Do I need a financial advisor, or an attorney?
January 16, 2015 2:39 PM   Subscribe

I am in need of some real guidance! I am up to my eyeballs in debt... have alittle equity in my home (I think) and i own one of my cars... So i need someone who can help me by assessing my overall situation & advise me the best way to proceed forward.

I have a good job, but i'm short abit every month ($2-300) & it's just a ticking time bomb. I don't want it to explode & would rather be proactive. I have about $8k in medical bills, $46k in Credit card debt (pretty good apr)... I'm not behind in any bills yet... but will be if i don't do something soon. Many of the medical bills are going into collections ... & as i get those calls i just negotiate the lowest monthly rate possible to get them off my back... but as i have nothing left at the end of the month, i'm trying to make something out of nothing.

I don't think i should default on the CC debt, as most "debt consolidators" want me to do (and then they negotiate the overall balance in half or third)...

We'd prefer not to move or downsize... but would consider it if it could solve our problems....

I own my car, but it's an '06 with 115k... my wife's car is an '07 with 90k... and we owe $11k on that....

I'd like to put my wife into a newer vehicle if possible (as she transports the kids more than I).... I would be open to selling my car... but would only get $10k or so max... maybe... but then i'd have to get another car (and therefore have another payment)...

I need some guidance so i know how to proceed...just don't know exactly who is qualified to assess my entire situation & give me the very best advice....
posted by foodybat to Work & Money (18 answers total) 6 users marked this as a favorite
 
I got in a similar hole many years ago, I went to Consumer Credit Counseling Services - they are a non-profit - it was on a "suggested donation" payment to them. - I.e., avoid all the rip-off joints that have names much like the real deal.
I had to give them the cut up pieces of my credit cards. They got the interest stopped on many of the cards, got the collections people off my back, and I made a single payment to CCCS each month till I was out of the hole.

They are not going to work with you if you want to get in more debt. I drive a 2000 model pickup with 135K miles on it. It works.

Within 5 or so years of getting out of the hole, I was able to buy my first house at a decent interest rate - this was around 1994, so it wasn't a NINJA loan.

Though I gotta say, I never got anywhere near 46K in credit card debt. I don't think there is such a thing as a "decent APR" on something like that. I gotta think you are paying enough on interest every month to make a pretty decent car payment. Go to CCCS and kill the credit cards.
I learned my lesson, I have not paid interest on a credit card in years.
posted by rudd135 at 3:08 PM on January 16, 2015 [8 favorites]


The first thing I want to say is there's nothing wrong with an '07 car - as long as there is nothing wrong with the car itself. And you're probably not going to clear any money selling your car if you just have to get another, unless you're happy to sell it for $10K and then drive around in a $2K beater. Trying to sell and buy cars is going to cost you more overall, so if your current cars are driveable and safe, you should keep them.

The next thing is: are you sure you need external help? Being short each month by $300 seems like it should be manageable with some cutbacks. Making some cutbacks in the short term is way preferable to other alternatives like bankruptcy, foreclosure, short sale, bad credit. Selling your house is a long term solution, not a short term solve. So have you assessed your overall situation? By that I mean, first, stop spending money on anything that is unnecessary or already committed. Second, make a fearless and searching inventory of all the debts you have, together with a list of minimum monthly payments, the amount outstanding on the debt and the interest rates. There's a huge relief that just comes with seeing it all on paper - even if it's overwhelming.

Third: work out how much you should have over every month if you pay all your minimums plus rent, bills and utilities. Is that enough for your monthly expenses like food, entertainment etc? If there's a gap you need to close that first. Do it by cancelling or downsizing any non-essential expenses: cable, netflix, cellphone plans, subscriptions, music lessons, vacations, gym memberships. Cancel and downsize till you have enough in your budget to pay your minimums plus your debt and have a comfortable cushion over to pay for essentials. If you can't do this, you're not being ruthless enough. If you are being ultra-ruthless and you still can't do it, you need Plan B.

Fourth. Debt snowball.

