How to handle old debt

noffgurl · September 2014

How do DH and I handle debt that is 4-5 years old? I know debt is supposed to roll off after 7 years and if we found the money to pay something on them it won't be a super lot yet. I guess what I'm asking is is it worth it to pay off old debt that would roll off soon anyways? Also, which helps your credit better: paying off debt or getting a secured credit card. We aren't really in a place financially that we can do both. . .

Xstatic3333 · September 2014

Do you mean debt that has gone to collections? If it has gone to collections I know you can settle for less than the original amount, but you need to be very careful-get the agreement in writing and don't give them access to your bank account numbers (they could garnish your paychecks).

It would be helpful to hear more details about your situation, but I wouldn't stress the credit score too much if you're scrambling to pay your bills. Get caught up on all that first. If you post your budget here people do a great job giving suggestions about where you could cut back, and give great support if you stick around!

CuriousKiddosMama · October 2014

Just because it rolls off your credit doesnt mean that the creditors will go away. Find the money and pay it. You borrowed it.
If you can get a small lump sum together you could offer to settle, but as pp said make sure you get a settlement offer in writing before you send them anything.

hoffse · October 2014

I agree with Xstatic - don't worry about the credit score, worry about getting out of debt.

We need to know more about your situation to answer your question.

noffgurl · October 2014

Details: I make a pretty steady $700 every two weeks, DH had been unemployed for about 7 months until this past June. His checks are weekly but can vary from $200 to $1000. We are just now caught up on our truck payment and what not from his being out of work, right at Christmas and birthday time. I'm just about done getting something small for everyone's birthdays/Christmases so that can be done. With all that said our regular bills are:

Truck $400
Insurance $180
Electric $300
Trash $70
Water $75
Phone/internet/rent/satellite $300

I've been doing good at putting 10% of each check in savings which is now at $400.

Old Debt:

We are in our mid twenties (me 23, DH 26) and when I turned 18 I decided it was smart to sign up for every credit card I could get approved, subsequently maxed them out, lost my job and obviously they have gone to collections. (4 @ $4100) I had a bad break up at 19 that left me with $1900 owed to apartments (long story). He has an old cell phone bill ($400) and loan from trucking school ($2700) and various medical bills ($3000). So yup pretty far down in the hole, I have no idea how to climb out and still be able to pay our bills.

jtmh2012 · October 2014

noffgurl said:

With all that said our regular bills are:

Truck $400
Insurance $180
Electric $300
Trash $70
Water $75
Phone/internet/rent/satellite $300

I've been doing good at putting 10% of each check in savings which is now at $400.

$300 on electric?

I don't see food listed. Groceries? Eating out? That pack of gum you got at the local convenience store on your way home?

No cell phones?

Not sure where you live, but some of these numbers seem a bit high compared to what I'm used to. High cost of living area?

noffgurl · October 2014

I honestly don't know what we spend on food, gas ends up being around $90 a week because DH's job is a hour away. Electric is so high because we pay utilities for 5 people and are in a very inefficient mobile home. Our cell phones are in with the $300 we don't have a landline.

noffgurl · October 2014

Just to add on the food thing: several people live in the house and we are the only ones with real money coming in so we get to pay for everyone's food an average weekly trip to Sams or Walmart runs around $150-200. We also get to pay for food for the animals, with everyone having pets and whatnot that equals to chicken feed (about $20 every couple of weeks) cat food(about $25 every couple of weeks) and dog food (about $50 a week). Moving out can only happen after figuring out our credit situation.

als1982 · October 2014

Regardless of your credit reports, you earned those debts, in my opinion, you're morally obligated to pay them. I know it's hard, but you just have to start chipping away.

Personally, I'd take down the phone bill, because it's the smallest, and it'll feel good to get just one gone. Then, I'd organize by highest interest rate, or whichever ones are hassling you the most. Get those off your back.

Keep the $400 in savings, and if you can try to get that up to at least $500 for emergencies. Sure, $1,000 is nice, but that should likely do.

