORM AND TO BE BOUND BY THE TERMS OF THE ACCOUNT AGREEMENT, INCLUDING ARBITRATION, WHICH WILL BE DELIVERED TO ME BEFORE USING THIS ACCOUNT. “ This simple little statement could be the subject of an entire article in itself. An unsophisticated or desperate consumer in debt may simply take advantage of what appears to be a predictable monthly payment debt consolidation loan to get out of debt. But this offer and application does not contain all of the terms of this loan and you won’t get those terms that you will be legally bound to or see them until you apply for the account and are approved. How can anyone make a fully informed decision about the merits of this debt consolidation loan offer without seeing all the terms? Credit card companies have been under a lot of heat about their binding arbitration clauses in the credit card agreements. If there is a dispute under this agreement and you challenge it the case will not be handled by the court, but by an arbitrator appointed by the creditor. For more information about the unfairness of arbitration and the reality of fair and accurate representation of the consumer, read Banks vs. Consumers (Guess Who Wins) . In the interest of actually finishing this review I’m going to skip reviewing the very short application part of the front of this offer and move onto the back. In a future review I’ll concentrate on the application part of another credit offer. The Debt Consolidation Offer - Back The back of the offer consists of two parts. The top part is a continuation of the marketing message and the bottom half contains mostly terms and some marketing messages. The top half is below. I’m already getting weary of pointing out all of the inconsistencies of this offer but here are some more. “If you like, we can pay your others creditors directly, deposit the funds right into your checking account, or send you blank checks to use as you please.” So now we learn that not only can we use the debt consolidation offer to take a vacation but that Bank of America will even send you blank checks to use as you please , and not just to get out of debt or to consolidate your debt or to lower your payments. If you take on new debt through this offer, your overall debt payments actually go up. “The funds have a reaccess feature, so you can ask us to “refill” your account up to your available credit line over and over as you pay it off.” I’m confused how a loan marketed as a plan or way to get out of debt, really gets you out of debt if you can just keep adding to the loan as you pay it off. The bottom half of the back contains more of the same terms and conditions that I’ve already covered above. so in the interest of actually being able to end this article. I’m going to skip it for now. Summary Bank of America promotes its CleenSweep debt consolidation offer as a way to get out of debt with one predictable monthly payment. A quick examination of the offer easily shows us that the intent of the offer is not to get us out of debt, but to in fact encourage the extension of more credit and cash to use how we see fit to use it. Maybe even for drugs, gambling, compulsive shopping or some other purpose that is not in our best interest. The idea that this offer will actually be as shown to the majority of people who apply is very suspect. The majority of people will not be able to repay their debt in accordance with the repayment table shown and there is nothing fixed about the monthly payment when the terms, fees, and APR can be changed at will by Bank of America. In fact, the repayment table is completely misleading, false, and inaccurate even for the most qualified of applicants. The table shows a monthly repayment amount for 96 months, that’s eight years. There is no recorded time in the history of the prime rate where it has held the same interest rate for anywhere near that time period. Prime Rate Historical Graph If we look at the prime rate adjustments over the last eight years you can see that the rate today, the rate that the repayment chart is based on, is at the bottom of the prime rate trends. That means that there is a significant chance that both the prime rate and your “fixed and predictable” monthly payment will rise during the period of repayment and be neither fixed nor predictable. This offer appears to be nothing more than a ploy to push more credit to people that might be concerned about their current financial situation, looking to consolidate their debts or get a grip on better managing their financial situation. However, almost everything about this offer does none of that. My vote about this offer - Avoid It. Source: Bank of America Offers “Clean Sweep” Debt Consolidation Loan Up to $50,000. Let’s Look at The Facts And See Who Is Really Cleaning Up. Other Related Articles to Read Is Debt Consolidation a Viable Debt Solution For Unsecured Debt? Diana Is Struggling to Make Credit Card Payments And Afraid Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas Is Consolidating Debt the Way to Go? - American Chronicle Robert Wrote “I Do Not Know Where To Start Other Than I Am in Debt”

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