Tuesday, September 30, 2008

More Children have Experienced Bankruptcy than Divorce

...according to Harvard Law Professor Elizabeth Warren, author of the books All Your Worth and The Two-Income Trap. (Hat tip to We Need to be Debt Free where you can find her hour-long lecture The Coming Collapse of the Middle Class. She explains why middle class families with children are perched precariously on the edge of solvency. )

Warren notes that most of us know a number of people who have been through divorces, but we don't know about the bankruptcies, even though there are more of them. People hide the reasons for life changes (we're moving in with Bob's parents because of their health or we're moving away for better job opportunities) when in fact bankruptcy is the cause.

Bankruptcies are more common among parents than any other group. According to Warren, a specialist in bankruptcy, creditor and debtor law, it isn't because people are irresponsible. Most bankruptcies, she says, are caused by either job loss, family breakup, or unexpected health problems of a wage earner or family member so that one wage earner must stay home to nurse the patient. Doesn't exactly make a person feel safe.

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Sunday, September 28, 2008

Another Banker

Kudos to a fabulous banker at Sovereign Bank for being, well human. The other day, I posted about the loan modification papers from heaven.

I received the check from my relative. (Thank you wonderful lady!) But, it's an out-of-state check that isn't guaranteed to clear for three days. I need to Fedex a certified check drawn on those funds back to the mortgage company TOMORROW for it to arrive by their deadline. (Not to complain about something that's going to save my house, but they didn't give us much time...)

I explained my plight to the teller. Instead of just shrugging and saying it will take a couple of days, she walked it over to a higher-up in cube-ville. This wonderful woman looked up my account (so she must have seen some bounced checks and other ugly trails of financial distress.) She asked for my id. She asked me about my business loan. (oops). She asked if we were refinancing and paying closing costs up front. I was honest, and said that it was a long story but we were doing a loan modification. She smiled wryly and said, "Isn't everybody?" And she went and cashed out the check and deposited cleared funds in my account. And then she said, "It's horrible now for a lot of people, but it's going to get better. I think."

So thank you bank person. A little compassion and a break or two is just what I need.
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Breaking It Down--A Debt Reduction Strategy

A sampling of snowballs.Image via WikipediaI enjoyed this post from Master Your Card
outlining a strategy for getting out of debt. Seems there is some controversy about deciding in which order to pay off your debts. The MYC author recommends paying off high-interest debt first (which is what I do), while David Ramsey recommends the snowball method, wherein the debtor tackles the smallest debt first and then applies those same payments to next next smallest debt. This is supposed to give you a sense of accomplishment as you retire each debt, modifying your behavior towards retiring your debt.

I suppose it depends on how you're wired which works best for you. I also guess the important thing is setting and sticking to a strategy in the first place.

Oh, and the 1st strategy, according to MYC? Stop using the bleeping credit cards! Duh, huh? I wish I'd thought of that a couple of years ago!
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Saturday, September 27, 2008

At the Mall

Apple ComputerImage via Wikipedia We went to the mall today. I have to say, I wasn't tempted to buy anything. I just kept looking at everything and seeing it in dusty piles in my home. No more carp for me!

We were there to visit the Apple Store. As a long-time frugalist, a few years ago we bought my husband's iMac reconditioned from the Apple web site, and saved hundreds of dollars.

Well, it died last week. Not before he took a good backup. He ran some diagnostics, and checked with some tech colleagues (he runs a computer repair shop), but, ultimately, it was dead.

There were a couple of bad moments there. I mean we are not in a position to buy a new computer.

But, the genius who is Mr. Poorhouse had the brilliant idea to check with the Apple web site for ideas about the problem. Lo and behold, his iMac serial number indicates it was part of a recall for a faulty video card that causes just the problems we had been experiencing.

So we were at the mall for an appointment at the Genius Bar at the Apple Store. And guess what? Even though the computer is long out of warranty, this particular recall EXTENDED the warranty, and they are going to replace the logic board AND the power supply. FOR, get this, FREE! (I like free.)


While we were at the Apple Store, I was once again amazed at how crowded the place is. I don't get the attraction. Once you have a computer and and iPod, why do you need to hang out there? But people do. Anyway, I, for one, was not tempted to buy anything.

