Who's the best to help me with my bad credit?
March 15, 2008 8:36 AM Subscribe
I have really bad credit and need professional help, who should I talk to?
My scores range between 568 - 665 depending on who you ask. I've defaulted on all my student loans by never paying any of them back. I've had a car repossesed, which I had a loan out for approx $14K. I have lots of other various outstanding debts from credit cards, unpaid medical expenses, etc. All of this total probably equally to approx. $75K in debt.
So, my question is who should I talk to? A lawyer to file bankruptsy? An accountant to get myself on a budget? A credit councellor to handle all the collection agencies? A finacial advisor, can they handle all of it?
I'm really wanting to get on the road to recovery and eventually clear my name and start saving for down the road: a house, kids, retirement, etc.
And does anyone have any recommendations for the appropriate person in San Francisco?
If it matters, I'm 32 and earn $57,500/annually (gross).
My scores range between 568 - 665 depending on who you ask. I've defaulted on all my student loans by never paying any of them back. I've had a car repossesed, which I had a loan out for approx $14K. I have lots of other various outstanding debts from credit cards, unpaid medical expenses, etc. All of this total probably equally to approx. $75K in debt.
So, my question is who should I talk to? A lawyer to file bankruptsy? An accountant to get myself on a budget? A credit councellor to handle all the collection agencies? A finacial advisor, can they handle all of it?
I'm really wanting to get on the road to recovery and eventually clear my name and start saving for down the road: a house, kids, retirement, etc.
And does anyone have any recommendations for the appropriate person in San Francisco?
If it matters, I'm 32 and earn $57,500/annually (gross).
Lutheran Social Services did a free hour consultation over the phone; we talked about everything I spent money on and they wrote up and mailed a budget. It's been incredibly helpful, and they didn't talk about Jesus. They started me on a debt management plan, which lowered the interest rates on two credit cards from 27% and 21% to 7% and 9%. It's actually improved my credit.
My monthly payment went from $143 to $61, which has helped free up cash to pay down other debts. Unfortunately, they can't touch education debt, which is also my biggest issue (a default).
I'm also using Buxfer to track expenses. It helped me discover that I'm spending 60% of my income on housing (!), which prompted some major life changes. You can create categories; I have one called "crap I didn't really need," designed to track impulse spending.
I also like The Simple Dollar for tips and support as I learn how not to be a moron about money. It's a long road, but a lot of us have been through this, and it starts to feel really awesome to have a plan for preventing debt from wrecking your life. Good luck!
posted by hamster at 8:55 AM on March 15, 2008
My monthly payment went from $143 to $61, which has helped free up cash to pay down other debts. Unfortunately, they can't touch education debt, which is also my biggest issue (a default).
I'm also using Buxfer to track expenses. It helped me discover that I'm spending 60% of my income on housing (!), which prompted some major life changes. You can create categories; I have one called "crap I didn't really need," designed to track impulse spending.
I also like The Simple Dollar for tips and support as I learn how not to be a moron about money. It's a long road, but a lot of us have been through this, and it starts to feel really awesome to have a plan for preventing debt from wrecking your life. Good luck!
posted by hamster at 8:55 AM on March 15, 2008
I'm in a similar position. I've started talking to an independent financial adviser, and this has been a good, non-humiliating start. I'm not personally keen on Consumer Credit Counseling, as they're on the take of the major credit card institutions, but YMMV. I'd certainly look first at what you have left after you cover your base expenses and look to invest in mutual funds, or a good, solid IRA. I've also settled on pre-paid legal services to help with any particularly aggressive debt collectors (who, if they're harassing you, will accept with persuasion and arm twisting around 33% of what they're saying you owe, since they usually buy the debt for 25% from the creditor). Debt is so neurosis inducing, so also be sure that whoever you find to help you is as accepting and non-squiky to you as possible... just like finding the right therapist, you may need to mesh with whomever you're spilling your finanical beans to. Take care of yourself, and try not to let the burdens you're experiencing take the wind out of your sails. Good luck!
posted by moonbird at 11:29 AM on March 15, 2008
posted by moonbird at 11:29 AM on March 15, 2008
Stay away from anyone who wants to manage your bills for you. If they want you to pay them one monthly payment, and then they pay your creditors, that's a bad deal. That type of service actually brings your credit score down, let along that most of those companies (yes, even the non-profits) are horribly mismanaged, and won't make payments on-time. You'll spend more time and effort managing them than you will dealing with collection agencies.
