Not in a good place

[JamesAHart]

Hello;

I have not been to frugal in the past and things have caught up on me now. Because of this I know I have greatly change my lifestyle and I have been researching ways to do that.. thus I am here on this website.

I am currently looking into debt resolution as a way to fix my issues and get on a plan I can afford. Has anyone done this? What is your experience with it? Should I do it or go the extra step of bankruptcy? What is the difference after it is all done and long term for me?

Anyway..I am open to any advice or info you can share.

Thanks;
James

[shoiji]

If you end up doing any debt consolidation make sure to use a non-profit organization.

Also, sit down and right down all your monthly bills and expenses. Be honest and look at any bills that you can reduce, such as lower cable service, lower internet service, only cell phone. Many times you can find extra money for bills this way.

[Gabe]

If you are looking for advice, you will need to be as transparent as you can. Meaning share how much is coming in and how much is going out and how much you are in debt.

A financial statement on your current situation would be helpful.
Or whatever is your monthly budget.

If you don't have a budget, then that's a problem.
Make one. this will allow us and yourself to better understand your situation and possibly give advice on where you can cut costs before considering a bankruptcy.

[Anna43]

Hearing debt resolution makes me nervous. There and MANY companies that promise to solve debt problems and absolutely ruin debtors. If you go with a non-profit like Consumer Credit, they will do an evaluation and tell you whether or not they can help you or if bankruptcy is your only option.

[Daisygirl]

My heart goes out to you. Many of us have been there -and some of us still are.

I went through a bankruptcee trustee to settle my debts. That means, at least in Ontario, we offered a settlement amount that I am paying over the next 5 years. So far, it has gone well and seems to have been a positive decision.

Best of luck to you. And welcome!

[Debbie-cat]

Welcome you have come to the right place. Alot of us have and still are where you are right now. Post your budget and we will try and offer some advice.

[miss_cas]

Hello,

I am enduring my own under-employment situation due to a disability.

I am also advising a friend who is disabled through the process.

Bankruptcy is difficult for anyone making over $30k due to changes that took effect a few years ago. If you are carting around a ton of student loans, a bankruptcy will not help. You can only discharge student loans if you become disabled and get SSDI. Get a reputable lawyer and double check his/her suggestion for the debt counseling company to use if you make over $30k -- it's a much harder/longer process. (Honestly, if you can change your living situation and expenses plus the necessary employment change (maybe to part-time), it might be more advantageous to live the under $30k lifestyle until you get the bankruptcy discharged.)

You may find "Total Money Makeover" by Dave Ramsey to be a good read. He also has a podcast you can find on itunes. I would NEVER pay to use his website - daveramsey.com. He also has "Financial Peace University", a financial health program that is taught by some churches. The packet of materials is $100+. Be aware, Dave Ramsey makes a hugely nice living off these materials but he got out of his own financial problems by bankruptcy, he advises his followers against this. Personally, put a hold on "Total Money Makeover" at your library then listen to his free podcast on his website or itunes. I wouldn't spend another penny on anything else there but it is a very motivational look at financial freedom.

Another good read is "It's your money or your life" by Joe Dominguez. He can totally change your way of looking at your lifestyle, possessions and your need to slave in the working world.

