I was recently talking to a new neighbor of mine, and he was saying about how much credit card debt he had. . . over 50K He has a good job but the plastic must have got away from him.

Anyway, since he is already paying high interest rates, I suggested just paying one at a time, and not pay the others, until one is paid off, and keep doing that until they are all paid off. They might be screaming for their money and the phone will ring off the hook, but what can they really do? Put a lein on his house? Could he call them and see if they would voluntarily LOWER his interest rate(s)? Sounded as if they were already high enough?

I have also seen those commercials on TV about credit help, but there has to be a catch for that too, although I dont know what the catch is.

Funny thing was he said a bankrupty lawyer wanted 2-3 K up front to file for him . . . but if he cant pay what he has now, how would he even come up with that?

 

The credit counseling might work.
Bankruptcy laws have changed in the past few years. you cant just wipe out debt anymore.
If he has a fairly new vehicle and is buying a house, he might try a refinanace and pay what he can. His credit will be hosed, but it probably is already anyway.

 

From what I gather, the house is bought (financed) but the vehicles are not new, probably 4-5 years old. I wonder what the interest rate is on the house?

 

I have a credit score about 700.
I just (this month) refinanced my house to lock in and get out of a variable intrest rate. I got 6-5/8%.
A 4 or 5 year old vehicle will probably only last another couple years before problems. I would say his best bet is to take what little credit he has available and file bankruptcy (If he has learned his lesson).

 

There is a guy on am radio by the name of Dave Ramsey. He also has a web site. He has been helping folk's with those problems for years. Might be a great spot to get started at least. At least give him a try, he is free.

 

First thing he needs to do is cut up all the cards. Then he needs to take on a second job and start paying as much as he possibly can on those cards. A credit agency may help him lower the interest rates, but he may already have low rates.

If he quits paying on any of them, they can jack his interest rates through the roof and double or triple what he already owes. Just depends on where he actually is with all that stuff.

He should probably pay close attention to his emails, the ex wife of the good Doctor Assam Mohimbe, needs help transferring hidden millions to this country

 

I actually have most of my cards cut up myself.

I look at it as money available, but if a credit card doesn't give me rewards, I wont use it. I may transfer money to it in an emergency, but thats it.

 

He used the money, he should pay it back. Definitely has issues of living within his means. Gitrdone is right, they have changed the laws and made it harder for people to file. If he confided in you he should be open for you to encourage him and his wife to get good finincial counseling.

 

No more spending on the credit cards.

Dave Ramsey is a good guy to listen too.
I would encourage your neighbor to start with the smallest balance card and put any extra money into that card. If that doesn't work have him do a consolidation loan by taking out the equity in his home and then pay off the credit cards. He can then pay off the home equity loan, most usually have a lower interest rate, and be diligent in carefully handling his money.

Ideally he needs to sit down with a financial advisor/credit counselor to explore options to refinance the credit card debt and help him plan his budget.

 

He should seek credit couseling. They will close his accounts and get the credit card companies to stop charging interest on the balances and accept dedicated monthly payment plans. This will save his credit rating. It won't be perfect, but it'll be way better than defaulting on all those accounts.

 

Hmmm, beware of credit counseling agencies.

My sister-in-law (her sandwich has no meat on it) was convinced she had won the Nigerian lottery. Started charging up a storm. Bought 4 cars.

Ok, fast forward 5 months. Down to one car, rest were repossessed. Owes about $20K for the cars. Her credit card debt is $90K, yep, $90,000.

Friend of the family is a bankruptcy attorney and was willingly to hear her story and give her some initial advice for free.

Here's the deal. She cannot file bankruptcy for at least 18 months or she will face fraud charges. The banks can only garnish 25% of her wages, so she does have some cash to live on. He told her to be VERY careful if she went the credit counseling route 'cause he has seen a bunch of bad ones that took folks for a ride. I do not know if he recommended anyone, may have, but I'm not sure.

Look, she's an nut for doing all this but have to say the bank's were sure happy to keep giving her cards. I'm not excusing the behavior but it's a shame they are so willing to help folks go down the tube.

 

I agree! He also has a book that can help as well.

 

Credit counselors can usually get you a lower rate but, you usually stop using or close the account as a condition of the reduced rate.

If they want to do it without help they can try to pay off the littlest balance first. Then take the amount of that payment, add it to the payment of the next smallest balance and pay it off. You have to be very disciplined and not spend that extra money elsewhere.

It sounds like these nice folks need to learn how to live within their income first.

By all means, do not just stop paying on one thing to pay on another. The bankruptcy laws have changed and defrauding on credit card companies is not as easy as it used to be.

 

Yep!
Tell him to beware of some of those card debt "consolidation" companies that promise easy help. They only want to "help" the client out of card debt through consolidation loans that they then get a slice of the payments. Especially when it could've been taken care of differently. Greedy, opportunistic vultures!
Whichever debt counselling agencies the United Way supports in his area are likely the no-charge types that can truly help w/o soaking him with more debt.
It won't hurt to check with the true, "not-for-profit" counselling agencies out there.

Still it's ultimately up to him, and it's not going to be easy.

Have a buddy that fell into that plastic trap years ago.

"There but by the grace of God, go I!"

K.

 

Maybe my advice was in error. I just figured, what can they do to him? If they are screwing him on high interest, and he intends to pay the debt . . .take all the money from the others and start with one and pay it. After it was paid off, do the next one. I figured the credit score and things didnt matter as he is getting the shaft now by the high interest rates.