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“Hi Jean- I watch you often on the Today show and am really in need of serious intervention-to say the least. My husband and I really don’t know what to do or where to go for help. So here goes:
We have been married for 4 years and have 1 daughter, Lucy 20 months.
We have $0 in savings and nothing for her. We both went to college and work-combined we make over $100K. But we have SO much credit card debt that we are overwhelmed and can’t save. I set up my cc for the hardship programs. I have-just in my name $35K in cc debit. My husband has about $20k in his name and he is working to pay them down. Should we go to a consumer credit place, file bankruptcy, get a loan? We just don’t know what to do and we really really want to save!
We got in this trouble from our first home-the taxes were $1500 a month and we just couldn’t afford that along with the mortgage payment so we started using credit to pay the taxes and utilities.
HELP please.” – Stacy

Hi Stacy,
I know how frustrating this is. You are making good money yet feel as if you’re getting nowhere. I’d give a credit counseling service a try — though I’m not sure how much lower this will make your payments (find one at debtadvice.org). When you go on the hardship programs with the card companies yourself, they often reduce your interest rates significantly. The counseling services bring them down to around 6% and they waive late payments and over limit fees. If you’re doing better than that yourself, I’d do two things — first go back to the card companies (your husband should do this too) and explain you’re still having a hard time making ends meet. Tell them (rather than asking them to tell you) what sort of payment you can make and in doing so give yourself room to save $100 – $200 a month. Then save the money automatically. I know it doesn’t sound like much, but every time you pay off a card, increase the amount of your savings by the amount you’re no longer paying to the card company. It will start to add up quickly. Next, go through your monthly spending line by line and see if there is anything you can cut down. Anything you can eliminate gets added to savings, as well. I’m telling you — once you start to see the savings, even small ones, add up, you’ll find strength and energy to do more. As for a loan — the answer is no, no, no. You already have too much debt. We’re paying down, not leveraging up.

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“I get a lot of letters in the mail from companies that say they can cut my credit card debt in half. Are these companies legitimate? I feel like I’m drowning.” – Alicia, Georgia

For the most part, no. I’m sure you’ve heard a lot in the news recently about debt settlement scams that target those in dire financial situations. Unfortunately, many of these companies don’t deliver what they promise – your debt cut in half, an end the collection calls, and a fresh start. “The truth is, the process can take years to complete, your credit is going to take a big hit and the large upfront fees mean that you can end up drowning in even more debt,” says Alison Southwick, a spokesperson for the Better Business Bureau (BBB).

This is one of those times when it’s nearly always too good to be true. Fortunately, the government is aware of how much trouble these debt settlement companies can get you into – and in response, the Federal Trade Commission (FTC), which serves to protect consumers, passed the Telemarketer Sales Rule which regulates the ways in which “debt relief services” can contact you, and what they can promise. “Debt relief services” include debt settlement, debt negotiation, and credit counseling companies. Here are three key provisions of the rule.

It’s illegal to charge upfront fees. In the past, some companies charged the consumer right away for debt settlement services, and for someone strapped for cash to begin with, this creates an even greater hardship. The rule states that you can’t be charged an upfront fee – the company can only charge you a fee once they have actually renegotiated a debt.

They need to give you the details. Before you can sign up, these companies are required to give you the rundown on what they’re offering. That includes a timeframe in which you’ll see results, what it will cost you, what type of bank accounts (if any) they’ll use to help settle your debt, and the negative consequences that can result from settling your debts.

They can’t make false promises. I’ve said time and again that it’s unrealistic to expect your debts to be settled for virtually nothing – which is often what these firms advertise. The rule requires companies to accurately disclose how much you’ll save, how long it will take, how it will affect your credit, their success rating, and their non-profit vs. for-profit standing – among other things.

With these protections in place, you should be able to keep yourself out of trouble if you find yourself unable to make payments on your accounts. However, it’s important to still be a smart consumer, and do research before trusting someone else with your money. “Contact your creditor first,” says Southwick, “and seek help from a not-for-profit credit counselor.” Non-profit organizations might still charge you a fee, but it will be much, much less than what you’d be charged through a for-profit company. You can find one in your area by visiting the NFCC’s website. And if you’re still hitting a wall, you can consider debt settlement as a last resort. “Research the company with the BBB first,” advises Southwick. Check the business’ rating along the BBB’s A-F scale. “A company that predominantly makes their living through debt settlement will automatically have their letter grade docked significantly, because we believe the industry has ‘inherent problems,’” Southwick explains. “As a result, perhaps only one or two debt settlement companies in the US have a grade above a C.” The BBB only gives their accreditation to businesses with a B- or above – so look for their seal on the company’s website first. And if you find a company that’s violating any of the Telemarketer Sales Rule provisions? Make sure you file a report with the BBB. Not only will it substantiate your own personal claim, but it will help keep others like you out of trouble in the future.

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My mom and I own a salon and day spa and like many businesses are having trouble paying off our credit card debt. We have several credit cards that we have made hardship payment arrangements with, but one of our cards was turned over to an attorney and the court awarded a judgment “by default.” What options, if any, do we have to settle this debt ($11,600), and can they garnish our business account to collect this debt? — Anonymous

The very first thing I want you to do is watch the Today Show segment that I did on this subject.  It’s not only happening to you.  It’s happening to many people — and many small business owners.

You should know you’re on the right track. Calling your creditors to notify them of your hardship (which, by the way, is a good word to use when talking to them), and providing them with a clear reason for why you’re behind is a good start, so you can negotiate down your debt and start to rebuild financially.

When it comes to that default judgment, I have some questions: Were you notified of the court date?  Were you, in other words, properly served?  That, unfortunately, is how a lot of these default judgments are coming down these days.  If you were not notified, you have the right to go back to whatever court handed down that judgment and fight back.

You may also want to get some help.  Gerri Detweiler of Credit.com suggests making an appointment – now – with a bankruptcy attorney. “I’m not suggesting you file for bankruptcy,” says Detweiler, since you might not need to at all, “but you do need to find out from the attorney what the creditor can do to collect on the judgment.”

One thing to know about judgment debts is that, like other debts, they can be negotiated. “It can be trickier once there is a judgment since the creditor has additional resources to collect,” says Detweiler, but an attorney can help you do so. Negotiated or not, however, you need to have the cash to settle the debt once and for all – which might be a struggle in your situation. “The fact that you have talked with an attorney and are considering going that route could give you some negotiating leverage with your creditors,” says Detweiler, “who would probably rather get something than nothing.”

So while it may seem a bit frightening, getting legal support is your best option. A lawyer can better explain the settlement options of your judgment debt, and what measures a creditor can take to get the money they’re owed. Depending on the state you’re in, that can include “garnishing wages, seizing bank accounts, and even placing a lein on your property,” warns Detweiler. By meeting with an attorney, you’ll know your specific risks – and they’ll likely have some good suggestions for how to handle the other debts you’re paying off already.

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