Personally, you need to look at your spending habits.
1. Discressionary spending - Write down everything you spend for at least a month, three months is better.
2. Collect three months of bills and write up a budget. Look at your discressionary spending from #1 to determine how much you are spending in all areas to determine how much to budget there.
3. Reduce, cut, cut and cut some more. -- Look at your discressionary spending -- what are your bad habits? Junk food snacks from the gas station when you fill up - use pay at pump and don't go in. Expensive lunches out at work - brown bag it four days a week, splurge once a week. Expensive dry cleaning - replace wardrobe with washable used or clearance items piece by piece or try a discount dry cleaner. Books - used book store/bn.com used for reference only and library for everything else. Smoking -- cut number of cigarettes in half every week until you have kicked the habit. Expensive memberships you don't use (golf course membership, gym, professional groups, subscriptions) -- cancel them. Electronics -- don't buy new until your old item quits unless you use the equipment to earn a living and the new model is a substantial improvement. Drinks out with friends - host a byob party at home and everyone brings a dish/appetizer. Wear clothing twice and change when you get home from work. Pick some 'cleanup clothing' for yard work and dirty housework and don't ruin your good casual clothing. Do your own yard work, laundry, house work and cleaning + learn to do some repairs. Have the car serviced on schedule but beware the package deals some shops offer which include a lot of stuff you won't need and short you on the work you need done -- change shops if you need too. Eat at home; use redbox for movies; library for reading/movies/music; check out free/very cheap entertainment in your community; group errands; shop the stores that are consistently cheapest (Aldi's, Dollar Tree, thrift). Don't over a/c or heat, dress appropriately and use fans. Clothing lasts longer and you have lower utility bills if you air dry your stuff. Check out generic products.
4. Dave Ramsey -- Establish $1k baby emergency fund. Make all the cuts you can using list above + studying frugality. Start debt snowball -- Make all minimum payments plus throw all extra money at the next debt from smallest to largest. (If you have a really high interest item, consider paying this down first.)
5. Consider getting a second job for a while.

[Beejay]

Please be careful about getting involved with debt management/debt settlement companies. My daughter signed with one of these companies, against my advice, and they really did not help her much. She had several accounts that had went into collections and they were supposed to contact these creditors and work out arrangements to pay these off. They only contacted one creditor to make an offer, which was refused, and as for the other three accounts, they claimed they were unable to contact them. Each month, she paid the debt management co. $250 and of that, $50 went to pay their monthly fee. I think they were letting the money build up before even trying to work out something with the creditors. One creditor sent her a letter with a settlement offer. She called the debt management co. and told them to accept the offer and to pay it from the money built up in her account. After that, she cancelled her contract with them and withdrew the remaining funds. Through her legal services dept. at work, she worked out payments to the other creditors, FOR FREE !!, each one for less than she owed. All have since been paid off with very little/no help from the debt management company.

[a.nonymous]

Be aware, Dave Ramsey makes a hugely nice living off these materials but he got out of his own financial problems by bankruptcy, he advises his followers against this.

This statement is a bit simplistic as well as incomplete or incorrect (whichever way the content was intended).

In a nutshell:
Dave Ramsey advises his followers to never willingly declare bankruptcy. Only declare when you are forced to.

While he did declare bankruptcy (after being forced into it), he also turned around after "making it" and repaid all debts he could remember being owned.
That's at least what he claims. I obviously have not audited that but have no reason to believe he is lying on that subject.

Otherwise, I like your post.

[Greebo]

Dave Ramsey makes a hugely nice living off these materials but he got out of his own financial problems by bankruptcy, he advises his followers against this.

If you think bankruptcy "gets you out of" your financial problems, you should read some of the posts her by people who've actually been through it - you couldn't be more poorly informed.

[Anna43]

Well, I've never personally filed bankruptcy but I've prepared and filed 100's of cases thru the years. If you are contemplating bankruptcy you need to find an attorney specializing in bankruptcy and follow the advise given there not here.

The financial qualification for bankruptcy median income test can be found here

U.S. Trustee Program/Dept. of Justice

The amount of allowable income depends on number of people in the household and where you live. Even if your income is over median there is a means test to determine whether or not you are eligible for a Chapter 7 or would need to file Chapter 13.

The way the crooked debt solution companies work is they require you to sign a contract to pay a certain amount to them each month and have your bills directed to them. They then take a hefty upfront fee, then monthly fee and later often ask you to sign a contract for attorney representation for further fees. They then begin to "accumulate" your funds in an account and say they are working out a compromise with creditors. The simple fact is once you are about 3 months behind you will get the same offers on the credit cards without the debt solution company and that is the same "compromise" they tell you they are working out. Unfortunately the first you realize its not working is when the sheriff knocks on your door to serve you papers for a lawsuit. I've had clients pay literally thousands of dollars to these ripoff artists and still end up in bankruptcy due to the lawsuits.

Whether or not bankruptcy will work for you requires an indepth evaluation by a bankruptcy attorney. Each individual's circumstances are unique so what works well for one might not work at all for another. Also, whether or not bankruptcy works depends a lot on attitude.