Five Good Reasons Not to Hire a Debt Reduction Company
73
Good Shark, Bad Shark
As unemployment continues to rise and the financial system continues to tremble, more and more Americans are finding themselves weighed down with debt they cannot pay.
Whether you are in trouble because you lost your job, because you have medical debt that is now loaded onto 33% interest credit cards, or because the value of your home has plummeted and you can't unload it at any price much less tap its equity, you know that not being able to pay your bills is no picnic and it makes you feel like scum.
Not only do you start to get those daily calls and letters from your credit card company or bank, you also are suddenly flooded with offers of 'help' from friendly-sounding organizations that promise to reduce the amount you owe and make it all better by combining your debts into one affordable monthly payment.
Maybe you've seen those offers on TV too. Operators are standing by. Just pick up the phone and an understanding voice will get you started.
Do you really believe that?
If you still have a job, and you want to try to deal with your debt but you just can't handle the payments the way they are currently structured, don't accept help from any third party agency that calls itself a "debt consolidation" or "debt reduction" service.
In fact, don't talk to anybody who claims to be there to solve your problems.
You will just be trading one shark (your credit card company) for another shark (the debt reduction company). You know the "good cop/bad cop" game that cops use in the movies to break the bad guy down during questioning? Well, this is that same game, and it's an ugly one. They're both sharks.
When you are in trouble with debt, the last thing you need in your life is another shark.
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Here are five reasons why not:
- Debt reduction companies are often fronts for credit card companies themselves. So why not deal with your credit card company directly? According to a June 16, 2009 New York Times article,
credit card companies are starting to reduce delinquent balances to 50
cents on the dollar. They will also reduce interest rates on the
reduced balance as a result of direct negotiations with delinquent card holders. Why
are they suddenly so cooperative? Because delinquent American credit
card debt is getting harder and harder to sell to collection agencies
and remove from their books. Credit card issuers used to get 15 cents
on the dollar for selling bad debt to collectors. Now they are lucky to
get 5 cents. Your 50 cents looks a hell of a lot better than 5 cents
today, and what's more, banks are getting nervous that soon they won't
be able to sell off this debt at any price. You have to be able to pay,
and they'll ask for a large first payment as a show of good faith, but
if that sounds possible, you can negotiate that arrangement yourself.
- Debt reduction counselors will lie to you for their own gain. When you call one of these organizations, you are not going to get Mother Teresa on the phone or even Dr. Phil. The person you will be talking to is a commission sales person. That 'counselor' is rewarded for talking you into things that may or may not be good for you financially. Many of these companies will set up a direct debit repayment schedule you can't quite afford, (and they know you can't), so that you will fall short, and they can then come back and seize your entire account. Yes that's dirty pool. No they don't care.
- You're probably in worse shape than you think. Studies
show that most people who fall behind on their credit cards want
desperately to catch up and carry a lot of shame and guilt about their
delinquency. The stereotype of the spendthrift who fills up the closet
with Louboutin pumps, designer bags, and bling and then gaily defaults
without care bears little relationship to statistical reality. While
there will always be people like that in the world and they will always
behave irresponsibly, the majority of delinquent cardholders in the
U.S. have had a personal crisis that kicked them into the red: a messy
divorce, a health emergency with inadequate or nonexistent medical
coverage, a house they can't sell let alone tap for funds, or all of
the above. If this sounds like you, you are absolutely statistically
'normal' and chances are you can't catch up even at 50 cents on the
dollar. You owe it to yourself to speak with an attorney about
bankruptcy before you negotiate anything with anybody. Most debtors
wait way too long to face the full extent of their problems, hoping
some other way will present itself when in fact it won't.
- Debt reduction will ruin your credit anyway. If
you are thinking (or being told) that negotiating a settlement on your
debt is better for your credit score than a bankruptcy, think again.
Either strategy will leave you a poor risk on paper for five to ten
years, and possibly longer (considering the current state of the U.S.
financial system). At some point you will have to face the fact that
your credit is already trashed, and it won't improve one iota unless
you pay off your debt now, in full, and then avoid getting into the
same situation in the future. If you can't pay your debt it full, (and
chances are, if you are reading this, you can't) then debt reduction
may ease your conscience, but your credit will still be trashed for
years.
