In a really desperate situation...

Hi all,

I haven't been on the boards for a long time and while it's good to be back, I wish it could be under better circumstances.  Let me explain:

I'm and ex pat - I've lived in the UK now for nearly 4 years and have been married to a wonderful UK lady for over 2 years.  But about a year ago, I lost my job.  The reasons why are unimportant, but the net effect was that I went from a salary of nearly £35k to being forced to take a job making about £16k (as I was at that time ineligible for benefits).  So, in order to make ends meet, I started living on my US Credit Cards.  It was working for a while, but about 6 months ago, they ended up all being maxed out, and I made the difficult decision to stop paying them off, as it was the only way to make sure all of my UK bills got paid.

Well, after months of trying, I have finally landed a new job, with a much healthier salary of £45k!  But unfortunately, it appears that the damage has been done.  I now owe a grand total of over $60k on my US credit cards, most of which have not had any payments made to them for 6 months.  I have worked out a budget where I can send about £500 a month back home to pay off these debts, but that will not even begin to cover the interest, which on most of them has shot up to over 32%!  I am afraid to call them and explain my situation, as I do not want them to know I am living in the UK (they are all registered at my Parents address where I used to live) as i am just starting to get credit here now.  My poor parents have been forced to screen all of their calls now as their phone is ringing non-stop with collection agencies.

I guess I just need to know what my options are.  I want to do the honorable thing and pay off my debt, but part of me is tempted to just 'forget about it' and hope it goes away in 6 or 7 years (wishful thinking).  Bankruptcy is not really an option, as the rules for Chapter 7 have changed and would seem to require me to go back to the US for an extended period of time, which I can't do now that I have a new job.  Debt settlement seems like it might be the way to go, but I have read so many 'scare stories' on the internet about it that it seems like it could make things worse and not better.  We don't own a house here in the UK, so a home equity loan is not an option either.  To make matters even worse, I had to take out a  personal loan here for £5k to help cover some of my UK expenses whilst I wait to start getting paid from my new job.

I need to face this problem now before it gets any worse.  Thanks in advance to all for any advice you have to offer.....

I can't offer much help, but can offer sympathy. I have similar problems only with student loans.

I'm not sure them knowing you are here will make much difference. They can't really pursue you here for the debt (there are some other threads on this). But it might at least get them off your parents back.

I don't know about debt settlement... is that similar to the IVA system here?

I'm in a similar situation after a layoff in the States. I lived on credit while looking for a job until I maxed out all my credit cards. I haven't been able to pay any of it back because we barely get by here, but I know that you can negotiate credit card companies down to probably a third of your debt, as long as you make an effort. You could send your parents the money, and have them forward it along. But you'll need to make contact with the companies first. I feel for your parents. Mine have been in the same position.

I appreciate the stress that this causes, Big_Ed. I too have had the same problem and my parents have also had the same sort of problems as a result.  I'm not terribly proud of myself, but sometimes we have to do what we have to do. I'll pm you and let you know what little I know....

Hi Big Ed,

The first step which is actually the hardest is admitting you've got this issue (ALOT of people in similar situations will continue to deny this till they're blue in the face and only begin to wake up when bailiffs arrive to take stuff from their home!)

The credit card companies WILL listen to you - they know many people are in this situation, they have people in their organisation who deal with clients like this every day.

Like already mentioned, speak to them, explain as much as you need to, but emphasize that you are looking to pay them back a reasonable amount given your current cashflow and commitments. They would rather they get some money coming in from you rather than none at all - the bargaining you have to do is to come to an agreement on how much per month you are able or want to pay back.

If it makes you feel better, £30 K worth of debt (equivalent of about 60K USD) isn't such a large figure in the grander scheme of things here in the UK. Many professionals in London for instance on nice salaries of 45-55-60-70 plus grand owe stupid amounts more than double of yours!

Also, don't think about the running off aspects - the day will come when you need credit for an important element and it'll come back to bite you.

I also suggest using personal financial software to accuratley monitor your spending which will enable you to vary payments back to them according to your cashflow from easy to see reports in the software. Many many people I used to support whilst working at Intuit and the Quicken software were in the same position as you and found it invaluable to use software to help with your financial situations. Microsoft Money is another good alternative - I just know Quicken as I was involved with it's Development, Testing and Support.

A combination of the above will allow you to pay off the CC companies, whilst allowing you to accuratley monitor your finances and give you instant access to your financial 'health' recovery as and when you may need access to it. Also can help in forcing changes for the better as well!

Good luck

Cheers! DtM! West London & Slough UK!

