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Dh and I are in serious serious debt (number of reasons mostly unemployment) to the tune of $50K. We now have an HHI of just under 200K and have a plan to pay about 1K down each month. We no longer use credit cards for purchases if it can be avoided (meaning if we have to order something onine we use a credit card but pay that off immediately). I am reading about people who negotiate down their debt - how would we do that and what are the implications for our credit going forward if we do that?
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np They are, actually. They lead to higher interest rates for ALL of us. We all end up paying.
[ Reply | More ]Yes, but that's about the country at large, not one OR in particular. I'm tired of these "But your financial problems are costing ME money and raising MY taxes" responses. Just as self-centered as filing for bankruptcy when you don't have to.
[ Reply | More ]I don't care how tired you are of it - it is true. Your lavish lifestyle costs money. All people pay for it except your lazy irresponsible butt. You are 30 years old with 200k in income. You should be ashamed. Ask your mother to bail your ass out, not the rest of us. We didn't contribute to your lack of money sense.
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They are about the entire country. She didn't say, "if you don't, the rest of us do", she said, "if you don't, I do". I'm done debating about this, I answered this beause I find it annoying when people try to debate issues that affect everyone by answering with a "me, me, me, me, me" response.
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Zippo, actually. I made one comment about how annoying it is when people respond to financial complaints by whining that "they" are going to pay for the OP's mistakes and suddenly there's a sh*tstorm of self-rightous people with terrible reading comprehension explaining what I already know about how this raises everyone's interest rates.
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You really think that the rest of us aren't affected by someone earning nearly twice my salary declaring bankruptcy over a debt that is a QUARTER of their salary? Because they just don't feel like paying?
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Yes but if everyone has her same attitude, we are all affected. Get it? If one dog shits on the sidewalk and his owner leaves it, oh well. But if aaaallll the NYC dogs shit on the sidewalk and the owners leave it there... then you're walking through a bunch of shit. This is somewhat similar. Everyone needs to just be a responsible adult and shoulder their own freaking burdens instead of asking others to take them on all the time.
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you are just wrong. you have some werid issue with debt. We all know we all pay even if OP decided to walk. We didn't eat the dinners, we didn't watch the flat screen, but we pay. Your point is indefensible. So just stop.
[ Reply | More ]All right, you know what, one more time - I am referencing the OR's irritating response that makes OP's screw-ups entirely about her, rather than about everyone. I realize this is a technicality, I find it very irritating when people respond to things but saying, "But that costs ME money!" It costs everyone money, not just you. This is such a stupid argument, just answer her questions. God.
[ Reply | More ]I still don't understand how I am not paying attention when I say that I realize that when everyone acts like a shithead, we all pick up the slack for them. I think that means I AM paying attention. But ok...
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dh's mom had to do this and it involved lawyers, in the end she had to pay higher taxes for some reason and, without knowing the details, i do know that the outcome wasn't great for her. my bother's bil declared bancruptcy and bought a new benz shortly after and they seem to be doing well.
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nuts - we have a HHI of 60 and do just fine. If I showed up at their house tomorrow - I could find 50k in two years, easy.
[ Reply | More ]I think this respondent means with that income they won't be able to negotiate down debt--no idea if that's true or not.
[ Reply | More ]Yes that's exactly what I meant. She will not be able to negotiate down debt because there's no reason for creditor to do it - they're going o let her choose between paying and not paying (whereby she will destroy her credit). And thank god for that. If I'm paying Credit card debt of someone with 200k hhi, something is v v wrong.
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If you have a HHI of around 200k, you can pay off that 50k easily in one year. Grow up. Don't buy any new clothes, or go out to eat, or send your kids to private, or take a cab, for a year. Done.
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op - our credit is fine actually and we have very minimal assets due to the unemployement unfortunately
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op - we didnt have much, paid for our wedding 3 years ago. Had ds following year and then lost my job right after that - hard time getting a new one.
[ Reply | More ]and you pay child care costs? you've been unemployed for for 2 years? and you pay somneone to watch your child?
[ Reply | More ]op- i work now, I was unemployed for 18 months dh for 12 of those, we are both in the same industry. And ds goes to daycare. We do not have a nanny
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op - cant really do that if we ever want to actually have careers.. eventually we should be in good shape if we can kill this debt...
[ Reply | More ]There is not a career on the planet that a 30 year old can't take one year off and recover. But you can find an excuse for anything. I'm telling you, I could have you out of debt in two year and you would have savings, but you don't want to do it. One of the reasons you are in this mess.
