And Now For The Questions of The Day

Winsor Asks...

Q: Can I get out of my outstanding debt?

A: Yes

Cheryl Asks...

Q: May credit card companies file real estate liens against my property without first notifying me in writing? And if so, what are the ramifications from my mortgage company?

A: Whoa. This sounds like a situation that is escalating without a solution. Either you have some incorrect assumptions of what might happen down the road or you have left your situation unattended for too long.

Before we worry about what MIGHT be at the end of the road, let's get headed in the right direction. You need to tackle the root cause of your situation. Think about it like this. You've got a really bad splinter that hurts but you are worried they may amputate your leg on the off chance that it might get infected and potentially spread to a wider area.

As we get further from reality the possibility of things that might happen gets wider and wider. So, instead of what might happen down the road, please take action and address your current situation.

Malia Asks

Q: After a divorce that left me with huge debt and my ex-husband filing bankruptcy, I was counseled to declare bankruptcy myself in 1999. Unfortunately, I had a terrible attorney and being rather ignorant of the law myself (that's why I hired an attorney!), I was not cognizant of what she was doing. As a result, a great deal of my debt was not discharged. Now I am remarried and my husband and I encountered "a series of unfortunate events": have had numerous difficulties with health issues and have incurred major medical debt. And I still have outstanding student loans. We have no credit cards, old vehicles and are renting a home.

The bottom line is this: Our daughter is starting high school with tremendous potential for a college education. We can foresee no way to pay off our debt, let alone plan for her education. Our combined debt is greater than our combined income --by almost 3 times.

I am at my wit's end with this situation. I feel like I've failed as a mom and a wife.

Any suggestions?

Thank you so much,

Malia

A: Dear Malia,

A purely technical answer would be to abandon all other desires and pay off the debt. From one point of view that is 100% true and correct. But life doesn't work like that. The older we get the more we learn that life is a balancing act of many different factors, not all right, not all wrong.

I put together a guide on student loan resources that you should visit. So what is ultimately more important, paying off this old debt or moving on to current and future responsibilities.

Debt repayment is a double edged sword. When you repay old obligations you are essentially taking current and future resources to pay for past responsibilities. Sounds reasonable but what you are also doing is robbing your future to pay back your past.

Take the example of the 65 year old client that is spending every dime to repay past mistakes and has nothing saved for retirement. Does she have a greater moral obligation to atone for past mistakes or prepare for the inevitable future?

Ultimately Malia in my humble opinion this situation is not a reflection of you as a wife and/or mother. Your current dilemma revolves around emotional guilt and regret over a technical situation.

Here are the facts as I know them from your question:
1. You have old lingering debt.
2. Reading between the lines I see that you are probably living month-to-month in trying to repay this old debt and meet current obligations.
3. You feel like a failure for the situation as it stands.

Malia, you might want to consider that the reason you might feel like a failure is because you are not doing something proactively to change the situation. If you put a plan in place and execute it at least you are retaking your power and not riding along as a victim. You are not a victim here. This is simply about choices.

Your choice now is to go back and speak to a bankruptcy attorney and consider another bankruptcy to clear up the past so you can be safer in the future. Or, you can continue on the path you are on and attempt to overcome the college expense or simply not be able to afford to send your daughter to college.

Big hug.

Steve

Mary Asks...

Q: I recently found out my husband has a large no. of credit card debts. The largest is 15,000, we received the bill today and there was a 300 finance charge. Do we work on this largest one, or try and pay off some of the lower ones. Could you recommend a credit counseling company or person in the Pittsburgh area. Would you recommend the group Consumer Credit Counseling Service. Or should we be seeing some type of a lawyer for help.

A: Dear Mary,

Time to apply the breaks here and take a deep breath.

Let's tackle this situation in order here. First the debt is what it is, but why? If we simply jump into trying to treat the symptoms here we won't be able to kill the cancer. The important questions to address first is why did your husband hide this debt from you and what was it spent on?