- You've probably already paid your credit card issuer back many times over. Chances
are, if you have missed a payment or gone late even once, your interest
rate was hiked to 29.7% or even higher long ago. (Some companies go as
high as 34% on the entire balance if even one payment is late.) As an
example, a $12,000 balance at 29.7% interest will take over 50 years to
pay off if you make the minimum payment on time for all 50 years. More
likely, you will miss a few payments, fees will be added, and your
balance will grow instead of shrink. Even if you manage the on-time
minimum, at the end of those 50 years, you will have paid the bank
$54,120.00 in interest on your $12,000 balance, or $66,120.00 total
(not counting fees).Yes you agreed to that, but I'll bet you didn't
realize you agreed to that. The average credit card contract is now
over 20 pages long and has been crafted by a team of corporate
attorneys. Basically, the bank can do what it wants, when it wants.
Those are the terms. Do you still feel like you are the terrible person here?
I
know that some people will respond to this hub with judgmental comments
about how they never ran up debt and people who do made their own bed
and now they should lie in it blah blah blah, but what I want you, the
debtor, to understand is that gouging people for exorbitant amounts of
money under the slippery terms of terrible loan contracts is called
'usury', and it used to be illegal in the United States, and not that
long ago either.
That code of ethics (that law!) changed in
1980 when Citibank discovered their credit card division could get
around the usury laws by bribing poorer states to repeal them, then
centering their credit card operations in those states, thus providing
jobs. Bad jobs, but jobs nonetheless. If you live in North Dakota and
you don't work in energy, any job at all is a good thing to have.
It's all been downhill for the consumer since then.
In fact, credit cards didn't even exist until 1958. Credit cards are a very recent phenomenon, and not a good one for most Americans.
So don't use a debt consolidation service. When you are being circled by sharks, don't find yourself a new shark, get out the water.
Call an attorney. Keep the appointment. Face the mess head on.
That's what the banks do.
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Comments
Hi Teresa--If your lender will let you do that, that's an option. I mean, the problem of course is, will it really stop there? I know so many people who did in fact do that--and usually the terms on the refi are way worse--and then a year or two or three down the road they're right back in the same mess only now with a crappier mortgage with a higher unpaid balance on top of it all.
In fact, a financial reporter from the NYT went through this over the past couple of years and has a book coming out about it. I'll see if I can find the link and I'll come back and post it. You know if a Times financial reporter can't sort it out it's pretty messed up for lots of people.
Right now though it's pretty hard to get a refi even your credit is awesome. If it isn't, forget it. Banks are understandably skittish and only people with credit scores over 720 have a shot at a mortgage never mind a refi with unsecured debt slapped on top.
The real question people need to ask is, "Is the problem that caused this solved?" If not, you really have to look hard at your situation and get some expert advice fron an attorney savvy about finance and bankruptcy and mortgages and so forth. Otherwise you'll likely keep trying to move the debt around, various financial institutions will feed off you while you do, and you'll end up at an attorney's office anyway.
I don't mean you personally. I just mean, this is what happens. This is what is happening in the U.S. right now to lots of people, because we can't pay for what we need with the money we have.
That link is really long. You can find the article at the NYT website under "My Personal Credit Crisis." It was in the magazine section 5-14-09 and is by Edmund L. Andrews, a financial reporter for the paper.
Here's the horribly long link, if it works:
Yep -- the long link worked -- thanks.
I really have been helped by the financial hubs you write. What you say here is just about giving me the nerve to refinance, since I can get a better interest rate and my credit isn't shot to hell yet (it has dropped -- one credit card keeps floating the due date on payments, so of course I've had a late payment there -- but it's still over the number you mention).
Of course, I just have to get a job, first, so I can qualify on the debt to income ratio, so I'm not too optimistic. . . .
I'm off to read the linked article -- thanks.
I'm glad you find these helpful. I think they're a bit glum, but I figure maybe some people can use a frank look inside the mess, so I pump them out to the degree I can stand it. Good luck! Sounds like you have a plan--if you can refi now at a better rate, hell, go for it. Who knows what is around the corner?
I don't know if going to a lawyer is any better. Talk about trading one shark for another! Plus, all lawyers know about debt counseling is bankruptcy. You see, lawyers always want to find the quickest solution to your problem so they can get paid sooner. My wife and I have used debt reduction services before with good results. We recommend you find a service that does not charge you, but instead makes their money by merketing their services to the credit companies. Many times credit companies do not want to negotiate with individuals. This is becoming more and more the case. That's when having an industry professional in your corner can be helpful.
This is a great hub....everyone who has a credit card should read this. Wonderful job.....thanks! :)
Thanks Tom! I'm glad you like it. :)
I just read the NYT piece -- good grief --
of course, I'm fooling myself if I think I can get even a part time job around here, but ya never know. As soon as I do, I'll try to refinance. Or if I could only sell the house, with enough to pay the original mortgage and the credit cards.