Fifth: Continue to make cutbacks in your expenses till you are able to build a comfortable savings cushion on your current salary. When you can do this, then take a breather, look at your larger situation (like selling the house and moving somewhere else).

I promise you, this will get better so much faster than you think. So to answer the question you are actually asking: it seems like the best qualified person to help you out of this is you. You don't sound like you are facing bankruptcy or imminent financial disaster.You can see a debt counselor or a budget counselor, but honestly, you have every skill you need to solve this problem right now.
posted by yogalemon at 3:09 PM on January 16, 2015 [4 favorites]


Where are you located? I absolutely think it makes sense to talk to a credit counselor or your local government equivalent about getting some of your debt forgiven. (In my very limited experience, medical debt is easier than credit card debt due to morality or some damn thing. Not sure.)

I don't know what things are available where you live (are you in Florida?) but, unrelatedly, sort of, if you make less than $53k per year, check out VITA. VITA is a free tax service that was set up particularly to help people get the Earned Income Tax Credit and to keep people from having to shell out for tax prep when their situation was relatively simple. You have to used the 1040 long form to get that tax credit and people were using the 1040EZ because they were intimidated by the long form.

The other reason to check out VITA sites is that many of them are linked to charitable programs that help with debt reduction and credit counseling. They might have the pro bono legal services information and so on there. A couple of the ones around here do.

Personally, I wouldn't get anyone a new car right now unless it was to get rid of car payments altogether, somehow.
posted by small_ruminant at 3:25 PM on January 16, 2015


National Foundation for Credit Counseling -- use their website to find a certified credit counselor, so you know you're not working with someone shady (www.nfcc.org). These counselors do budget counseling as well as debt programs, I used my local one recently to figure out a household budget and it was free and well worth the time. They can also advise you if doing a debt payment plan is your best option.
posted by rabbitrabbit at 3:27 PM on January 16, 2015


Seconding NFCC. Just don't commit to anything until you've evaluated and researched.

Also, I know it would stink and you'd rather be with your family (and this isn't exactly what you're asking), but would some extra work help stop the bleeding for a while? 2-300/month shouldn't be a full-time job, and could give you some breathing room until you can make bigger dents in things.
posted by powpow at 3:37 PM on January 16, 2015 [1 favorite]


I used Consumer Credit Counseling years ago and found them to be life savers. This book also helped me a great deal. The hardest part for me was accepting the fact that I got myself into debt and I was responsible for getting myself out of it. I kept trying to make excuses for why I shouldn't have to pay such and such a bill. I'm not saying you are doing that. That was MY issue.

I do recommend finding help, but as others have said, beware of the creeps. Shop around for a non-profit company. Consumer Credit Counseling is run (or was anyway, I think it still is) by the United Way, that might be a place to start looking.

Good luck to you. This is fixable, and it wont take as long as you think. Definitely one of the best things I ever did for myself.
posted by WalkerWestridge at 3:45 PM on January 16, 2015 [2 favorites]


First off, do you have a grasp on why you're coming in short each month? Before you make any other decisions you need a firm grasp on these two questions:

- How much $$ do you have coming in (after taxes and other paycheck deductions)?
- How much $$ do you have to pay out each month and to who/what?

Add up all your monthly expenses. Include irregular payments like car registration and insurance, divided by 12, 6, whatever to get a cost per month break-down.

Take a look at your expenses and see what you can cut out. This may mean things like reducing grocery bills, cutting out cable or dropping to a lower package/tier, changing cell phone plans, dropping gym or other outside memberships, etc. This will probably involve making some hard choices but I'm betting there's at least a little low-hanging fruit in your monthly expenses that you can use to give yourself a bit more breathing room.

Sit down with your wife and discuss your spending habits. Aside from the medical debt, how was the CC debt run up? How are your household bills paid? Do you and your wife have a spending plan, including household expenses, debt payments, kid-related costs, personal money for each of you?

This is critical going forward because if you don't have a working budget you'll just end up back in debt again. I've never used it, but the "You Need A Budget" (YNAB) app/site is highly recommended here on MF.