How much equity do you have in the truck? Can you sell it and buy something in cash with the money you made from selling the truck? Then you'll save in the payment itself, and likely, the insurance. My H and I proudly drive our 15-year old Honda and Toyotas, which run like a charm. They may not be pretty, but they get us to work.

Digging your way out of this debt will help give you the confidence and ability to move out of what sounds like an unhealthy living situation. You CAN absolutely do it!!

noffgurl · October 2014

I don't know on the equity but my DH refuses to give it up because it is the one thing his dad was proud of DH accomplishing. We also have a 21 year old Toyota Camry that I bought cash when I was 18 and is honestly the best damn thing ever. I really want to start preparing for repair costs though. Unfortunately one vehicle wouldn't work since his work is so far away and he is coming home when I'm leaving and vice versa

hoffse · October 2014

OK I have some thoughts. Hopefully this doesn't come off as harsh because I certainly don't intend it that way.

First, with two of you making between $2200-$5400 per month (depending on your H's paychecks), that's a HUGE amount of variance in income for your income level. If it were me, I would set a budget based on the low end ($2200) and then consider anything extra your H brings in as bonus. Use that bonus to first build your savings a bit more and then throw the rest of it at debt. It will take some time, but it will go more quickly than you think. Read some of the recent posts of folks who have achieved significant financial goals in the last couple of months.

Second, I'm sorry but the other 3 people who you are supporting need to do something to contribute financially. I don't care if it's public assistance, you have absolutely no business feeding and supporting 3 extra people (who you imply are adults) on an income that is potentially as low as $2200/month. You can't afford it, and that's why you haven't been able to crawl out of the debt hole.

If there's no way to get those people to contribute - and you can't move out yet - then you have every right to set a FIRM budget that fits within your low-end take-home so that you don't sink further into the hole. From the numbers you listed, you have $875 left in a very lean month. You said gas is about $90/week. So in a 4-week month that drops you to $515. That's how much you have left for food to feed 5 people. It's probably not enough, but you can do some surprising things to make money stretch at the grocery store if you are savvy about it. I know it might sound hard-ass, but I seriously would not pay a penny more than that until others are contributing. Even during a boom month for you guys, I would stick to the food budget. Sorry, but these people absolutely do not have a right to your money/largess, even if they are family members... frankly, it sounds like they are mooching off of you. That's going to sink you fast if you allow it to continue.

Don't even get me started on the amount you are spending on animal food. I'm a huge animal lover - humane society contributor, etc. But $50/week on dog food is insane, especially at your income levels. I own one cat and spent $17 on a bag of dry food for her every 6 months or so at Costco. She never eats all of it either - it's just that after 6 months I worry it's gone bad so I toss whatever is left. If I allowed a bag to fully empty it would take 8-9 months. How many animals are you feeding where it costs that much? What kind of food are you buying? Again - you can't afford it.

If it were me I would spend a couple of months tracking EVERY SINGLE EXPENSE. You need to know EXACTLY how much you spend at the grocery store and EXACTLY how much you spend eating out. The day I realized I had a starbucks habit (addiction?) that was costing $4/day or $1460/year was a pretty profound day for me. I now have a coffee out once every few months instead of once or twice a day. You have to track it to know where your money is going. After that you can set firm numbers for each category and slowly start to cut back.

One last point - I am not a Dave Ramsey follower personally, but I think his methods would be great for you guys. He's pretty good at helping people get out of serious debt - which is what you have - one step at a time. There are lots of folks on these boards who follow him, and they can give you more info.

als1982 · October 2014

noffgurl said:

I don't know on the equity but my DH refuses to give it up because it is the one thing his dad was proud of DH accomplishing. We also have a 21 year old Toyota Camry that I bought cash when I was 18 and is honestly the best damn thing ever. I really want to start preparing for repair costs though. Unfortunately one vehicle wouldn't work since his work is so far away and he is coming home when I'm leaving and vice versa

I'm sorry but a truck is not an accomplishment. It's a material possession. Getting out of debt and moving into your own place is an accomplishment. It's going to take tough decisions and smart behaviors and actions that aren't always fun or easy to get yourselves into a better position in life.