I feel for you and your situation.  Getting out of credit card debt is a long and stressfull process.  It's good that you have money to budget.  Promise yourself to never pay less than that each month unless you absolutely have to.  I was about $23K down in credit card debt 4 years ago with interest rates a bit less than yours.  I stuck it out, stopped using my cards entirely, developed a payoff plan, and kept my eyes out for new credit card opportunities that would aid my situation (i.e. low interest rates on balance transfers).   

As Suzanne said I think it will be worth your while to contact your CC companies.  What they want more than anything is to get some money back.  Try calling them and explaining that you simply won't be able to pay off the debt without some give from them.  Ask them if they can either eliminate you interest rate, or reduce the amount you owe, and tell them that if they don't do something you will not be able to pay off the debt.  My father did this multiple times.  He got his card company to drop his rate to 0% on at least four cards, and drop the amount he owed on many others.  He wouldn't threaten bankruptcy, but he would tell them that he wanted to pay the debt, but couldn't with the current situation.  He would then propose certain ways that would allow him to pay.

For my payment plan I use Excell.  Using my current interest rates, and planed payments I calculate how long it will take to payoff each card.  I use a sheet for each card and one sheet that tallies number of months until each card is payed off, month and year each individual card will be payed off, and the total amount of interest payed on each card and all cards combined.  I could send you an example if you like. 

When I got a card offer that looked promising, i would put it into my spread sheet and see how it would effect my payoff dates and interest paid.  If it made a big difference I applied for it. 

After a while, the card offers will get better.  Currently, I have $10k on a fixed 3.9% apr for the life of the balance and $3.5k on a 4.9% fixed apr until 2010.  All from balance transfer offers in the mail.

Good luck, it will be hard but if you stick with it things will eventually get better.

-Tyler

I'm no professional adviser so take this advice with a grain of salt.  I would do the following:

(1) Find out how much of a loan you can get here in the UK.  Your credit isn't damaged here as they know nothing about your US problems and your salary is quite good.  Your interest rate should be much better than what you are paying in the US so go for as much as you can at a longer term loan so that you can continue making payments to the higher interest rate US cards.
(2) Transfer all the cash from UK loan to the US, you get the additional benefit that current exchange rates are great
(3) Get your US cards to compete against each other.  Tell them each you have money to pay off 1 card only (even if you can afford to pay more), what kind of deal will they give you?  No one wants to be the last creditor in line so they may be motivated to be the bank to get their cash first by giving the best deal.
(4) Pay off as many as you can but make sure you leave enough leftover in a US account that you can pay at least minimum payments to each remaining card going forward to avoid further penalty fees.

Advantages are that you can potentially motivate the cards to decrease what you owe, you can transfer it to a lower interest rate loan, and you take advantage of great exchange rates.

For example, say you owe $15,000 at 30% interest on 1 card in the US.  You get a loan here for £6,000 at 15% interest and convert it into $12,000.  Convince your US card to settle for $12,000 (or the cash goes to another card).  Difference in costs:

$15,000 at 30% over 5 years = $485/month
£6,000 at 15% over 5 years = £143/month ($286/month)

Cuts the cost of one card nearly in half.

You said you could afford to send £500/month, this would be enough to pay off a £26,000 loan at 15% in 7 years.  If you could borrow this much you could convert to $52,000, haggle all the cards down, and pay them all off.  Not likely you'd get that much but you get my point, borrow as much as you can here to pay off US.

Thank you all for your advice and words of wisdom.  Looks like I got some thinkin' to do.....

Cheers

No words of wisdom, Big Ed, but just to say hope things go well for you.  Good for you for facing up to what is ahead and not just ignoring the problem.  It's quite a responsibility have a family and expenses in this day and age, on top of the immigration issues (fees for visas and ineligibility of tax credits, etc). 
Somehow I sense you are the kind of person who will get on top of this and in a few years time it will just be a distant memory. 

Hi,
I owed about $5k on my credit cards about 4 years ago - a lot of people would scoff and say that it's not that much money. But if you don't have the money to pay off the amount you owe, any amount is a serious amount. Some other people have made a very good point of first facing up to it. (Which for me was the hardest thing to do) I had 9 credit cards - bad idea (at least for me) First, I closed all cards that I wasn't using. Then, I paid the minimum balance on the ones that I owed the most on, as I paid off the remaining ones that had smaller balances and closed them one by one. I got to the point where I only had two left. I worked out a deal with one credit card company (the one with the larger balance but lower interest rate) and then did a balance transfer from the second card over to first one. They even gave me a credit increase to take on the balance transfer so long as I was committed to paying them off. I came up with an amount that suited me to pay them each month and was committed to it. (obviously much larger than just the minimum) I also never used my credit card unless absolutely necessary! I have to say that one of the toughest things I did was actually learning to live within my means. The whole process took about 18 months. But I have to say now, I have learned to live within my means and have been credit card debt free for over two years now.  I wish you the best of luck Big Ed. I've been there and it's incredibly difficult! You definatly have my sympathy. But unfortunately, I guess it just one of the not so fun things about life. Best of luck!!