Car
-----
I would strongly suggest NOT getting a new car (and that includes a new used car) for either one of you if what you have right now are safe and reliable. And that really should be the only consideration. Bells and whistles and "Gee, it'd be great to have more leg room" need to be put off for now. You'll take a big financial hit getting a new vehicle. Unless both cars are on their last legs, it's MUCH better to keep driving them, even if they may require repairs.

Medical Bills
------------------
Regarding the medical bills - have you called the hospital (or whoever provided the services) and tried working out a payment plan with them? Many people are able to negotiate and work with the providers to get some breathing room and more manageable monthly payments. Others will weigh in with advice regarding dealing with collections, but I'd start with those medical bills which have not yet been sent to collections. Call the billing departments and explain your situation. Tell them you need help and would like work out a payment plan.

Debt Reduction
----------------------
I'd second the debt snowball method @yogalemon mentioned. It really works well for many people by knocking off the smallest debts first and giving a sense of reward and accomplishment making it easier to stick to the plan.

You may want to check out some books on getting out of debt. Your local library should have a few at least. A very popular author is Dave Ramsey (who popularized the debt snowball concept).

How to Get Out of Debt, Stay Out of Debt, and Live Prosperously

The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

From the Federal Trade Commission website:

A run down of dealing with debt collectors including your rights
posted by moxiequz at 3:46 PM on January 16, 2015 [5 favorites]


Consumer Credit Counseling Services is paid for by the credit card companies. It's not a good way to go. They generally have what most people would consider a conflict of interest (pun intended).

Dave Ramsey on this.

There's only one way to get out of debt. Spend less than you make.

So the obvious things are:
    Cut up the credit cards.
  1. Budget.
  2. Stop spending money you don't need to.
  3. Call each card company yourself and tell them you need to negotiate better terms or you are surfing your balance. Give them the choice between some interest and none.
  4. Start aggressively attacking your smallest balance.
  5. Put aside an emergency fund.
  6. Get a second and third job. Wife gets a second job too.
  7. Sell a lot of shit. Sell your kids' toys if you have to. Stop making stupid choices.
Sometimes being an adult is hard.
posted by cjorgensen at 4:34 PM on January 16, 2015


I should have also written above that you absolutely need to pull a credit report. That might not be the best link, but you are entitled to a free report from each of the major agencies annually. You should know your credit is shot to hell at this point, but you should also know where the holes are. Start cleaning them up, start contacting each and negotiating. Tell them you need a payoff amount or you are going to just declare bankruptcy. Do everything you can do to just pay them.

I have about $8k in medical bills, $46k in Credit card debt (pretty good apr)... I'm not behind in any bills yet... but will be if i don't do something soon. Many of the medical bills are going into collections ... & as i get those calls i just negotiate the lowest monthly rate possible to get them off my back... but as i have nothing left at the end of the month, i'm trying to make something out of nothing.

$46k in credit card debt and it doesn't really matter what the APR is. Also, you can't say you are not behind on bills and then write that bills are going into collections. Bills that are current are happy bills. Those people do not contact you.

I'd like to put my wife into a newer vehicle if possible (as she transports the kids more than I)….

As much as you would like to you can't afford to. Your next several cars, until you are out of debt, need to be embarrassing beaters that you neighbors complain about because they bring the property values of every house in a 3 mile radius down. Also, the interest rate anyone would offer you on car debt would be beyond usury.

Never ever ever again get a car payment. Pay cash for your cars, and if you can't afford to do so you can't afford the car.

Seriously, here's how you do this. Let's say you decide your wife needs a new car. Figure out what the payment will be. Let's say it's $375. Set aside that payment each month for a year. She drives what she has now until then. Can't afford to do this? Guess what, you can't afford that payment. If you can, at the end of the year you'll have $4,500. Go buy a $4,500 car. Drive that. Keep setting aside the $375 a month until that car dies. A $4,500 car should last you at least two years, and at the end of two years you'll have $9,000 to put toward a car. That one should last more than two years. Can't afford $375? Figure out what you can put away for a year. If at the end of the year all you have is $2,400 then you have to decide if that is a step up or not.