noffgurl · October 2014

Yes they are family members 2 adults (my mother and brother) and one child (my niece). My mom brings home about $2200 every two weeks (I know because DH used to team with her and make that). But she's constan complaining that she doesn't have money for anything. My brother just went through a nasty divorce and decided it would be a great idea to add a felony to that, that leaves him working for a friend of mines husband paid very little cash each day. DH and I have two dogs, my brother has one, my mom has 8 dogs and 2 cats. But she doesn't pay for them, we do. We've gotten rid of some animals before and she went down right ballistic. I really really really want my own place but every time DH and I mention that she again goes ballistic. I don't understand it because she makes a lot and could easily be on her own.

Xstatic3333 · October 2014

I'll second a lot of what PP have said. You guys are clearly very loving and caring people, but you can't afford to support three other adults right now. If they are truly incapable of working they should qualify for disability and be able to contribute that way, but if not they need to be looking for a job (I do know that it's not usually instantaneous to find one) for a full "shift" each day, or hustling by mowing lawns, walking dogs, Etsy shop, etc.

I'll also second selling the truck if you stand to walk away with a couple of thousand for a new car. I know it's hard to disappoint your parents with financial choices, but the truck is not an accomplishment if it's holding your family back. It just isn't. I'm not a Dave Ramsey expert either-hopefully @brij2006 or @vikingsfan can fill you in on his method because I do think it could really help you guys-but from the podcasts I've listened to I know he talks a lot about changing your family tree. Maybe a big shiny car was an accomplishment to H's family growing up, but you guys can change the expectation to one of financial security.

As to the old debts, though I do think you have a moral obligation to pay them, I don't see a problem with settling them for less than the full amount. Why not? Because the debts have already been sold to new creditors, not the people you originally borrowed from, for pennies on the dollar. What I'd do if I were you, is keep saving like you have been until you have $1000 aside. Then, pile up a little more money and offer to settle either your smallest old debt or the one that's causing you the most grief. Again, get all agreements in writing and don't give bank information! You could start by offering half to consider the matter closed, then negotiate a little bit. Continue until they're gone. Disclaimer: I haven't gone through this process myself, so those who have on the board feel free to correct me.

Finally like the others said, you CAN do this. It won't be easy but it will be so, so worth it. GL!

Sisugal · October 2014

Sorry, but your mom and brother MUST pay some kind of rent AND pay for their own pets! Insist on it as a condition on their continuing to stay with you. (Where else would they live for free?) They need to pay that FIRST before any other expenses.

Dave Ramsey's TOTAL MONEY MAKEOVER will help you get out of debt - it works every time the plan is followed -(your library probably will have it) You CAN do this!

You need to pay your obligations in full and on time to build good credit --- but first you need to get out of the hole.

Get a second part time job (holiday temp retail, housecleaning, waitress,babysitting, etc. Do you realize that everything that you make is going to support the truck? 400+ 280+ gas+ maintenance?

At one point in my life I worked 3 jobs.( one full time 9-5, one part time 4 evenings a week 6-10, and then a third job all day Sat and Sun 7-7.) You do what you need to do - you do not have to like it - you just have to DO IT. This will take serious action - but you start one step at a time and build on it and keep on going until you get there. You will be so glad you stuck with it and your life will be so different.

Do not let your family guilt you into being financially responsible for them. They are adults and can and must figure out how to take care of themselves. Use the extra earnings from your extra jobs to get out of debt, build a good emergency fund. --- Your actions to improve your financial/life situation will show them how to do it/ and hat it can be done.

You do NOT need satellite, cable or other TV costs --that is a luxury you cannot afford.
Cell phones should be basic talk only - not text or data. Consider something like a Trac phone with prepaid card for minutes.

Sell the truck - buy something inexpensive to own and easy on gas until you get out of debt. Then save first and then buy what you can afford - not always what you want. You need to learn to live with your means - and that means limits on what you can spend.

How are you paying for food?
IF you have any credit cards notw- STOP using them. Just STOP.