I have been away from the States for 16 years now so, my advise might be redundant.  Just a query, however, is'nt there a personal insurance attached to the credit card facility which covers interest payments on outstanding balance, in cases such as loss of employment?

Ed, I am late getting to this thread so not sure if you're still checking around, but my very strong recommendation would be for you to get an appt with this organisation:

http://www.nfcc.org/

It is a non-profit (charitable) organisation that has been around since post-WWII days.  They are there to give non-judgemental, practical support & advice to people exactly in circumstances such as yours.  Typically, having an appointment & getting initial advice is free of charge.

There is a 'Zip Code Locator' function to help you find the office nearest where your US address (parent's address?) is.  If you let them know the particulars of your circumstances, they should be able to conduct an appointment with you over the telephone.

Generally speaking, they may be able to set up a plan for you whereby you make a single monthly payment through one of their affiliate agencies, who then pay out to your various creditors monthly on your behalf.  They also mediate/negotiate with the creditors to either reduce or stop interest & charges - although this is not guaranteed & depends on the specific creditors involved.  (Some affiliates will assess a small & affordable fee if you go on the plan, but most of the organisation's operating costs are paid for via donations from the creditor community.)

With $60K debt and about £500 monthly to offer, you would probably be looking at about 5-7 years to clear everything -- if your creditors are among those who stop/reduce interest as part of their agreement with the organisation.  A much better option than bankruptcy for the reasons that you describe, as well as that the figures you have given suggest your debt could be paid in less than 10 years.

The organisation will also help you review your budget & look at other solutions/alternatives with you as well.  If you would like more specific info or advice, please send me a PM.

Hi CarolynB

Excellent advice there, and thanks for the link, i've bookmarked it as well!

Big Ed - just wanted to add, you're in the enviable situation that the dollar rate is weak right now, so anything you earn here and is 'sent back' there is worth double ! might help you in paying off faster. Also, I've one more bit of info for you, but I need to find the contact details for this company so that you can approach them and see if their services are of use to you or not.
Basically, theyre a currency dealer - mainly used by Brits looking to buy properties abroad - they allow you to buy a currency at a certain exchange rate and then 'hold' that rate for up to 2 years. So I'm thinking you could arrange say £15K worth with them of USD at £1- $1.97 (remember they take a cut!) and 'fix' that rate for as long as you or they let you. Then transfer that over to the US to pay off your debts. I only read about this 'service' in the last couple of days so i'll find out the details and post back here.

Beegirl - Kudos for you for doing that, count yourself as one of the brighter ones in this sort of scenario - beleive me, the vast majority are anything but ! that 'change' from spending and not worrying about it now to realising you do have to pay back is very hard, but it'll definitley serve you well through the rest of your life and your future financial astuteness! and it's good when a success story like your's comes to light!

Cheers!
DtM! West London & Slough UK!

As said before.. the US dollar is extremely weak right now.  If you set up a money transfer you can lock in an interest rate of up to £1.94 (almost doubling your money!)! I recently set up a money transfer to pay off my US student loans.. and no matter what the interest rate is for the next 2 years, mine is 1.94... it takes £500 from my UK bank account every month and puts $960 into my US bank account so i can pay my loans in American dollars.. your almost doubling your money.. and i pay my loans online which im sure you can do with your credit card... its easy... its free.. and theres plenty of companies that would love your business.  The longer you sign up for too.. the higher your interest rate will be and its locked in.

Heres two companies i remember researching...
www.xe.com
www.moneycorp.com (i used this one)

Also, as said before... talk to your creditors ... they WILL help you... but you will have to pay something so hopefully my advise helps!

Best wishes,
Chrissy

As said before.. the US dollar is extremely weak right now.  If you set up a money transfer you can lock in an interest rate of up to £1.94 (almost doubling your money!)! I recently set up a money transfer to pay off my US student loans.. and no matter what the interest rate is for the next 2 years, mine is 1.94... it takes £500 from my UK bank account every month and puts $960 into my US bank account so i can pay my loans in American dollars.. your almost doubling your money.. and i pay my loans online which im sure you can do with your credit card... its easy... its free.. and theres plenty of companies that would love your business.  The longer you sign up for too.. the higher your interest rate will be and its locked in.

Heres two companies i remember researching...
www.xe.com
www.moneycorp.com (i used this one)

Also, as said before... talk to your creditors ... they WILL help you... but you will have to pay something so hopefully my advise helps!

Best wishes,
Chrissy