Confessions of a Laid-off Lawyer

Just Your Average Joe Blogging Away His Debt—In One Year or Less

Credit Schmedit

with 11 comments

Total Black: $1,086.75
Total Red: $228,537.78

Well, looks like I got my wish.  So to speak.  Just yesterday in Seventh Day of Accounting, I expressed my disdain for a particular credit card and noted that it was next on my debt elimination radar screen.  I sent a payment to that card this morning: a $700.00 payment.  Later in the day I got a bit impatient and decided to check the card’s website to see whether the payment posted yet.  Former MBNA credit cards can’t be viewed or managed through Bank of America’s website.  And what did I discover when I checked?

Bank of America closed the account on me.

I suppose I don’t really care that much.  I mentioned in Venom and Vitriol that a sizable portion of the total balance on that credit card came from donations to the Obama campaign.  I don’t use that card.  And as I referenced in Seventh Day of Accounting, I don’t get anything back from that card.  And even though Bank of America bought out MBNA, I’m not able to check the account on Bank of America’s website, I can’t get ebills or bill reminders, and can’t transfer money directly to or from that account.  So, I’d often forget about that card as it was somewhat off my radar screen.

But it does infuriate me that the bank closed the account without even a warning.  I don’t count repeated telephone calls as “warning.”  It’s not clear.  And customers shouldn’t be required to enter the spider’s web to find that sort of information out.  No, banks are not required to warn their customers.  I didn’t know that until today.  This is actually the second card that’s been closed on me.  American Express closed my platinum card at the end of 2007 because I carried a balance longer than ninety days.  That too infuriated me because I viewed having a platinum card as a status symbol and that was ripped from me.  I think it also infuriated me because the bulk of the money owed on that card came from utterly stupid, silly, and wholly irresponsible purchases: renovating the apartment I had in Brooklyn.  My ex and I thought it would be cool to attempt to strip the paint off the wood paneling in the apartment.  The layers went back at least sixty years.  It was fascinating work, great do-it-yourself experience, but overall it was a disaster, in every sense, and it cost me that card and thousands of dollars.  Insane.  But I’m digressing here.

Another factor that bothers me about this card being closed is that it was the oldest card I have.  That’s a factor in your credit rating.  Another factor is the utilization ratio.  Now the amount owed clearly exceeds credit limits.  But stressing out about this will not solve it.  I came up with the title to this entry but then decided to google the spelling.  I came across Credit Schmedit the website.  And one of the postings on that site is the following: Top 10 Tips to Reduce Credit Stress.

Credit worries can create a lot of stress and anxiety.  This is a very difficult situation to find oneself.  For those feeling their backs are up against the wall, here are ten tips to help reduce credit stress.

  1. Realize that you are not alone.  Many people have been in the same situation as you.  A large percentage of these people were able to successfully overcome their challenges. There is no reason why you can’t either.
  2. Understand the situation will not change whether you stress out or not. You can get angry, upset, nervous, and annoyed and it will not change your situation. Actually, it will make it difficult for you to take the steps needed to straighten out your situation. Why put yourself through this? Keep a clear head and…..
  3. Devise a plan. When you owe money you need to figure out a way to pay it off. Whether it is getting another job or preparing a debt settlement offer is irrelevant. The key is you must devise some sort of workable plan. This will provide the hope needed to reduce stress,
  4. Set up a schedule for your plan. Develop a realistic rime [sic] frame and a course of action. This will create a cohesive way of getting out of your troubles and develop a belief that there is a better tomorrow.
  5. Follow the plan to the letter! A plan is not worth anything if you do not stick to it. If you really want to reduce your stress you need to make sure to follow the devised plan. Not doing this will lead to the situation remaining unchanged.
  6. Realize that the situation will improve if you follow your plan. This is a form of positive reinforcement. When you realize that your situation will change for the better, you will not worry about it as much. This is because fear of the unknown creates the stress. When you add a sense of certainty to the situation, you will not fret as much.
  7. Promise to never get into the same situation again. This is another form of positive reinforcement. When you acknowledge that you will not make the same mistakes in the future, you add further certainty to your situation.
  8. Tell confidants about your situation. When all your feeling remained bottled up inside it can become overwhelming.  This can be the root of much anxiety and stress.  Talking about the situations with friends can help reduce the anxiety.
  9. Speak with a professional credit counselor. Friends are always nice to talk to but their knowledge base might be limited.  Seeking the help of a professional credit counselor can set you on the right direction for getting out of your difficult situation.  They do this for a living and they know what works and what doesn’t.
  10. Remember, it is only money. Sure, this may sound like a simplistic statement. It is also a true one. Money can always be earned. Once your health goes, you are really in trouble. So, why wear yourself down mentally and physically? This will only make improving your situation even more difficult to overcome.