Track ALL your spending - every dime - you will be surprised where your money is going and how much is not necessary.

hoffse · October 2014

Look, I don't know how else to say this but you have to make some hard choices here. You also need to face some facts:

1) A truck is not an accomplishment, especially if it was bought on credit. Given that you report a truck payment, it sounds like it was bought on credit. Vehicle loans only make sense if you have a very very low interest rate because it's a depreciating asset. I suspect his truck loan does not have a low interest rate (I'm talking 1-2% here).

2) Your mother is taking advantage of your generosity. She makes significantly more than you do - in fact she alone almost makes as much as you and your H make combined in a lean month. She has absolutely no business spending your money on food for her and her animals. I don't care if she goes ballistic - stop enabling those bad behaviors. I get that it's hard to tell family no, but ultimately YOU are making choices here.

3) Your niece obviously can't work and is in a crappy situation through no fault of her own. I would be inclined to help with her expenses. I would not be inclined to help with your mother's or your brother's. Even if your brother doesn't make much, it can partially be attributed to the fact that he's made poor choices recently. Committing a felony is a choice, and he's a grown adult. He should know better.

This isn't going to be easy, but you and your H need to take some time to redefine the expectations you have for your financial lives. Read Total Money Makeover by Dave Ramsey and Smart Couples Finish Rich by David Bach. The first book will give you a step-by-step approach to get out of debt. The second book will help identify whatever emotional relationship you and your H have with money that has caused this downward spiral. Seriously, you guys do NOT have to live like this. Start making different choices and take advantage of these resources to help you.

noffgurl · October 2014

Thank you, everyone. I appreciate the help. I will try talking to DH again about the truck. We are looking at Elephant Insurance (it's $80 cheaper a month than our current) but are hesitant because we really haven't heard much of anything about it. We had the General before and got a ticket because even though we were paying on the insurance, it didn't show up on the cops system. Ticket was eventually dismissed, but don't care to deal with that again. If I could kick my brother to the curb I would but it's my mom's house. She pays the mortgage ($668). Telling her no equals we don't love her or appreciate the fact that she pays the mortgage. It also means being kicked out (why would she let people who don't love her live in her house). Getting kicked would actually be fine, if we had good credit. I know it doesn't sound like I'm giving much here, but I feel like I am completely stuck. I am looking for a part time job in the evenings and DH is considering other companies and possibly leasing a semi because the overnights are killing him and Swift screws up his checks regularly.

hoffse · October 2014

noffgurl said:

Thank you, everyone. I appreciate the help. I will try talking to DH again about the truck. We are looking at Elephant Insurance (it's $80 cheaper a month than our current) but are hesitant because we really haven't heard much of anything about it. We had the General before and got a ticket because even though we were paying on the insurance, it didn't show up on the cops system. Ticket was eventually dismissed, but don't care to deal with that again. If I could kick my brother to the curb I would but it's my mom's house. She pays the mortgage ($668). Telling her no equals we don't love her or appreciate the fact that she pays the mortgage. It also means being kicked out (why would she let people who don't love her live in her house). Getting kicked would actually be fine, if we had good credit. I know it doesn't sound like I'm giving much here, but I feel like I am completely stuck. I am looking for a part time job in the evenings and DH is considering other companies and possibly leasing a semi because the overnights are killing him and Swift screws up his checks regularly.

Have you tried looking for an inexpensive apartment? There are many that will take a chance on a new tenant if you put down a deposit.

Xstatic3333 · October 2014

hoffse said:

noffgurl said:

Thank you, everyone. I appreciate the help. I will try talking to DH again about the truck. We are looking at Elephant Insurance (it's $80 cheaper a month than our current) but are hesitant because we really haven't heard much of anything about it. We had the General before and got a ticket because even though we were paying on the insurance, it didn't show up on the cops system. Ticket was eventually dismissed, but don't care to deal with that again. If I could kick my brother to the curb I would but it's my mom's house. She pays the mortgage ($668). Telling her no equals we don't love her or appreciate the fact that she pays the mortgage. It also means being kicked out (why would she let people who don't love her live in her house). Getting kicked would actually be fine, if we had good credit. I know it doesn't sound like I'm giving much here, but I feel like I am completely stuck. I am looking for a part time job in the evenings and DH is considering other companies and possibly leasing a semi because the overnights are killing him and Swift screws up his checks regularly.

