Letters to the Editor
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There Comes A Point Where You Simply Owe More Than You make -- Then What?
Like everyone else my wife and I fell in debt because of the double whammy of job lose (thanks child labor in China!) and crappy insurance that never seems to pay for any medical procedure in full (Great, I only am responsible for $14,000 of a $75,000 illness! Thanks Blue Cross!)
Our mortgage was still due every month! See, I don't know if anyone else knows this but the bank doesn't give a damn if you're out of work for 3 months. Think of loan sharks only more hostile. Either get them their money (now!) or you'll lose your house. But what happens when there is nothing left after you pay the mortgage? You buy groceries on a credit card. You put gas in the car using a credit card. Kid needs oral surgery? No problem! With insurance I'm only liable for $1200 --- which I had to put on the credit card.
And what happens when they jack the rate up to 30 percent interest?
I owe more in minimum payments than I can afford. I can't pay all the minimums plus the mortgage plus the car insurance plus the car payment (on my 1999 used car) etc.
My solution?
I stopped bankrupting my family paying Visa. I took a year off from paying them anything.
I know I didn't get into debt flying to Paris every weekend and buying 5 plasma TV's. I used Visa to bridge the gap created by insufficient welfare benefits. Now I had a choice: I could either make a 500 billion dollar transnational happy by bankrupting my family to make the minimum payments or -- or I could just re-prioritize my life and put my family first.
That means paying into a SAVINGS account first, investing in my 401(k) first, creating a college fund, having cash available for emergencies so I don't have to rely on VISA (at 30 percent interest) in times of unexpected crisis first. Family first, Visa dead last.
A lot of Americans are trapped in debt because doing the "right thing" often means bankrupting your family to make minimum payments. We need to wake up and realize that not paying the credit cards is a much, much smarter move. Yeah, Visa will "not like you" and your credit score will go from crappy to slightly crappier -- but we have to start putting our families first! And guess what happens when you stop paying VISA -- that account that was generating 30 percent interesting and growing bigger every month suddenly closes and generates ZERO interest! A massive improvement. And 2 years later when the collection agency offers to settle the amount for half -- another improvement. If there was another way, I'd take it. But when I BEGGED Visa to lower my interest rate and stop with the endless late fees they laughed in my faced! So screw them.
Without legitimate and common sense debt-forgiveness measures in this country -- the debt crisis will never go away. People simply owe much more than they (and their stagnant/falling wages) and can pay off. Failing a rewriting of the bankruptcy law the only other option that families have to save themselves is to simply stop paying the credit cards and take the credit score hit.
And what good is a credit score for if you already are in a 30 year mortgage? Not much good.
Credit score is only good for one thing -- getting more credit! And that's the last thing anyone struggling with debt needs.
Stabilize your household finances first and foremost. If (and only if) you have any money left after paying your mortgage, utilities, savings account, 401(k) and health insurance then you can throw whatever's left to Visa. Don't get guilted into "doing the right thing" and bankrupting your family trying to make a soulless transnational credit card company like you. Protect your family first.
Don't let the holier-than-thou crowd guilt you into bankrupting your household budget making minimum payments if you honestly can't afford to. Don't let the "But I paid off my $100,000 debt in just 6 months by clipping coupons so why cant you" crowd bully you into financial suicide. Pay yourself first!