True words.  True words.  I suppose #9 is the only one I’ve avoided like the plague.  In my experience, speaking with the credit card company’s representatives doesn’t help.  I finally picked up the telephone the other day when a unknown number called.  It was Bank of America.  They wanted to know when the next payment would be forthcoming.  I explained that I get paid weekly and that I’d be sending in a payment then.  Of course, they wanted to set up the payment right then.  I explained that I transfer the payment directly from my checking account to the credit card all within Bank of America’s website.  It’s instant.  No need to set it up in advance.  The person I spoke with said that he’d note my account but said that I’d still continue to receive calls from representatives.  That’s the line that I hate!  What’s the function of this call?  Why are we talking?  Why are you “noting” my account if I’m just going to have to repeat the same information again in a few days when my account next pops up on automatic dial?

But a professional credit counselor is not the same.  And I haven’t thought about reaching out to one.  I may have to, if only to discuss ways to begin repairing my credit.  There could be some tricks out there that only they know, like putting a consumer statement in your credit report noting extended unemployment.

Eh . . . tomorrow’s another day.  At least that $700 payment posted already.  Bank of America was pretty fast in snatching that out of my account.  Less than twelve hours!

Written by Laid-off Lawyer

February 11, 2010 at 23:40

11 Responses

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  1. Probably no longer an option, but would your parents allow you to consolidate your high rate debt into a home equity loan or line on their place?

    My credit union, for example, has a HELOC for 3.25% and I think the Equity Loan rate is about 5.25%. Plus the interest is tax-deductible (well, it would be for your parents).

    If that is an option, it would clear up your credit card issues and help with your credit score in that way, plus your interest would be less, plus you’d have the added incentive (I hope) to be vigilant in making your payments.

    On the flip side, if you flake out your parents might end up living in the gutter.

    Doug

    Doug

    February 12, 2010 at 08:22

  2. In all honesty, it’s something I’ve thought about mentioning. If only because it’s an avenue to consolidate debt and streamline payments.

    But.

    I saw Suze Orman a few months back and she decried this practice, claiming that it’s really unwise. You take unsecured debts—like credit cards—and then swap them for a secured debt—your home. If you can’t make your payments on your credit cards, your credit may get hurt, but the credit card companies can’t “foreclose” on anything. Just close them. If you pay off those cards with a home equity loan, you’ve now put your house on the line. And if you can’t make those payments, you could end up homeless. Incentives are there. And the tax-deductible angle is attractive. But it just seems like a risky option, all things considered. If I knew this then, I wouldn’t have borrowed that money from my mother. But, then again, the IRS was breathing down my neck, threatening to lien on me.

    I’m learning to question that “popular wisdom” out there.

    Laid-off Lawyer

    February 12, 2010 at 08:29

  3. Don’t consolidate if it means opening a new line of credit. If you do so without addressing and changing your spend- and charge-happy habits, you’ll only run up your newly clear lines of credit and end up in twice as much trouble. And if you do it on your mother’s dime (and her home), that drags her into an enormously risky situation.

    Anon

    February 12, 2010 at 09:26

  4. Professional debt counselors/consolidators can be very helpful but I think it also takes some effort to find one that just doesn’t want to scam you. My sister-in-law finally sought one after about 30k in debt became impossible to tackle alone working minimum wage. It is really working for her, in addition to some other lifestyle changes. If anything, they work out a reasonable plan with the CC companies and in turn get them to stop calling yo ass at 3am.

    Lawbservation

    February 12, 2010 at 10:34

  5. Yeah, Doug’s advice is insane given today’s economic climate. I’d never consider leaving my parents on the hook for my debts. Never.