Have you tried looking for an inexpensive apartment? There are many that will take a chance on a new tenant if you put down a deposit.

This. When H and I first moved in he had poor credit and I had very little income (all under the table stuff). We applied a few places and "played it cool" each time before we found a landlord who just didn't check credit. I'm not gonna lie, it was demoralizing. The landlords who rejected us were often quite rude about it. But my point is, they don't all look at credit if you can show pay stubs and seem reasonable. Look for guys who manage 6-8 units; big companies and people who rely on rent for their mortgage tend to be the strictest.

I'd actually make getting out of that house Priority 1A if I were you. Your mom is being selfish, and it's no way to treat family. If selling the truck could get you the capital to do that it would be amazing.

noffgurl · October 2014

I think we will try that. Most of the apartments around here check credit heavily, but I think I know of a couple of places that may work, it will just be not so great places.

formerlyGDaisy09 · October 2014

you've gotten a lot of good advice here. I'm going to agree that you need to move out and look-out for yourself, your husband, and your pets first.

definitely look into selling the truck to buy something in cash...I'm not opposed to car-payments, but with your current credit you probably will not get a good deal on a loan (if you even get approved) so I would avoid financing.

your insurance and electric seem high...if you sell the truck and find a place that uses electric more efficiently you'll have a little flexibility in rent.

be creative at the grocery store (you'll probably end-up eating a lot of rice and pasta to keep the bill down) but save where you can. cutting the number of dogs/animals you're feeding will help temendously. we live in an area where selection for pet food is limited, I take advantage of subscribing for monthly delivery (for a discount) of our pet food. Our dog does go through a $60 bag of food every 6 weeks or so, I insist on feeding high quality food because my dog has allergies and a sensitive stomach, you can probably find a less expensive food.

as far as the debt goes, i agree, pay off the cell phone first, then organize by interest rate to tackle the other debts. base your budget on your H's minimum take home and send the majority of the "extra" to paying down debts...looks like you've got about $12K...if your H's take home varies by $3200 a month a few "good" months and you'll have it paid off in no time.

CuriousKiddosMama · October 2014

noffgurl said:
Yes they are family members 2 adults (my mother and brother) and one child (my niece). My mom brings home about $2200 every two weeks (I know because DH used to team with her and make that). But she's constan complaining that she doesn't have money for anything. My brother just went through a nasty divorce and decided it would be a great idea to add a felony to that, that leaves him working for a friend of mines husband paid very little cash each day. DH and I have two dogs, my brother has one, my mom has 8 dogs and 2 cats. But she doesn't pay for them, we do. We've gotten rid of some animals before and she went down right ballistic. I really really really want my own place but every time DH and I mention that she again goes ballistic. I don't understand it because she makes a lot and could easily be on her own.

She goes ballistic because you are asking her to act like an adult and pay for her own shit - which obviously she hasn't been having to do. You are enabling her to continue to live like this by staying there with her. In one way it's just like giving a drunk a drink, until you move out her behavior is not going to change and neither will your finances. Even then it may get pretty nasty for a while until she grows up.
You need a written budget. If your dh gets paid weekly, I would have a weekly budget. I am a huge Dave Ramsey follower as one of the other ladies said and I think his method could help you out extremely. Go to the library and rent the total money makeover. If you don't have time to read it they often have it on cd too.
You need to have a weekly budget. At the top out your income, and the. Underneath start listing all your bills. Include only the amounts you must pay for that week. For things like groceries, come up with what you think you can live on, and this may take some time to get right. When you have a 0 balance based on what you know you will make, then you can add goals- so if dh makes $300 this week we will pay this, if he makes $500 we will pay this, etc.
to start paying off your debts Dave recommends the debt snowball- you list your debts on a peice of paper smallest to largest. (The truck should get listed here if you keep it, but a $400 payment is insane for your income and really needs to go). Every extra penny you have goes to the smallest debt. Once you get that paid off, your minimum from that debt and every extra penny go to the second smallest debt. This is about motivation and not interest, and this is where some people don't like Dave. Paying off debts keeps you motivated to keep going, so I believe in following him.