Polly's Pointer:

1. Check with the manufacturer when anything breaks. You never know if there's a hidden warranty, or if the company just wants to extend you good will. Believe me, if the same thing is breaking on lots of people's widgets, the company knows about it.
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Friday, September 26, 2008

Debt Consolidation: Not the Right Answer for Us

This post has beeen included as part of the 83rd Carnival of Money Stories - Election Day Edition!" hosted by Simply Forties. Check out some of the experiences of others in this rock 'n roll money world.
A few days ago, I posted about the positive outcome that I think came from my conversation with the folks at Money Management International--the mortgage division.

I did not find the debt consolidation group to offer such a good deal. The same night I talked to the mortgage counselor, I went over the same financial details with the credit card folks. Now I've got a number of credit cards (too many). Some of them were just for low-rate balance transfers. Two of them I've used for spending. Two were for my business. Two of them were a big concern--high rates, late payments. The others, I was juggling more or less successfully. (Probably the wrong word.)

After going through the drill with the credit counselor, he suggested that they could lower my 30% rate to 15%, but the others would all stay the same or even increase. They would create a 5-year payment plan to pay off all the debts. I would pay MMI, and they would pay the lenders. And, oh yeah, it was going to cost me $40, that's 4-0, dollars a month.

Say what?

We got rid of cable or satellite TV, Tivo, our long distance plan. We've eliminated movies, eating out, music lessons, soccer, school lunches, new clothes. We've switched to a cheaper dog food, and haven't bought light bulbs for months.

"$40? I don't have $40 a month," I said, said I. I was disappointed, thinking about those 30% rates. "Can we just put some of the credit cards on the plan? Yes?"

Yes. That will be $15 a month. Cha-ching! I told them I had to think about it. So I thought about it. And I might have done it. But by that time my credit card company had come around (as I mentioned here) and lowered my rate to 10%

The moral of the story for me is that it's much better to negotiate with your creditors directly. $40 a month? Really?

The other thing to keep in mind when working with a credit counselor is that the credit card companies subsidize these organizations. If you follow the money, you will see that the settlement the counselor offers may be one that is not in your favor.

Polly's Pointers:

1. Try working with your creditors directly first.

2. If you do work with a credit counselor, make sure they are affiliated an organization such as the National Foundation for Credit Counseling.

3. Avoid paying someone to "repair your credit" or help you get out of debt.

I know that some of those organizations are served by my own Google Ads, and I wish I could tailor the ad services to screen them, but organizations that prey on the desperate and downtrodden are pathetic. Research the organization you are working with to make sure they are legitimate. Don't be afraid to talk to a number of people. You may even want to leverage your conversation with the original lender.

4. Debtor beware. Some of these places run out-and-out scams! They take your money, charge hefty fees, and never pay the creditors leaving desparate debtors worse off than before! Now here's the place in financial crisis where shame belongs.

Further Reading
Profit Possibilities by Elizabeth Warren, blogging at Credit Slips
Debt Relief Can Cause Headaches of Its Own

Thursday, September 25, 2008

Credit Card Reform on the Way--Bill of RIghts Passes House

On September 23, the Credit Card Bill of Rights, sponsored by Congresswoman Carolyn Maloney (D-NY) passed the house. Yes!

There's more work to do. If you feel, like I do, that credit issuers are using deceptive practices to entice consumers to carry more debt than they can afford, and that they rely on high fees and rate hikes as standard operating procedure, you may want to contact your Representative and Senator and ask that they include credit card reform in any bailout package. (Hat tip to Consumers Union, publishers of Consumer Reports, for the idea.)

Here's a link to your elected officials:
House of Representatives

Here's the letter I wrote

Dear Senator/Congressman ____,

I was pleased to see the Credit Card Bill of rights sponsored by Congresswoman Carolyn Maroney, pass the House of Representatives earlier this week.

I feel very strongly that protections against personal financial ruin such as this legislation should be part of any economic bailout plan for the large financial institutions.

Predatory lending practices in common with a failed business and my husband's extended unemployment have almost bankrupt us this year.

Thank you for your consideration.

Polly Poorhouse

Tuesday, September 23, 2008

The Fedex Guy--Better than Ed McMahon

A FedEx Express delivery truck, showing the du...Image via Wikipedia It's better than winning the American Family Publishing sweepstakes. Out of the blue today, the Fedex guy brought loan modification papers for our mortgage.

