Reduce Debt

I've been filling out some free offers on CashCrate lately. One of those offers was to see my FICO score for free! My score turned out to be 787. I've been trying to get as high as possible - the holy grail being above 800 for me, but I figured that score wasn't bad. I have a 787 FICO. What do I do now? Make phone calls.

I immediately hopped on the phone to give my friends at Chase a call. I asked them if I was eligible for a promotion rate on purchases. Turns out I wasn't BUT they could offer 0.95% for 6 months on balance transfers. They would send out access checks with that rate and I could use them to make a purchase by writing a check. In that way my purchase would qualify for the promotional rate. I figured that was too much work for me.

Next I called Bank of America to ask them for a promotional rate. No dice there, but they wanted to invite me to apply for their World Platinum card. That card has a promotional rate of % for 12 months then a fixed rate of 12.99% after. They would give me a $50 statement credit if I made $50 in purchases within the first 60 days. There were also some other benefits too. I asked for all the terms including balance transfer fee. There was no cap on the fee, and the transfer fee was 4%. Ouches. After doing the math I realized that if I transferred by Chase balance over the new card, I'd break even with the interest after 3.5 months. Sounds great. I told the rep to go ahead.

During the application process she asked if I owned a home and how much the mortgage was. It felt great to tell her yes, and that I had no mortgage. She went off script for a bit because she didn't believe it. Turns out that she's 5 years older than I am and have been trying to save enough for a down payment on a house. I told her that she needed to downgrade the house that she wanted and to live now as if she was in the house. If she couldn't pay her potential mortgage now, then she couldn't pay it later, but I digress. Not only did an advertiser pay me to see my FICO score, but after picking up the phone, I stand to save a could hundred bucks in interest over the next year. All it took was two phone calls. Think about calling your creditors too! The worse they can say is no.

I have a friend that has fallen on hard times. Well, it's not so much that she has fallen on hard times, but her that her husband's business is failing and he refuses to let it go. Instead of letting the business close he has taken money from his wife's 401K, advances off her credit card, and bill payment money to prop up his business. They have a 12 and 24 year old. The responsibilities of the running the household has fallen onto my friend. She pays all of the household bills including the mortgage, utilities and credit cards; has loans to put the older child through school; and is attempting to finish a certificate course to improve her income. I applaud her, but I know that the stress is weighing heavily on her.

A few months ago she confided her financial information to me. I didn't judge because I thought that as a friend it was my responsibility to listen, then if she needed advice to offer her my opinion when she asked. Her situation was this:

1. Her husband had taken an 8K advance from her credit card and never made a payment. The account was now overdue and the bank was calling her. I asked her if there was any that she could pay it or set up a payment plan. She said no.


2. She was about 1.5 months behind on her mortgage and could not catch up. She had an adjustable rate mortgage that she paid late every month.


3. Her son was no longer in school full time, but she had over 20K in student loans that she was responsible for paying. Her son was not working.


4. Her husband was not contributing financially to the household


5. She had filed bankruptcy roughly 8 years earlier from bills that her husband had accrued.


6. She had loans on her 401K that would not expire until October.

It was a tough situation but I gave her the following advice.

Since she could not pay the credit card and it was already over 6 months late the account had already been charged off. At this point since there was no way for her to pay the full balance, she should not worry about the cards but tell their collections department that they could not call her at work. I told her to ask them to close the account and agree to a settlement. They agreed to a total that was 1/4 of the card balance. Keep in mind that the husband had taken the full amount as a cash advance very shortly after she received the card.
THE RESULT: She was put on a payment plan for the agreed on amount and the credit card company sent her a 1099 for the balance that she did not pay. Thus, this was counted as income that she had to include on her taxes.

For the house I asked her how much her mortgage payment was. She also had taxes and utilities to pay and she was often one to two months behind on those bills as well. When we did the math on selling the home and renting, her mortgage was actually less than or about the same as if she rented a 3 bedroom apartment and paid utilities. Part of the issue was that the value of the home had fallen since she had purchased it, and they had taken additional mortgages on the home than the original one. I asked her to call the bank and see if she was eligible to refinance the loan at a fixed rate or if she qualified for a modification.
THE RESULT: She was not eligible for either since her credit rating was low and she was not behind enough to qualify for a modification.