Or if the tooth fairy decides to visit -- or if the Great Pumpkin casts a spell. . . .
Thanks for the nice hub. I agree with the top 4 but not the 5th one. If they are making so much money off of the interest on our accounts, shouldn't we do whatever we can to keep from being a slave to them forever? Why should we keep working hard to pay interest on stuff we bought years ago? I've already paid my debt for the stuff I bought, I want to stop paying so much in interest to these banks.
Thanks for letting me vent a little.
Keep up the good work.
C'mon people . . . not a great time to generalize. I went to a bankruptcy lawyer, but only after researching thoroughly. He had been in the business a long time, knew it inside out, and eventually gave me all the reasons I shouldn't declare, thereby costing himself money, but saving me mine.
I agree with you of course, PGrundy. I wrote two hub weeks ago urging people to stay away from loan modifiers. Now, that seems to be common knowledge.
To me, there's only one way to go, and that is to get your lifestyle down to the point where you spend what you have, not what you hope to have. The latter thought, along with the greed of certain leaders and lenders, is what got us into this mess. Everything I'm doing now is designed to get my family to that point.
But the hard truth is that, for virtually all of us, you're not likely to get to that reality without losing some things. I am certain to lose at least one house to foreclosure in the next month. I'm not happy about it. I've never been late on a payment in my entire life. But in order to get my family on an even keel in all other areas, I have to let go of that house. Losing the house is not the end of the world, and my family is both growing up and getting closer.
Gulfvet--I'm glad you had good experiences. It's true that credit card companies won't negotiate with everyone and that sometimes, having some speak for you helps. However that can be tough in the current economic climate. And yes, attorneys aren't all that cuddly, but when you need one that lack of cuddliness becomes a asset. Just don't expect a hug.
Teresa--I am in a similar bind with the job market. I just keep plugging away here and at the freelance stuff. I don't see anyone hiring me in MICHIGAN at FIFTY-SIX any time soon. It could happen I guess. Pigs could fly. I could become a Playboy centerfold, inherit money... yeah it could happen, I'm sure. Hang in there kiddo. :)
Steve--Those are all good points. Of course attorneys can be as awful as banks or debt reduction companies, and every situation is different. I was just recounting some of what I've seen personally, both in my time at the bank and outside of it, and throwing in my two cents.
I also agree about paring down our lifestyles. It's disturbing how many of these situations are medical though. You can't pare down your cancer or heart attack. But in general I totally agree with what you are saying. Thanks for the comments.
Infinityplusone--vent away! It can't hurt, and if it makes you feel better, that's good. Thanks for commenting.
Wish I had read this hub years ago when I was confused about finances!
I used the debt consolidation services many years ago, and it didn't work for me. I kept paying and paying every month and at the end of the year, the balances in my credit cards were almost the same. I finally paid off my bills, including a hospital bill for $15,000 bill for treatment for a broken arm with my s/o Phil's help and by negotiating with the creditors and hospital. Never again, if I can help it, will I get into high debt, its a very unhealthy burden to carry.
Thank you for sharing that VioletSun--I feel the same way. I hesitate now before buying anything, even socks, even with cash.
I utilized a non-profit debt consolidation organization in the early 90s. My ex and I paid off a substantial amount of mostly credit card debt (young and stupid credit card debt), but not until after I added 2 part time jobs to my regular full time job. I was in my early twenties--I don't have the energy for that anymore, but I'd say if you do, look for the non-profits; if you don't, visit the lawyer. Like Pam said, that's what the banks would do (and the car companies).
another thumbs up from me!
Pam,
Great article, putting your head in the sand and doing nothing is the bankers dream, they have you forever that way.
And even the so called non-profits are just loan sharks with a different tax structure.
TMG
Pam, I'm not sure about becoming a Playboy centerfold, depends on how you perform on the Ranty Pin Up girl calendar -- BUT as jobs go, you could open your finance consulting firm. For crying out loud woman, you know more about the stuff than anybody else I ever "met"!
Great hub, I went to one of those debt consolidators, thinking they were non-profit, (they prey on ignorance), charged me for the privilege of telling me to call up my cards and tell them they couldn't call me anymore. Then I had to negotiate a payment plan with each of them. Kinda always wondered what the benefit was - I could have done all that crap myself and done it better.
I hate those frakkin sharks. The lady that supposedly was helping me gave off the wrong vibes, like I was a nuisance, not a client. I listen to those feelings now and pay off my own darn debt.