I would absolutely consider bankruptcy if I had $46k in credit card debt and an addition $8k in medical. Your credit rating is shot. You're not moving up anytime soon in house. You need to get this under control or you are teaching your kids the wrong lessons. Sacrifice now for everyone's future.
posted by cjorgensen at 5:10 PM on January 16, 2015 [4 favorites]


Most people's two largest expenses are housing and transportation. So yes, downsizing if definately something you should be considering. If you have any equity you can sell your house and either rent or buy a cheaper place (most places it is cheaper to rent but there are exceptions).

Beyond financial advice, you should be looking for someone to discuss your attitude towards money because you may be trying to fill other needs with your wallet. You gotta admit, it is kinda odd to be in so much debt, have a monthly deficit and a still existing car payment and yet be talking about purchasing a new car.

If you get to the root of what motivated the way you have been using money you will stop yourself from continuing to make the same mistakes and truly get on top of your budget.
posted by saucysault at 5:17 PM on January 16, 2015 [5 favorites]


Came here to say what I see saucysault and others have - to be thinking of buying another car when you're up to your ears in debt tells me you need to rethink your approach to money.

In the short to medium term, one of the credit counselling services will hopefully help with the current debt situation, but you may end up falling back if you don't address the underlying issues that push you to spend money you don't have.

I do understand that it's difficult; my partner has some debt issues and she is not a profligate spender by any means. One of my sisters also really struggles with money issues too, so I've seen how easily it can get on top of you. I also know it's possible to live a really happy and satisfying life with very little money. I've done it with little to nothing and I've done it with plenty and, whilst I do like my toys shiny, I know the pleasure that brings doesn't actually make me happier and has, at times, made me less happy. And that's without the worry of owing people lots of money I don't have.

My point being that going without things, which you are going to have to do if you're going to get out of debt, will not necessarily decrease the quality of your life and may actually improve it.
posted by mewsic at 1:37 AM on January 17, 2015 [3 favorites]


Reading mewsic's response reminded my of H.D. Thoreau - "A man's possessions can become a noose around his neck."
posted by rudd135 at 6:39 AM on January 17, 2015 [2 favorites]


I was looking over your past questions.

Six years ago, you had $38,000 in credit card debt and had a job paying $150,000/year. Last June, you indicated that after a period of unemployment you had accumulated $45,000 in credit card debt and were looking for advice on debt consolidation services. Now you are carrying $46,000 in credit card bills.

You have another question from a few years ago, asking how to make your wife’s 40th birthday party extra special. You indicated that you already planned to cater the event for about 50 guests. Somewhere in there you also mentioned that at one point you had a car lease with payments of $711 per month. I think those would be two examples of poor financial decision-making given your debt load.

One person asked if your wife works, and if not, why not? You didn’t respond, but given that your kids are now teenagers, I’d echo that question.

Because it’s actually pretty simple: either increase your income or decrease your expenses, or a combination of the two.

So my answer to your question, based on what I see, is that you need a financial advisor, to get you on a workable budget, but I wonder if you’d be paying for advice that you don’t follow. You’ve gotten lots of free advice here over the years, but you don’t indicate whether you’ve ever acted on any of it. And I would advise against a lawyer, because without making fundamental changes to your spending habits and your apparent views about money, you’ll ruin your credit AND be back in debt in a few years.

I was in debt 30 years ago. What worked for me all those years ago was a trick my accountant brother taught me. Every time I charged something, I entered it into my check register as money spent. It was painful, because it made me realize that I hadn't thought of charging things as actually spending money. I felt suddenly poor and it sucked. I kept at it, though, and in time I was better able to distinguish between what I wanted versus what I needed. And, yes, for a long time I was forced to restrict my spending to what I really needed. This sucked, too, though less over time, because frugality became a rather pleasant a habit of mind. And I eventually did ease up in places, so I do take vacations and drive a nice car, but they are always paid-for in advance. And I'm about to retire.