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If you have decent credit you can move the debt to a 0% card and pay it off in one year. Do you own your home? Do you have a 401(k)? You can call and ask for a lower rate, but you are unlikely to get one. Using a company to negotiate the debt will kill your credit score and is stupid.
[ Reply | More ]I do have a 401K - do you think I should pull out my contributions for a year and pay down debt. We are trying the balance transfer option and crossing fingers we get approved to move over the balances...we have gotten rid of everythign extra. Our rent and daycare is what is killing us...
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If you're still at the company, I'd take a loan against it - you'll still make payments, but back to yourself w/ a much lower interest rate. The only downside is that you'll need to pay it back or lose it if you change jobs. How old are you?
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You should try to get out of your lease rather than your credit card debt. I don't see why you see the debt as negotiable but not the lease.
[ Reply | More ]because they are living in a dream world. They can have it all fancy wedding, great apartment, baby - opps, can't afford it - will someone else pay it?
[ Reply | More ]I can't stand this. I disagree vehemently with op not taking responsibility for her own debt and I think her question is somewhat gross, but where does she say she has a fancy wedding and a dream apartment? Don't make shit up to suit your argument!!! Read the facts and respond accordingly. The fact that you've totally exaggerated and assumed here doesn't affect the result, but elsewhere it will.
[ Reply | More ]she actually used paying for the wedding as an excuse for the debt. I asked if it was a studio or not and she refused to answer.
[ Reply | More ](1) she said wedding, not fancy wedding (2) she did not say that's why they're in debt. Sounds to me like they're in debt because of unemployment. That said with 200k hhi she should pay her debt.
[ Reply | More ]I hear, we can't move, we can't get rid of daycare or we will never get ahead in our careers, I was out of work for 18 months, dh for 12 - I can't cancel cable, I paid for my wedding, I had a baby, I hear excuses. I hear I want to just make my debt go away. There is no excuse. You are healty and 30 years old. Shrink your lifestyle to bare minimum and pay your bills. You just do it. I didn't have the debt (way too responsible for that) but I lived that way until I had 100k liquid assests in case of emergency and then added extras in. Grow up and do it.
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Anything outside of city hall is not fancy. Similarly, a 1 Br apt is not necessarily a dream. you detract from your own argument bid you don't want o hear that, it's no skin off my back.
[ Reply | More ]I disagree with you. I say, studio in inwood is cheaper than one bedroom, studio is Queens is even cheaper. You and I both know she spent 1,000's on the wedding. Someone needs to spank this person. Her parents apparently aren't doing it. She doesn't need ANYTHING extra until she is out of debt. I haven't asked her to starve her child - or live in a shelter. It is basic. I don't know why the wedding thing bothers you or why she won't tell you how much of the debt is wedding debt. I do know, she spent more money than she had. Her wedding wasn't paid for in cash. Financially responsibility does not involve spending what you don't have and she needs to learn it and I'm happy to be the harpy that tells her.
[ Reply | More ]she is going to disregard my opinion anyway. if she had any sense of moral responsibility or financial planning ability this would not have happened. But when she goes to sleep tonight she's going to be so pissed at me that maybe 1/10 of what I said will get thru and that's a start.
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I believe it is considered a strike against you on your credit report if you use consolidate your debt. It's better just to pay it off over time. I managed to pay off $15k of debt on a HHI ("household" being just me) of $60k before marriage; it's totally doable.
[ Reply | More ]op - ok so tell me what you did. We have cut everything and 1k is what we can pay down due to the interest servicing...
[ Reply | More ]NP - have you really cut everything? Like Suze Orman style cut everything? Like do you still have cable TV (in any form other than reception)? Still eating out? Ordering from FD (if you are in NYC).
[ Reply | More ]op - we no longer eat out, no gym, no extra sitters, no new clothes for any of us. ds gets necessities only and usually those are hand me downs or old navy now. We do have cable but that is our only entertainment...
[ Reply | More ]Sheesh, keep your cable, you can have ome small pleasure in life. Take the long view, keep paying down your debt and the time will pass before you know it. Move somewhere cheaper when you can and stay there. Good luck!
[ Reply | More ]I'm a tough love type and I disagree. This is a hard lesson, but if they learn it, they will be better off. You live poor. You cling to each other. You pay off your debt. You don't "deserve" any extras until you are debt free. Then you add them back in. You won't die. You will be better for it. Had you done this instead of thinking you could have it all - you wouldn't have a problem. 50k debt is a problem
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i haven't declared bankruptcy or left a property that is underwater but if it came down to decision whether to declare and/or walk away from a property vs. the health and well being of my family i would choose my family and file and ditch the house and start rebuilding.