Just one more fine example of good, efficient capitalism.
Find a crisis, large of small, and exploit it.
It's called disaster capitalism and its time has come.
Great Hub. the usury laws should still be in effect.
Thanks Dineane--I think things have deteriorated quite a bit over the last 10-15 years. Some of these companies are so bad that some in Congress are calling for investigations and new consumer protection laws. Thanks for your comment. :)
Money Guy--Good to hear from you! Long time no see. :)
Elena--Thank you for the vote of confidence. I wish my supervisor at the bank had felt the same way. lol!
Alelexander--I know what you mean. I hate that dead, irritated tone that many CSRs have. They get that in their voice because they hate their lives and feel trapped, but it does NOT inspire confidence. I agree, you could have done all that for yourself.
CWB--Obama is supposed to announce a new regulatory package today. Let's see if it has any teeth. If I had to guess, I'd guess.....um....no.
RV Daniels--Thanks! I agree.
It is really eye-opener
Useful information. Do you have the Citizen's Advice Bureau, like the UK. If you do these people will neogtiate on your behalf and may have interest payments slashed to nothing.
Hi Ethel--No, we don't have that. If we had more nonprofits that were real nonprofits instead of 'front' organizations that were really businesses I think it would help a lot. Maybe we'll get that if we get new regulation. Thanks for your thoughts. :)
Very good hub...credit card companies are really getting desparate. Everyone with a card is going to have to watch their terms closely. Read anything that is sent to you on your accounts real well, so you have no surprises. My low interest rate of years is going triple plus and variable in July. Will call and decline so it will be closed, but that is better than surprises.
Hi Gifted Grandma--I think that credit cards will start to slowly go away. Right now the financial industry is screaming about this as if it's a bad thing. I personally think it would be a good thing. At the very least, they should be harder to get and less attractive to use--that would be good, not bad. I agree with you, rates are on the way up and terms will get worse. Anyone who can pay off a card should do it now and use it as little as possible. Thanks for your comment!
Excellent hub! Too many people do not realize that they are better off talking to their creditors themselves. Many times they will listen and work with you to work on the debt. Not answering the phone and avoiding them is what turns it into a real problem.
Hi Erick--That's often true. On the other hand, when I got divorced eight years ago I called Citi because I couldn't make my payment for the one month that I moved out (one month---I got the card in 1994 and never missed a payment and was never late)--and they said tough, charged me a pile of fees, and hiked my interest rate to 29.7% for three years. I think its only very recently that they've been more cooperative. That's my personal experience anyway.
Fantastic hub, as always, nice one!Do Americans have options such as law centres, debt charities, NGOs etc? They can advise on all the options, and negotiate with creditors for a person, and don't make a penny out of it.
I read that article you linked to, Pam. He says:
"How could I have glossed over the fact that we had been spending about $3,000 more than we were earning, month after month after month? How could a person who wrote about economics for a living fall into the kind of credit-card trap that consumer groups had warned about for years?"
Actually, that's a good point. He was a financial expert, paid to know about it, but spending thousands of pounds a month on flash holidays, lots of clothes, all sorts. That is quite crap.
Hi LG--Most states and major cities have Legal Aid societies where law students and lawyers volunteer to do pro bono work for the poor, but usually it's pretty hard to get into one. People with housing problems can call HUD (Housing and Urban Development) and talk to a HUD counselor for free, but I don't know that they really help with debt counseling at all. I'd like to see more free help available and also some basic education about money in schools. At the bank I talked to so many customers who cearly just did not understand and had no one to help them understand. Many were just irresponsible, but many were good people with low incomes and limited understanding of finance, which made them sitting ducks for predatory loans and crazy bank fees.
LG--That finance guy at the Times--that story was insane was it not? I don't think most people understand how many supposedly SMART 'good' people did insane things at the urging of lenders and 'experts'. People are always complaining that poor people did this, but it's not accurate--investors and yuppies did this.
You'd have thought at least ONE of these people advising that writer would have had a clue, but no--they just wanted their commissions. And that happened over and over. When my middle daughter and her husband bought a home last year the bank and the realtor kept urging them to spend more, and they had to keep saying, no we can't afford that, and they kept saying but you can, you can afford it .And they couldn't.
But you'd think a financial writer for the NYT would 'get it'. I thought it was especially weird that when the article went to press in May of this year the mortgage company had still not taken any action against them, nearly a year after they'd quit making payments at all. Too backed up with foreclosures I guess, but geez, it's like nobody knows which end is up. It's a big free for all mess here right now.