Believe me when I tell you we did not even know this was in the works. The terms were beyond our wildest expectations. For a couple of hundred dollars extra a month, they will add our past due principal to the amount we owe and spread it out over the life of the loan. The low fixed interest rate does not change. The term of the loan does not change. There are no processing fees or closing costs. All we have to do is sign and notarize the papers and (cough) come up with the first payment, which has an extra $1000 towards the principal amount.

Wow. How did this happen?

Here's what I think it was. A few months ago, we hit rock bottom. Mr. Poorhouse was working minimum wage part time because nobody in retail was hiring managers. I've been working "for the man" since March, but my income just wasn't enough. We had missed a mortgage payment. The well had run dry--we had tapped out our home equity line, our credit cards, my business loan. We had borrowed against my retirement savings. There were no more pots to cover the mortgage and other expenses.

I googled consumer credit counseling services. I found one: Money Management International. I wanted to talk to them right then. But they didn't have an appointment for weeks. (I guess the Poorhouses and the MacMahons have something in common with lots of other folks these days.) I made the appointment.

The day came. I spent an excrutiating evening on the phone going over our financial situation with the mortgage counselor. At the end of the day (literally) he said we didn't have enough income to carry the debt. He talked about options. Selling Assets. Borrowing from relatives. Increasing income (now why didn't WE think of that!). Short Sale. Bankruptcy. Walking away from the property (not that he recommended that.)

I explained that my husband had an full time job offer for a job that would start in September.
The counselor said he would submit a request for loan modification to the mortgage company, but that he could not say what would happen.

I was pretty emotional during that phone call. He was good. He explained he had also had a failed business and had been in this place himself. A little compassion goes a long way.

A few weeks later, I got the "plan" in the mail. All it was was a reiteration of the financial information I had given him, and advice about options (short sale, bankrutpcy, yada yada). It said NOTHING about a loan modification.

(Aside: MMI also has a credit card debt division. Different counselors, and for me different outcome. I'll blog about that another day. See this post.)

In the meantime, the mortgage company called every few days. I mentioned to each and every individual that I had requested a loan modification through MMI. The answer was always the same: "We don't have any information about that."

One day, in a conversation with my husband, the lender suggested a payment plan which would add a hefty (like 50%) addition to each mortgage payment for six months until the loan became current. We talked about it, and I called the next day to work it out, but by then the acceptible payment amount had gone UP. No representative we talked to ever seemed to have any knowledge of any other conversation we had had with any of his or her colleagues. Hmmm.

Well, we agreed to a payment plan. On a payment plan, it turns out, the mortgage company will accept partial payments, so I started paying 50% of the new really high payment out of each paycheck so that I wouldn't be short at the end of the month. All this during a time when my husband hadn't yet started his new full-time job with a full-time salary.

So imagine my surprise when this loan modification fell out of the sky today! It doesn't make any reference to the payment plan we had agreed to. It doesn't make any reference to the credit counselor.

No matter how it came about. You bet your sweet bippy I'm signing these docs.

The catch: I need to send them a certified initial payment plus $1000 cash contribution to reduce the principal by September 25. Trouble is, I just made a partial mortgage payment, and I don't have the cash.

So, for the first time in all of this, I asked for money from a relative. I'll skip the long complicated family relationship story. But this wonderful woman simply said, "Of course, Polly. You don't have to ask. The money is already yours. It isn't a loan. You need it, I'll send you a check tomorrow. And if it isn't enough, let me know."

Saved. Thank you National City. Thank you Money Management International. Thank you lovely relative. I think I'm going to cry.

OK, I'm better. Just wanted to let you know if you didn't already that MMI and other credit counseling services get their funding from the lenders. This modification didn't cost me anything but sweat and tears. If you keep that in mind you may be better off. Follow the money to see whose interest in being served. In this case, it was both ours, and the bank's, which, I have heard on the news, is having financial troubles of its own. The difference is, in our case, the federal government is pretty unlikely to bail us out.

A good day.
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Monday, September 22, 2008

Closing Bank Accounts

I closed my consulting business and took a full-time job in March. Well, "closed" is kind of overstating the case. I emailed my past clients and then shut the door on my home office.

The problem: an outstanding business loan and loaded up credit card. I was a DBA or "doing business as" organization--no incorporation, no limited liability. So I am liable for the business debt personally. And that's OK, because I believe if I borrowed it, I should pay it back.