[ Reply | More ]OR: $1000 a month is definitely a start. In fact, it's a great start. I'd look for lower interest credit cards (as a PP suggested) and then pay off each card according to interest rate (highest first, of course). I also channeled 100% of every year-end bonus and tax return into paying off my credit cards. It didn't happen overnight -- it took a few years. But one day I had just a couple thousand left and I was able to write a big check and be done with it.
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Negotiating down your debt is a charge-off. Big ding to your credit. Bad news. You could try to go to a credit counseling service to consolidate your debt, but they will make you surrender all of your credit cards. Your credit is cut off entirely while they help you sort out your mess. They can negotiate much lower interest rates on your debt which could be the difference between keeping afloat and sinking, but it sounds to me like you're not ready to go cold turkey and surrender every last piece of plastic. Best bet is to cut your spending to the bone and plod along paying as much as you can.
[ Reply | More ]When I was in a similar situation years ago, I really went bare, bare bones for about 7 months to get caught up. I knew it was for a limited period of time, so it was ok. Get ppd cell phones, cut off cable, eat dried pasta/rice and beans, but cut to the absolute minimum. I know it's hard after you're finally working, you feel like you should be able to breathe again, but it's such a great feeling to pay it off and you're not going to get there at $1K/month. You simply won't.
[ Reply | More ]First, reduce the interest rate on debt. Low interest card is first choice. Credit Unions or special offer from bank of 0% on transferred balance could work. If those don't fly, yes, loan against 401k is best choice. Second, bankruptcy would be a stressful hassle and would kill creit for 7 years. And I'm not sure you qualify for much relief. Third, move when lease expires, and see if landlord will let you out earlier - might be worth it, even if you have to pay a bit.
[ Reply | More ]I've read most of this and I have to say you need to move. That sounds like your biggest monthly out of pocket expense and the only thing that will possibly move the meter. You are going to have to slum it for a few years to really take a bite out of the money you owe. What would it cost you to get out of your lease? Can you find another tenant for the landlord? You could potentially save thousands of dollars a month right there that you could apply to your credit card debt.
[ Reply | More ]This! We have a ton of debt, and are able to pay more than twice as much as the OP, on half the HHI. Did OP say what her rent is? Presumably they can slash it way down if they move. Sublet out the place and move somewhere cheap. Considering she says they still have cable, I also assume that she hasn't fully cut down her other expenses, either. The cable alone is another $100/month, which is $100 too much when they're only "able" to put $1,000 towards their debt total.
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How can your credit still be good with $50K in debt? I used to work for a major credit card company and you crossed into the danger zone a long time ago. If you're close to your credit limit on any of those cards, that's bad news. As you pay the cards down, the companies will cut and cut your credit lines because of the risk. I doubt any company would give you a 0% balance transfer. They are inviting trouble if they do. You need to move--to a crappy studio apartment in a cheap area or your mother's basement and live an austere lifestyle until the debt is paid off. I would not borrow against a 401k. If you lose your job while the loan is outstanding, you must repay the loan immediately or be hit with a big tax bill and penalty. How would that work for you? Honestly, you seem to be making a lot of excuses. Until you're ready to get serious about dealing with this, nothing is going to change.
[ Reply | More ]So I am going to skip over all the self-righteous comments and perhaps some of the ones meant to really help you. Now that you have income again, write down everything you spend money on, cut it back to the minimum and start paying off the highest interest rate as much as you can as fast as you can. The debt will snowball off. To answer you question, you can negotiate with unsecured creditors- it will effect your credit, there is an option of chapter 13 bankruptcy (which is actually designed for your situation) but I would avoid that given the high amount of income relative to your debt. I was in this situation years ago (failed business) paid everyone off in a couple of years, had good credit to show for it, bought and sold houses thereafter.
[ Reply | More ]my dh had 50K in debt. If you negotiate down your debt be prepared for many years of bad credit (I did this in my 20s and it took yrs before anyone would give me a credit card). With the 50k my dh had, he did 2 things, took out an annuity loan (borrowed from himself and pay himself the interest) and he took out a personal loan from another bank (the annuity wouldn't allow more than 25k to be borrowed). Both loans were for 5yrs. We just payed off the annuity in Dec. and the 2nd loan will be paid off this March. I can't tell you it was a LONG 5yrs but it did go fast. With both loans we had a set payment amt each month and a good interest rate...so glad we did it. GL
[ Reply | More ]My DH and I were in a similiar situation about 4 years ago (we were abt 120k in debt). We are now debt free, and have been able to save 50k in our emergency fund. We followed Dave Ramsey's plan. Google him. I highly recommend reading his books. Its not rocket science. It just takes discipline. I agree with the other posters who said not to negotiate getting your debt reduced - it will ruin your credit. Very bad idea.