Come up with a budget for next week and post it. We will let you know if you are forgetting things, and we can help keep you accountable.

CuriousKiddosMama · October 2014

Oh and one other thing- if your mom won't take responsibility for her pets, or get rid of any, you can probably do it for her. 13 animals in a house sounds like animal cruelty to me. Call the local animal control to anonymously report her. (I know people may blast me for this and it's fine) that way you don't have to buy their food anymore and can save up quickly a deposit for an apartment to get the heck out of there. Many cities have regulations about how many pets you can have so even if it isn't animal cruelty it may be hoarding and they may take some because of that. It all depends upon where you live though. If you are in the country with acreage that's a completely different story. I'm assuming you are in a city.

CuriousKiddosMama · October 2014

noffgurl said:
Thank you, everyone. I appreciate the help. I will try talking to DH again about the truck. We are looking at Elephant Insurance (it's $80 cheaper a month than our current) but are hesitant because we really haven't heard much of anything about it. We had the General before and got a ticket because even though we were paying on the insurance, it didn't show up on the cops system. Ticket was eventually dismissed, but don't care to deal with that again. If I could kick my brother to the curb I would but it's my mom's house. She pays the mortgage ($668). Telling her no equals we don't love her or appreciate the fact that she pays the mortgage. It also means being kicked out (why would she let people who don't love her live in her house). Getting kicked would actually be fine, if we had good credit. I know it doesn't sound like I'm giving much here, but I feel like I am completely stuck. I am looking for a part time job in the evenings and DH is considering other companies and possibly leasing a semi because the overnights are killing him and Swift screws up his checks regularly.

Next time carry a copy if your current insurance card in the vehicle- then to don't need the cops system to pull it up for you. I had this happen once. I had insurance but it wasn't found because the insurance company screwed up the vin. The card I had in the car expired just a few days before hand but it was still my fault.

noffgurl · October 2014

I had the card in the car but the cop argued with me over it and gave me a ticket anyways. As far as the animals- they are all healthy and taken care of (thanks to DH and I) but DH has tried calling various places. The local animal shelter will not do anything because we are out of city limits (way out) and ASPCA will not do anything because the animals are healthy and they have an acre.

RosieC18 · October 2014

Ugh double post.

RosieC18 · October 2014

I just want to say - it sounds like you're working very hard to be responsible in a really difficult situation, and you should be proud of doing as well as you are given everything going on in your life. You can absolutely work your way out of this, even if it takes some time. You've gotten good advice from other posters and while it may not be easy, it can be done and it's definitely worth it.

Sisugal · October 2014

Looking at your previous posts history, I see that you are asking the same questions/have the same financial issues that you did 2 years ago.
Honey, in order to have things change, you HAVE TO CHANGE WHAT YOU ARE DOING!
Decide to make one change today. Then FOLLOW THRU with it by DOING it. Then do it every day.

When you feel you have it mastered, then add another change.
Baby steps - will get you there - one step at a time.
Dave Ramsey's Total Money Makeover will give you the step by step program.

noffgurl · October 2014

How do I find out the trucks equity?

Sisugal · October 2014

KBB.com or NADA or KellyBlueBook.com will have current value for the truck (you plug in the year,make, model, features, mileage, condition and it will give you an amount for trade in or private party sale (selling it yourself).
Then subtract the amount owed on the truck
Anything left is the equity (or amount you get to keep if it is sold)
If you sell the truck, make sure you cancel the insurance for the truck as well.

If you owe more than it is currently worth - it is considered "up side down" and you would have to re-evaluate the plan to sell depending on the amounts due.

noffgurl · October 2014

KBB.com Value for private sale is $8,575 for very good. It's in pretty great condition. Principle owed is $11,271.54, payoff quote is $11,355.54. So that's an upside down difference of about $2500.

How to handle old debt

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