Drowning in Debt? Here Are Your Options, Good and Bad – Consumers’ Checkbook
- August 18, 2020
Excerpt from the website Consumers’ Checkbook shares a personal story from one family that worked with GreenPath to manage finances during the ongoing crisis.
Even before the onset of today’s crisis, millions of Americans are saddled with excessive debt. As the COVID-19 pandemic continues to damage the economy, the number of people unable to handle the problem themselves is growing.
The website Consumers’ Checkbook looked at approaches to deal with debt relief. They all agree: Your first stop should be a non-profit credit counseling agency.
Non-profit Credit Counseling
A trained counselor will look at your overall finances and suggest the most affordable pathway to repayment. Your options would typically include:
Do-it-yourself by making a budget, cutting back on spending, and talking to your creditors about a lower interest rate.
Signing up for a debt management program offered by the credit counseling agency that enables you to affordably pay-off your debt in full.
Talk to a lawyer about bankruptcy.
This is individualized advice based on your specific situation: income, monthly expenses, and total debt. This service is not limited to credit cards. Your counselor can also provide guidance for other debt, such as auto loans, student loans, and home mortgage, and can help you develop financial habits that will benefit you in the future.
With a debt management program, your credit cards are canceled, and you agree to pay back all of what you owe, but the agency will negotiate with your creditors to lighten the load.
It’s not always easy, and it will take time—typically three to five years—but if you’re committed to a brighter financial future, it can be done.
Victoria Garcia and Jeff Milligan were able to pay off $45,000 in credit card debt in just three years after signing up for a debt management plan with GreenPath Financial Wellness. The Denver couple made their final payment a few weeks ago.
“It still feels a bit surreal; we’ve been struggling for so long that mentally it hasn’t quite hit me yet,” Garcia told Checkbook.
Garcia and Milligan over-extended themselves in 2016 when they decided to invest in their financial future. He took a real estate course; she learned about running an online business. They paid for those courses with credit cards.
While they had some success, their incomes didn’t improve as quickly as they expected, and within a year they were unable to pay their credit card bills or their mortgage.
“I remember how awful it felt to be constantly getting calls from the credit card companies. It was very, very, very, very stressful,” Garcia said.
Their credit scores tanked, so Milligan couldn’t refinance his car when the lease ended. Then they received a pre-foreclosure letter from their bank.
“We had a heart-to-heart with ourselves and realized that we were past the point of no return, and it was time to suck it up, admit the truth, and get some help,” Milligan told Checkbook.
The couple said their counselor was friendly, approachable and non-judgmental about their debt, and described a debt management plan which is a method of repaying debt in which you roll several lines of debt into a single repayment plan.
Milligan’s credit score, which dropped from around 810 to 419 when he stopped paying his credit card bills, is now back to around 717. Garcia’s credit score is also good again. The couple refinanced their mortgage and built a $20,000 emergency fund.
Nonprofit counselors can help with mortgage problems and student loan debt. For instance, GreenPath financial counseling takes into consideration people’s full financial picture to understand the best plan forward when it comes to financial health.
Read the complete Consumers Checkbook article.
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