Oh PGrundy, BLESS YOU!!!!!!
Reading this made me feel so much better about my situation. Several years of illness, surgery, and therapy drained the bank account and then everything went on credit. Still, I was working and paid full balances (and a bit more) every month. Lost my job. Still paid, from savings! Husband left me. (STILL paid, despite no job, despite divorce costs.) Now, I feed my chidlren with FOOD STAMPS, may lose our house, and feel sooooo ashamed and at loose ends and with no job and no reasonable hope of a job anytime soon I don't know how I will ever repay. The debt consolidation services ARE attratctive to someone like me who has always paid her way and wants to do "right" -- but THANK YOU for pointing out that they are SHARKS!
My questions:
1) Is there any reason NOT to declare bankruptcy??? With credit already wrecked, what's the downside?!
2) Does it make sense to WAIT to declare --w ait til my payments are 6 months behind rather than 2 months behind? Or should I declare right away? Does it matter?
3) How do you know if you have the right bankruptcy attorney?
4) Are there situations in which the judge may not ALLOW you to declare? I am afraid I may borrow $3,500 from someone to pay the lawyer and then the case will be dismissed and I I will still be on the hook.
I feel so lost.
Thanks for this hub and thanks in advance for any advice and answers to these specific questions!
Hi JayS--I'm so sorry to hear of your situation. It certainly is not unusual. Millions of Americans are going through what you are right now. It can only get better once you hit bottom like this, so hang in there.
In answer to your questions, most bankruptcy attorneys meet with you at no charge for the first visit. Ask before you make the appointment if there is a charge, but there almost never is. At your first appointment the attorney will ask about your income, your assets, and your debts. Just tell the truth to the best of your ability. At the end of the appointment the attorney will tell you if you can file or if some other option would be better for you.
You can wait to file if you want. There's a limit to what creditors can do to you if your debt is unsecured (that is, credit cards). They can't take your house or car. They can freeze your bank account if they can find it (but usually they don't do this until you are well past six months without sending a payment and usually not even then), and they can attach your wages if you are employed, but only up to a certain amount. All the things they CAN do to you are expensive for them and the payoff is small if you have no assets, so often they just try to sell the debt, and eventually it gets written off.
An attorney is the best person to advise you on bankruptcy. People often think they can't file when they can file. It's slightly different in each state so you have to make the appointment to find out, but as to the drawbacks--the only one is your credit will be shot for 7-10 years. However, chances are it is already shot, and what's more, it doesn't look good for the future of credit cards any way. If I were you I'd make an appointment with a bankruptcy attorney and get some information. Good luck! And hang in there. This too shall pass. :)
I totally agree. There are a lot of junk hubs written on Credit Cards to try and make money. Written by people who don't know what they are talking about. This is a very good hub, very good. I read a lot about credit markets. People don't realize how it works. They don't realize simple things like American Express CEO paying himself 48 million in 2008 then taking 3.5 Billion in Government Bailout money. Then just cutting credit lines... credit lines to people who have never been late or missed a payment. With all the Government money they can really stick it to the consumer charging rates as high as 27%! However with high default rates and continuing job losses it's a real poker game when it comes to collecting from people who are out of work. Right now Credit Card companies are getting as little as 5 cents on the dollar from collection companies. So they do NOT want to sell your paper. They want you to pay and will give you a lot of promises. But if you are not a lawywer you may just be hurting yourself with their "deals". Make sure you don't look before you leap. And again I totally agree that consolidators are NOT the way to go.
Thanks Mike NV--I know my views on this shock a lot of folks, but I used to work in the financial sector, and if people could only see what it is really about, I think they'd be shocked. Thanks for stopping by and for your positive comments. :)
It's just my opinion, but from all I am aware of....