Remember that your student loans aren't bankrupt-able. You'll still have to pay those back regardless of whether you file bankruptcy, or not. The old repo can probably be settled for literally pennies on the dollar, depending on how old it is. If you can offer them *anything*, they'll take it. Most of those never get collected on, at all. Same goes for a lot of the other bad debt. Old credit card debt can usually be settled for a third of what was originally owed, and medical for similar percentages. Without exact numbers, I obviously can't give you specific advice, but from what you rattled off in your post, it doesn't strike me that you're bankrupt.
The worst part of all of this, I know, is the feeling of helplessness and hopelessness. When you stare at that big number - it's overwhelming. You feel like you could never possibly make inroads against it. You feel lost; like you'll never be able to get anywhere, or achieve any of your long-term financial goals (house, kids, retirement). Getting your hope back is the first step. I'll echo the above plug for Dave Ramsey. His plan helped us tremendously. It sounds like you're at the point where you're looking for some professional help. I'd give them a call at 888.227.3223. At the very least, pick up a copy of The Total Money Makeover at your local library. That book changed my life.
posted by dblslash at 4:42 PM on March 15, 2008
Remember that your student loans aren't bankrupt-able. You'll still have to pay those back regardless of whether you file bankruptcy, or not. The old repo can probably be settled for literally pennies on the dollar, depending on how old it is. If you can offer them *anything*, they'll take it. Most of those never get collected on, at all. Same goes for a lot of the other bad debt. Old credit card debt can usually be settled for a third of what was originally owed, and medical for similar percentages. Without exact numbers, I obviously can't give you specific advice, but from what you rattled off in your post, it doesn't strike me that you're bankrupt.
The worst part of all of this, I know, is the feeling of helplessness and hopelessness. When you stare at that big number - it's overwhelming. You feel like you could never possibly make inroads against it. You feel lost; like you'll never be able to get anywhere, or achieve any of your long-term financial goals (house, kids, retirement). Getting your hope back is the first step. I'll echo the above plug for Dave Ramsey. His plan helped us tremendously. It sounds like you're at the point where you're looking for some professional help. I'd give them a call at 888.227.3223. At the very least, pick up a copy of The Total Money Makeover at your local library. That book changed my life.
posted by dblslash at 4:42 PM on March 15, 2008
IANAL or financial advisor, just someone who has read a lot of personal finance books.
I don't think bankruptcy is a good option for you. It sounds like your income is too high to file for Chapter 7 bankruptcy. (Chapter 7 is the type of bankruptcy that wipes out your non-student loan debts -- student loans can almost never be discharged.) The other kind, Chapter 13 bankruptcy, requires that you pay back your debts over a 3-5 year period anyway, so if you can work out how to do that on your own it probably is better for you (no lawyer fees, better credit in the long run) than filing for bankruptcy, since it sounds like you don't have any home equity to protect.
posted by Jacqueline at 3:10 AM on March 17, 2008
I don't think bankruptcy is a good option for you. It sounds like your income is too high to file for Chapter 7 bankruptcy. (Chapter 7 is the type of bankruptcy that wipes out your non-student loan debts -- student loans can almost never be discharged.) The other kind, Chapter 13 bankruptcy, requires that you pay back your debts over a 3-5 year period anyway, so if you can work out how to do that on your own it probably is better for you (no lawyer fees, better credit in the long run) than filing for bankruptcy, since it sounds like you don't have any home equity to protect.
posted by Jacqueline at 3:10 AM on March 17, 2008
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Consumer Credit Counseling of San Francisco is a non-profit credit-counseling association.
Dave Ramsey is also a good source - he has a website, books and radio program. Ignore the Christian stuff if that's not what you're into - his actual money message really works for a lot of people.
I would also suggest a therapist and/or Debtors Anonymous. From what you wrote, you seem to have a troubled history with money and debt, and it might be a good idea to tackle the psychological roots of the problem head-on. If you don't take a look at why you never pay any of your loans back (unless you have had a long string of really bad personal circumstances which have prevented you), then you will just get in and out of debt again and again.
Good luck! Getting out of debt will be difficult, but it's do-able.
posted by Rosie M. Banks at 8:48 AM on March 15, 2008 [1 favorite]