I hope you can get to such a place!
posted by Short Attention Sp at 7:53 AM on January 17, 2015 [9 favorites]


Yes, scrolling through your old questions was illuminating.
Vacations, iPhones for young kids?
Why is a 2007 not enough for your family?

All this debt is not going to go away without sacrifice. Second job? Cutbacks? Absolutely.

You have a special needs child and perhaps that's why your wife isn't working but this is something else to consider.
posted by k8t at 9:00 AM on January 17, 2015 [1 favorite]


Does your company have an employee assistance program? Many do, and they're super-helpful in getting you to the right help for you. Also confidential.
posted by ctmf at 3:12 PM on January 17, 2015


I can't speak to the impact of debt consolidation vs. bankruptcy, but obviously there are professionals who can. I dont see either as a big deal. Pull the trigger. But you need to get a handle on some numbers.

If you wanted to save $200 a month, I bet you know how. Cable, family cell phone plans need to be cut if they haven't been already. You're doing a lot of face saving if you still have those.

Tally up your total debt and ADD BACK IN the taxes taken out of your income. $65k debt post tax, assuming 30% federal plus state income tax means you needed to earn an extra $100k to spend that much. Divide by number of years it took to accumulate that debt. If 5 years, then you are UNDEREARNING by $20k a year by living your lifestyle. You previously wrote you earned $150k a year. You need $170k a year really, but we re not done.

You are really short $20k in earnings a year to maintain your lifestyle. BUT that doesn't even include extra earnings needed to paydown the debt. Again, assume $100k in earnings needed to pay for $65k in debt. If you wanted to pay $65k down in five years that means you need to earn ANOTHER $20k a year to pay down the debt at zero interest in 5 years. Zero interest is not happening, of course. You now need to earn a minimum of $190k a year to maintain your lifestyle and pay down existing debt in five years.

Is your housing payment too high? Does your wife need to get a job? Do your kids? Do you need to take in a boarder?

$150k in income sounds great. But you're living a $190k a year life and it's strangling your future. Debt consolidate or declare bankruptcy if possible, but deal with the fact of your overspending.
posted by charlielxxv at 3:17 PM on January 17, 2015 [2 favorites]


Is your wife on board with controlling the debt? The two of you should be sitting down to review the spreadsheets you've made showing how much money is coming in each month compared to an itemized list of how much is being spent. Each of you should be agreeing to cut back on whatever you can to rein this in, and each of you should know how much your "allowance" is per month, since both of you should have talked about this while you were reviewing your spreadsheet.

If you are committed to reducing your debt (and based on some comments above, I'm not sure if you really are committed), but your spouse is not, there is no advice in the world that will help you.
posted by CathyG at 7:07 PM on January 18, 2015 [1 favorite]


Response by poster: i appreciate everyone's advice.... however, i must say, many do jump to conclusions and make assumptions.

Just to give alittle history, from 2010-2012, i gradually had to accept a reduction in pay due to poor business conditions. Eventually the company closed in 2012. Over the next 2 years, our industry suffered terribly... and during those 24 months or so... i only received income for about half.

I had very little in terms of a nest egg... and had very little choice over how to subsidize my very limited income.

My wife has had a job over the last 2 years... but unfortunately recently lost that job.

The cars i mentioned to give the best overall picture i could of my situation (as i do have some equity in my car), but we certainly have no problem staying in the vehicles...

We do not live over our means by any means... and as of now, i'm current with all our bills... but in another month or two will begin to default on some... so i'd rather be proactive and address this now before it implodes in my face.

My kids are 14 & 10... so obviously they won't be working.

Yes, i've already begun taking actions to reduce whatever costs i can...regardless of how much (cable, cell phones, etc.).

I hope this helps... & helps some of you have a better understanding of my situation & spending habits.
posted by foodybat at 8:06 PM on January 21, 2015


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