Money-hungry people have been around for a long, long time, squeezing the financial life out of the middle class and even the poor; (many of whom probably had BEEN part of the middle class prior to the monetary mugging &/or, in plain terms, financial rape). It is NOT the 'lower class' who are "scum", but the blood-sucking rich who want more and more untold wealth by any means they can get away with. Too many of these greedy SOB's are connected through legal channels, directly or indirectly, so that what they do is under the radar of the common man, yet technically 'above board' by way of laws that have been 'fixed' for their benefit and ONLY their benefit/profit. The super-rich find ways of avoiding taxes and the poor don't have enough to BE taxed, so the ROCK of our financial system IS the middle class. However, once the wealthy strip every dime from the middle class and the ROCK has lost every drop of blood, there won't be a middle class anymore, just rich & poor, neither one supporting the USA with tax revenues. The 'haves' know what they are doing to the 'have-nots' AND this country, but they really don't care. Sadly, Credit Cards and the debt created are only the tip of the iceberg. It wasn't all that long ago that the standard for calculating your ability to afford a monthly rent on a home or apartment was 25 percent of your monthly income, or (obviously) ONE week's pay. Now it hovers between 50 and 75%, which doesn't leave much for basics, like FOOD!... much less medical needs or even any savings towards such emergencies, or (will we ever see the day?) retirement. I grew up on the bottom end of the middle class, not far above poor, yet we always went places, had decent vacations and holidays; not many actual mid-middle class can say that anymore.
An awful lot of decent law-abiding people who slaved and went without for years to save their money have been scammed, ripped off and lost everything to corporate hucksters in recent years, giving our system a giant black eye. Trust in any financial institution has suffered drastically. It seems like almost everyone has been conned into living beyond their means. No matter what their income was, it isn't that anymore, yet the out-go is even bigger now, so nearly everyone is on the proverbial hook, one way or another. I sold off a few things to friends in order to pay off bills I had. Doing it in a payment plan way (so they could afford the reasonable price I needed to get) backfired on us both when their income situations changed and they couldn't finish making payments, (as yet). You just can't win for losing.
Hi Slave2No1--I agree with everything you say here. I wrote a hub awhile back on the average wages in America where I went through the budget of an imaginary single mom making $30,000 a year who bought the $100,000 home the bank was glad to sell her. Before the basic expenses were even met she was out of money the first month. Half of the families--families, not people--in the U.S. make less that $50k per year. That's a very thin income to support a family these days when housing and heat takes half or more right off the top.
What people don't realize about the debt settlement companies is that they don't necessarily contact your creditors to let them know that they are working on your behalf, they are only obligated to tell one. They advise you to ignore the phone calls, but are quick to tell you that they cannot advise you to breach contracts with your creditors, but that IS exactly what they're telling you to do by having you stop paying them and set aside x amount to create the bucket of settlement money. They tell you that it's extremely rare for one of the creditors to sue you, but that it can still happen. Then when one does, and you notify them, they quickly point you to their legal department, but before you can talk to them, you must now pay another $150. You pay it thinking that's probably the same rate you'd pay somewhere else and all he does is file an answer to the lawsuit and tells you if you hear anything else, to contact him again. You then get the notice to appear in court, but you can't talk to the attorney to tell unless you pay another $150. The judge is going to grant the judgment either way.
The debt settlement companies do NOT have your best interests in mind. They really are as bad as the credit card companies.
Hi KCC--Good point. Really there are two levels of 'help' here. One takes a reduced payment and sends it off to your creditors (often those agencies ARE your cc company in disguise), the other advises you to set aside the lump sum as you describe--neither is real 'help' since either you could do yourself, without the debt reduction company.
My personal feeling about defaulting on credit cards is that in some instances it is actually the responsible thing to do. I know it upsets people when I say this, but if you've just lost your job, you don't have another on the horizon, and you're just trying to keep a roof over your head, sending off hundreds of dollars each month on a credit card that barely touches the principle on the amount owed is not really a good idea. You're just flushing that money when it could keep you indoors or buy food.
Each person has to take a hard look at reality when debt gets our of control. Can they really pay off those cards? Really? Then do it. If not, default and/or bankruptcy makes sense, especially when people have families to support. Most people go through a long period of denial with debt during which they pretend like it is not that bad, when really, if they whipped out a calculator and spent even 5 minutes looking at it honestly, they'd faint.
Meanwhile, the cc company is actively trying to make that debt grow and a pay off more impossible. The last thing they want is for you to pay off the card. That's like a leech wanting to be pulled off your body. Not going to happen without an extraordinary effort on the part of the suckee.
What is ironic to me is that people focus on personal responsibility, yet the banks and credit card issuers behave in the same way their worst customers do in terms of leverage and risk, AND default, and yet their feet are rarely held to the fire--it's always the little guy, the working stiff. Credit card issuers really prey on people's need to feel responsible. It's a one-way thing--the cc company holds itself to no moral standard but it exploits the moral standards of the customer. That strikes me as wrong. It's not a good faith arrangement at all.
Thanks for your excellent comment. Good points all around.
Teresa McGurk says:
5 months ago
Yikes. What about refinancing a current mortgage, and folding credit card debt into that?