Dealing with the Wolves

I just read an interesting article about people losing their homes...no, not to flooding and etc., but to debt. Well, okay, I guess interesting isn't the only word. It was a little depressing too. But I think there is much to be learned.

One couple, the story told, lost their home after they had a $300 cell phone bill. Apparently the cell phone company told them they would take legal action if they didn't pay it, and in paying it, they were unable to pay their mortgage. Hmm, first of all, I wonder if that was just a part of the story. Just an interesting tidbit for the feature story, maybe? Because one missed mortgage payment doesn't mean foreclosure, does it? I'm not an expert on that, so I'm not sure, but I do know something about credit in general. And I don't get my knowledge from booklearning. Well, maybe some of that, too, and I have two books to recommend.

I highly recommend Mary Hunt's Debtproof Living. I also recommend an easy read called Escape to Prosperity by Wes Beavis. I don't know if the latter is still in print, but books are so accessible today, what with Amazon, eBay, library sales, etc.

Back to the couple who lost their home because of a cell phone bill. I don't know the circumstances, and maybe their cell phone company really wanted all the money now or else. But usually creditors can be worked with. The threat of legal action is not always as imminent as they would like you to believe.

So, what do you do if the wolf is at the door (or more likely, on the phone)?If you have debt and find yourself in a position that you can't pay in full, there are three keys I'd like to offer: 1) The mortgage or rent comes first. 2) Stay in communication with the companies to whom money is owed. 3) Pay them something, even if you can't pay in full. Sometimes I have offered to pay a lot less than the minimum, and they say, "If you could pay such and such (a little higher than my offer), we could keep you out of collection for this month." I really don't know if this is just their magic number or if they take my number and ask me to stretch. I'm thinking that perhaps offering a number slightly below what you feel you can afford might be a good idea, so you have room for the stretch.

And by the way, staying out of "collection" is a very nice thing! Worth a lot of sacrifice, etc. But in some cases, (if it's not a credit card company, but some other type of debt) even while in collection, you can sometimes still deal with the original company, if you wish.

Of course, one can't go on forever paying less than the minimums. You have to explain your reason and it needs to be sincere. And if I pay less than the minimums on a credit card, it does affect my credit rating and cause late fees to be attached. It is only a temporary "solution".

If serious debt ever has you by the collar, I highly recommend a meeting with a trained counselor from Consumer Credit Counseling Services. Please don't just do a search for credit counseling services, though. Many of these are simply a way of getting you further into the hole so that whoever is "helping" you can make money. Who you would want to see is someone accredited by the nonprofit National Foundation for Credit Counseling. They can help with budgeting, and if you're ever in over your head, they can often arrange for the credit card companies to allow you a payment plan that you can handle.

Of course, my personal opinion is that the best preparation is prevention. If we can budget our needs, buy only what we have the money for today, and build a contingency fund, we can avoid a lot of debt, especially a lot of unnecessary credit card debt. And if you do have credit card debt that you can handle, by all means, I suggest you consistently pay more than the minimums and get that baby paid off. Then either cancel it or use it only for convenience, paying off the balance each month. Ah, what a world THAT would be! (smile).