Letters to the Editor
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Yeah, the house thing is a biggie
I, too, got into horrible debt because I bought a condo in fixer-upper condition and lost my job before I finished fixing it up. Paid it off, but it took a while - and all the self-righteous advice I encountered in those get-out-of-debt books didn't do a whit to help.
My new philosophy - no more mortgages. I will rent a cheapo apartment with a roommate until I've saved enough for a house. It comes out cheaper that way, and I will own the house outright.
As for how I got out of $16K worth of debt with no job (yes, I was freelancing):
1. I kept a record of every single expenditure on my PDA. I knew, to the penny, just what I owed on what cards, and how much it all added up to. Watching the debt go down was very therapeutic.
2. I spent a few months living rent-free with a friend (to whom I had once provided a similar service, way back when...) When my business took off, I paid half the rent on her cheap apartment.
3. I took on any job that I could possibly do, as long as it could bring in money. I spent all my free time trawling Craigslist for more jobs I could do that would bring in money, and placing ads for the various businesses I was operating.
For the record, I did not give up designer coffee or gourmet food. Everyone keeps telling debtors to give up Starbucks. Even if you've got a serious, horrible Starbucks habit, you will spend on the order of $4 a day - that's $120/month. Mine was nothing like that; it was more on the order of $4 every few days - I believe something like $30/month. It's nothing compared to housing or automotive expenses (and both can and must be reduced). I moved from a $2000/month condo to a $450/month apartment, and sold my $200/month car and bought a $0/month car (I owned it outright). Compared to that, my $30/month Starbucks habit was nothing. Giving it up, however, would make me feel deprived and make me less likely to comply with the other financial restrictions I had to comply with.
Same for food. Yeah, I could have economized by going to a less expensive supermarket (I have always bought organic fruits and veggies, and all sorts of exotic gourmet delicacies). Definitely, eating canned soup every day would be a lot cheaper. However, I don't want to risk my health in order to save money. Medical care is expensive - much more expensive than organic food. And again - most people's major expenses are houses and cars, not food and coffee.
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Earn More Money
Money is sort of like the diet/exercise thing.
You need to keep things aligned, and for me, I found my spending habits to be difficult to change. It was a lot easier just earning more money.
This isn't necessarily workable advice. In this case, freelance writing is a very tough way to earn enough to live in New York. Print journalism is under incredible pressure. Newspapers are no longer good businesses, and it can only get worse. Remember The Wire is about 1995 newspaper economics -- it's only gotten worse since then.
So get a job in an industry that is making money and expanding. Not quite as hard as it sounds, since they are the only people really hiring. I sort of went over to the dark side, working for a name brand global corporation. You have to get over prejudice about stuff like that. It can be hard for artistic types, but if you don't have a trust fund, you can't afford to be a snob.
Make more money. Lighten up on yourself. Good luck.
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neema_r is right - settlement is the word the credit industry doesn't like to hear
Indeed, I was screwed by a business partner who bolted with 6-figures in debt...some of which rolled over to me.
What I found out was:
1) save your house/mortgage first.
2) credit card companies will settle with you and the percent on the dollar VARIES greatly...some start at 75% on the dollar and haggle, some go right to 20%...and in that you see the squeeze because these people are making commissions off your pain.
3) if you can afford an attorney (a good one) get one even just for advice...figure out the attorney fees and what you'll be saving. Lawyers talking to lawyers gets respect and few fools are played.
4) engage them, be nice but don't be scared because theirs is a leverage play and you just need to find the counter-leverage...i.e, INFORMATION.
5) you can repair credit.
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@Neema
Do you have any weblinks that would be helpful to do what you did? I remember a friend of mine advising to do this back when I was only in 30k debt. At the time I was in a dotcom with stock options so I thought it would all work out. Well that stock tanked, of course.
How exactly does it affect your credit if you're technically settling "paid in full"? Also, can you settle on most cards and keep one for the times when cards are absolutely required? I'm thinking my Discover, which doesn't carry a balance, would be good for this. In some ways, if I do this it was really stupid to refi 2 years ago as that 2nd loan won't be able to get written off like the credit cards, considering if I'm screwing my score, I might as well kept my mortgage where it was.
Not so sure why I'm so attached to my high FICO score. I was incredibly savvy in managing the shear madness of it all and probably would've been fine without the job loss.
Selling my house is not an option right now. But if there is a way to do all of this while maintaining some semblence of credit-worthiness I'm all for it.
When you say default, what do you mean? Not paying the bill until they start calling? Since I've always been able to make my mins on time can I settle before not paying? In all my years I pride myself on never being called by a creditor. Considering I'll have my ridiculously low tax return as proof of no money coming in is this an option? That I'm in commission only sales and I won't see money for at least another year? Do they care about that sort of thing?
I'd really like to do something without declaring bankruptcy. The main reason I didn't go this route before the laws changed, other than the obvious reasons (and I used to believe that I was morally responsible for this so didn't deserve to walk away. That kind of thinking isn't an option anymore after the job loss.) was that I live in a small town that prints the names of bankruptcies in the paper and I didn't want my family to find out about this since I'd never hear the end of it.
So any type of website that explains this really well would be a big help to me. Its really beginning to eat at me and affecting my ability to get on the road for sales.