[ Reply | More ]Hey OP, hopefully you're still checking this thread. I'm suprised by the crap that everyone's given you over your situation. Frankly, I don't think you have THAT much debt compared to your income and age. After grad school @ 29, I had $70K in loans and a job that paid about $150K. I was able to pay off all of my debt in about 6 yrs. No biggie. My husabnd and I have $1.5MM in the bank now and about $700K in homeowner equity. Currently if you're paying $1K/mth and you manage to get your debt down to a 12%APR, you'll be paid off in 70 months. That's not so bad. Definitely negotiate for the best cc rates you can get. Don't negotiate the debt itself bc of the impact on your credit. Don't listen to these idiots telling you to move in with parents, give up your Internet, etc. Complete nonsense. You need to focus your efforts on 1) Increasing your income 2) Saving for the future. The economy is getting better. Focus on getting a job that pays better. You don't say what you do -- can you do consulting work on the side? Or something else on the weekends to bring in additional cash? Even a once a weekend catering/bartending gig could bring in an extra $500/month. If you're a professional, look at companies like Gerson Lehman that pay to interview people in certain industries. I had a friend working in media who earned an extra $40K/yr from this type of work. Even babysitting once a weekend after your DC goes to bed can bring in about $400/mnth extra. It's hard for me to give you concrete ideas b/c you don't say what you do. Ultimately though investing in your career and the higher future income it will bring is the way to go. Regarding saving, DEFINTELY keep contributing to your 401K -actually try really hard to max out the annual contrib. Don't take out a loan from it -- you will need to pay it back immediately if you switch jobs and/or get laid off. You don't want to be in that position. You need to keep saving though b/c of the effect compounding interest rates have on your future nest egg. Even if you can save $400/month, that will be great. But in the meantime, put together a budget you can live on and assume it will take about 6 yrs (or less if your income increases) to pay off your debt. Your take home is about $6k/month, $1K of which is going to debt repayment, so you shouldn't be spending more than about $2.5K/month on rent. You should be able to live on the remaining $2.5K including childcare (or less with your 401K contrib). Good luck!
[ Reply | More ]I just settled 50K in credit for 10K (3 separate cards). Credit score took a hit but it wasnt a disaster. stop paying completely and you will get many calls for the first 90 days. do not pick up the phone. these are merely collection calls. after 90 days you will start getting offers to settle. negotiate with them and you should be able to settle for 20-30% of what you owe. try to keep at least one card current so you dont blow all your credit. good luck
[ Reply | More ]from a BTDT be prepared to be hit with a tax bill for the amount that you never paid off. The Credit card companies will let the gov't know and the IRS will send you a bill for tax on that amount which they now consider income. It can take a few years but when they collect, they give you like 30 days to pay if not they will take it from your next taxes if you get anything back. You can make a payment arrangement with them if you can't pay that bill off.
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A few suggestions for you. One, don't worry about your credit for now, most important is finding a way to survive and pay your bills the best you can. You can worry about restoring your credit once your financial health is restored. In terms of negotiating down your your debt, if you are considering that I strongly urge that you do this on your own without the benefit of firms that allege to do it for you. I am sure some of those firms are reputable, most are not. Options are to negotiate down the balance, negotiate a lower interest rate or get put on a payment plan that you can manage. One thing to keep in mind is that if you do negotiate down the debt, the difference between the new balance and the old balance is considered taxable income. I don't believe that law has changed, you should check. Not knowing the full extent of your situation, I recommend you consult your accountant or local Consumer Credit Bureau for information. Another option for information and some consultative help is LearnVest. Check out their website, they are terrific. Best of luck.
[ Reply | More ]this is true about the taxable income. I settled a credit card many years (4-5 yrs ago) and all of a suddent Dec. 2010 I get a bill from the IRS in the mail. I was given 30 days to pay (didn't have $480 on hand) so I made a payment plan for 3 equal payments. I had no clue settling would cause this to happen. It may not happen all of the time BUT if the credit card that you settled with reports or claims the loss, the IRS will come after you for the tax.
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