Regarding her husband's business I told her that he should sell it if he could and hire himself as an expert to the following owner or to another business. If not he needed to close the business. If he was not able to do either she needed to separate all of her finances from his to protect herself and the children.
THE RESULT: Her husband would not entertain the thought of closing or selling the business. This can happen when someone becomes too emotionally attached to something that could bankrupt his family and leave them all out on the street. Unfortunately his priority has not shifted to his family yet. On the other hand had never filed joint taxes with her husband and after their bankruptcy did not have joint accounts with her husband.

Regarding her son, I thought that it was time for him to grow up. He needed to contribute to the home. She spoke to him about this and he began contributing $100 every two weeks to the home.

I just hit the submit button to make the final payment on my personal loan. Somehow I am sitting here expecting something, somewhere in the cosmos to go wrong. Now to refresh your memory this is the loan that I had on Prosper to pay for a Bowflex. Please, don't write me, I already know. Anyway so the loan was for a 3 year term and here I am 9 months later and it's paid off.

I don't think that I've paid anything off knowing that it's totally gone in a long time. It's actually a bit of a scary feeling and I wish I knew why. You'd thing that I'd be dancing up storm or at least toasting my small success but I can't even do that! It all actually seem surreal - kind of like that I'm not sure that it really happened.

Something does come to mind though. I shouldn't be blocking positive thoughts on my success. Some people would say, "don't block the blessing." For some people it's easy to bask in the glow of someone else's accomplishments but they have a hard time acknowledging their own achievements. I'm a little surprised to find that I am one of those people. NOTE TO SELF: Be more positive and smile a little.

P.S. I owe myself a stiff beverage in toast to my own minor success.

I typically don’t take myself too seriously on this blog but this is probably the one time that I will. We haven’t discussed the pink elephant in the room. I like to call her Bankruptcy. Yes, I know that she’s a little fat and has bad acne, but big girls need love too!

I’m inspired by this post from a comment that I received from someone who is over 500K in debt. Yes, let’s all inhale that number together. I did just say half a million dollars. I can’t even wrap my brain around a number that huge but I realized that there are many people out there faced with astronomical numbers who have no idea how to even begin tackling it. So let’s all face this number together and see what our options are.

As you might know, not all debt is created equal. I like to use four different categories that may overlap. I call them government debt (aka The Man Owns You) and non-governmental debt; secured debt and unsecured debt. Let’s talk about each for a second. When you owe The Man money it won’t go away. This means IRS, judgments, liens, etc. We supposedly don’t have such a thing as debtor’s prison but you might want to ask Wesley Snipes about that. When you owe The Man, The Man owns you. Mind you, they might be willing to settle, but for the most part you will have to pay. Non-governmental debt just means that you owe someone, but it’s not The Man. Non-governmental debt can be either secured or unsecured.

Hi! If you've never seen a carnival now is a good time. It is a collection of finance related blog posts all in one place. Yesterday's post has been placed into the carnival. Pop on over and read some interesting personal finance blog posts from all over the internet.

Have you heard of the snowflake method of debt repayment? It's basically a a variation of the snowball debt repayment method. Jaime over at I've Paid for This Twice Already says that it is "small amounts of money saved or earned that are applied directly to debt or into savings before they melt away into who knows where". For me that works out to every $20 that doesn't get spent paying someone or the Chinese food takeout guy. Do you know how much that stuff adds up?!

Take a look at my running debt balance on the left. Do you notice something? One of my credit card balances now reads $0! That means that I've paid off one of my cards. I know that Bank of America is kicking themselves in the shins now but that baby reads zero, zip, nada, zilch, nothing and they're not making any more off my stupid decisions any more. I received my Federal tax refund yesterday and paid down my debts as I had planned to. This took my credit card to zero. I don't know what to do with myself. I feel like calling up customer service and just saying, "Ha, ha!" Alas, I'm a mature woman so I would never do such a thing.

Since this is Valentines Day I could not think of a better Valentine's Day gift for myself. Since the boyfriend and I don't celebrate the day anyway I feel like someone just dropped a gift right onto my lap. Whoo!