These are very important questions to ask and have a frank and open conversation about before you move on. If you don't you may put a solution in place only to have the secret debt happen again, and how would you know? You didn't know the first time.

Your get out of debt path is well documented in my book, Eliminate Your Debt Like a Pro.

There is no need for you to consider credit counseling or a lawyer just yet. Take a deep breath, ask the right questions, understand your reality and engage an active plan to get out of debt. Once you have done that and you need to take the next step, write back.

Marie Asks...

Q: I was discharged for a Bankruptcy this past March. Not knowing I could have declared a payday loan advance of $2500 I am still trying to pay it. I am getting further behind and I need to act. I have a good income of $49000, no car payment and a first and second mortgage and am single. No credit card bills. Question: Where can I get a loan for $2500 this early? Anything is better than that rate on a payday. I can easily pay back a loan of this size within three months or so.

Thank you for your site. You are an insightful man. I am trying to get my life back on track back have this hanging over me. Marie

A: Dear Marie,

I can't imagine that you are going to find a loan like that without some collateral. I'm sorry to hear that the payday loan was not included. That was a huge mistake.

Sounds like the best approach is to focus as much financial effort as you can to repay this loan and/or discuss this issue with your bankruptcy attorney to see if there is any way in the world to get your past bankruptcy modified. (Don't hold your breath on that.)

Mary Asks...

Q: We've considered refinancing our first and second mortgage to help reduce our financial difficulties. However, when we actually got the numbers, the payment total is $60 a month higher and we would only be able to pay off enough other bills to save us about $300 a month. There is a prepayment penalty on our first mortgage of about $5000. In addition, the closing costs are about $7000. We don't think this deal is worth the cost. What do you suggest?

A: Dear Mary,

Answered your question on this weeks radio show.

Steve

Philo Asks...

Q: If I was to sell my house before 2 years, will I have a prepayment pently if so how much

A: Dear Philo,

Answered your question on this weeks radio show.

Steve

Diane Asks...

Q: I am a 52 year old single mother of one child in college. I have approximately $100,000 in my 401(k) and $25,000 in credit card debt on 9 cards. I am paying the minimums on 8 cards while maximizing payments on 1 card. Does it make sense to take out one loan at a time for approxmately $3,000 from my 401(k) to pay one card while continuing my plan on the other cards. When the $3,000 401(k) loan is paid off (in 3 years), I could take another $3,000 loan to pay another high interest card. Does this hurt my 401(k) in the long run and make sense as a debt reduction plan?

A: Dear Diane,

Answered your question on this weeks radio show.

Steve

Cathy Asks...

Q: I know you say to order the three credit reports together as it is a better. I have a problem with that as I do not like going on line and have to put in a credit card number or my social Security number. I know you are going to say the site is safe. Is there a phone number to call the credit companies that I can talk to a live person? I have had a problem in the past with my computer and ended up with a $400 phone bill and $220. bill from a company that said it was collecting for a web site. That meant that some how someone got into my computer. I finally got rid of the problem and didn't pay the bills after telling them that there was no way I did what they said I did. I also had one of my debit cards on a list of numbers that were stolen. That was caught by the bank. I think I know how that happen. So you see how I could be leary of going on line. Any help with getting the credit reports would be great. I am telling a person I know about your site. T! hey need all the info to get themselves out of debt. I am ok just want a credit report. By the way I got your site out of a paper in the business section. Thanks for any help.

A: Dear Cathy,

Answered your question on this weeks radio show.

Steve

Tania Asks...

Q: I am wondering if you know that answer to this. If you have already filed chapter 13 bankruptcy and have a payment plan for a certain amount of years and everything, is there a way to get out of your plan early if you were to come about a great deal of money and that made it possible to pay off all the debt in the bankruptcy?

A: Dear Tania,

Answered your question on this weeks radio show.

Steve

Your Money Coach For Comfortable Success,^sm