    Wow

    February 12, 2010 at 11:58

  6. It was just another “option” to consider, and I admit, based on LoL’s past track record–likely one not to be undertaken!

    However, even in this “economic climate,” LoL does appear to have the cash flow to make minimum payments and then some.

    I do agree with the downside of trading unsecured debt for secured debt, but I also thought that bankruptcy was not an option for LoL, so that really should not be relevant.

    All in all, minimum payments would be less with any type of consolidation (including HELOC or HEL), plus those options carry with it the benefit of deductibility. No other option is going to give you a better deal than that, if it is available.

    And also, Wow, you say you would not consider leaving your parents on the hook, but if you were in LoL’s shoes, maybe you would consider taking them up on offered help and not look at it as leaving them on the hook.

    I’m assuming that LoL would not “leave them on the hook” either, and would make his payments. Perhaps a bad assumption…I don’t know, but this man needs some debt consolidation, and if he isn’t going to see a professional debt counselor, then maybe it will have to be mom and/or dad.

    Doug

    Doug

    February 12, 2010 at 19:26

  7. First of all you need to demand your money back from Mr. Obama. A lot of good he did you – not even health insurance. Talk about scammers!! I hate the Republikkkans but at least with them you know what you are getting into. The Dems are like the nice guys that turn out to be assholes – much worse!!

    Ladybug

    February 12, 2010 at 19:39

  8. Lawbservation, I am curious – which company did your sister use?

    curious

    February 12, 2010 at 23:15

  9. Hi L-O-L,
    The ten tips sound great, but it doesn’t seem like you’ve been doing many of them. A plan to pay off debt is figuring out income and expenses, then taking disposable income and determining how long it will take to pay off existing debts. If you could pay $2,000 a month, how long would it take to pay your debt off (interest rate would need to be calculated in)? Alternatively, run the numbers to determine the amount you need to put to debt each month to be out of debt in ten years. Your current plan, as best I can decipher, is that a miracle will occur in August. I hope you get your miracle, but hoping for a miracle or to hit the lottery is not a plan.

    If you can find a free professional credit counselor, great. But you’ve been given lots of great advice here, and can find other advice online. Whatever the original intention of your blog, it reads like a personal finance blog – which is why I keep coming back. Don’t discount the wisdom of some of your readers, many who are probably interested in personal finance because of their own mishaps (that’s what brings me here).

    Since your parents do not seem to be financially secure (if they had piles of cash lying around, they already would have helped you out), consider whether its wise to ask them to mortgage their house to pay your credit cards. If they end up losing their source of income, they can lose their home. And then there’s the ramifications of pulling family members into this, especially if its not enough to truly dig you out.

    Good luck! I commend you for putting this out there for comments, so it seems like you’ve got # 8 covered. You’re a great writer, have you looked into other ways to monetize this blog-you’ve got good traffic.

    govtlawyer

    February 13, 2010 at 09:47

  10. Wait, it cost thousands of dollars to strip the paint? How can that be? It should take a lot of elbow grease, but not thousands of dollars. Chemicals or scrapers don’t lead to that expense. Did you end up hiring contractors or something?

    travis

    April 28, 2010 at 05:18

  11. Yeah, probably a case of me exaggerating a bit . . . for emphasis. Certainly didn’t cost me thousands, as in $8,000. But around two. The stripping solution itself costs around $30 or $40 per large tin can. Then you’ve got to buy the metal scrapers, the plastic tarps and drop clothes, the paint brushes to brush on the stripping agent. Don’t forget the gloves—god!, the gloves. We went through so many variety of gloves. Plastic, nylon, vinyl, polyurethane, coated and uncoated—the paint remover ate through them all. Then there was the special masks to filter the fumes and ensure we weren’t inhaling lead. Craziness. Plus I needed to buy a ladder. I didn’t have a window fan either.

    But this all happened just after I wrapped up months living in Europe, working on a major case and feeling like a superstar. I had no true warning that a year later I’d be out of that apartment and unemployed.

    Learned life’s lesson well.

    Laid-off Lawyer

    April 28, 2010 at 13:34


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