Only, there is no income to pay off that debt, so it has to come from current earnings.

So today I (figuratively) opened the office door and decided to close my business bank accounts. I had two: one for taxes and one for operations. Seemed like a good idea at the time--I'd sweep money into the tax account when I got a check from a client so that I could afford to pay my quarterly estimated tax payments. Except, I kept dipping into the tax account for operational expenses. My bad.

To do:
Close tax account. Check.
Close operations account. Not so fast.

You see it's linked to the business loan, which is, um, not current.

So Monday, it's on the phone to the business loan people to see if we can work something out.
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Sunday, September 21, 2008

Skulking Behind the Bushes

An image of a lot of cubicles that seem to go ...Image via Wikipedia So, I just gotta say that it's kind of humiliating to sneak out of my office, make sure nobody is looking out the window as I dart across the parking lot, and duck behind the bushes to make phone calls on my cell phone to my favorite creditors.

I work in cube-ville. The conference room is a fishbowl, literally in the center of everybody's desks. A few windowless rooms are available, but they adjoin my boss's office and the walls are thin.

So skulk I must. It's comical. It stinks.
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Saturday, September 20, 2008

Triple Play: Car Insurance, State DOR, Business Loan,

The payout schedule leads to geometrical incre...Image via Wikipedia I've been popular with the letter carrier recently. I got two more registered letters: one from my car insurance company, one from my state department of revenue.

And I followed up on them all. (Yay Polly!)

Out 1: The car insurance company wanted a certified check or money order for payment, but I had already sent an automatic payment through my bank. The very helpful rep suggested I try to cancel that payment and pay with a debit card from the same account to avoid the risk that they won't accept the payment and cancel my insurance. Seems like a good plan.

Out 2: The state was kindly informing me that they received my 2007 return and will be happy to levy my federal refund for taxes owed. Not a big deal, since there will be no refund. As a matter of fact, the IRS already absorbed my economic stimulus check. The state will have to get in line.

But, I did call and talked to a colleague of my previous contact at the State DOR (see back story). I explained that I had done everything requested of me but am still waiting for the forms for electronic payment for the payment plan we had negotiated. I live in fear they will levy my wages again. I do NOT want to go through that again. Success--he gave me the direct phone number of the woman I talked with a few months ago AND told me her hours.

Out 3: This poor collections guy from the bank where I have an outstanding business loan has been trying to reach me for months. I have called him back numerous times, but we never seem to be able to connect. (Plus I am not willing to give collectors or creditors my work number or my cell phone number, and I'm at work...a LOT.)

There's a long, and probably boring, story behind this business loan. I took it out as a line of credit when I opened my business to even out my cash flow. It's got a pretty good interest rate--lower than any of my credit cards. I used it as intended for years: borrowed against it, paid it down, borrowed again.

To pay taxes last year, I borrowed against it and ran it up again. Not to my limit, but enough that it became difficult to repay with no actual revenue coming into the business. At one point I had set up an automatic deduction to pay the balance from my business checking account. So, what begain to happen was that the payment would hit my checking account, which had nothing in it, and I got charged exhorbitant fees from the checking account for bounced checks. I was not on top of that.

Eventually, I would figure out what happened, make a transfer from my personal account to my business checking account, and then it would start all over again. After a few late payments, I guess the bank decided to run my credit report. They sent me a letter that they were closing my line of credit because my credit score had declined. That wasn't a big deal to me--I wasn't planning to borrow anything more--just trying to figure out how to pay it off.

So, they referred my account to collections, and this one individual would call me every month, and I would make good on the payment, or a couple of times, they just 'took' the money.

I wanted to close my business checking account because it doesn't make sense to be paying this loan out of an account...that never has any money in it. It's costing too much. My branch manager said I have to clear up the loan first before I close the account.

So, I finally actually got through to the collections guy today. And he was great. I told him the situation, and he said, "Well, Polly, it really doesn't look TOO bad."

I laughed, because from where I sit it looks awful.

He said, "Yeah, I don't have that kind of money lying around either, but I deal with people who owe hundreds of thousands of dollars who have closed their business, so in comparison, this isn't that bad." Yikes!

He suggested I fax a letter asking to have my overdue interest deferred until the end of the loan period so that he could refer me to the guys who can help me work out a reduced payment schedule. (I guess they won't talk to me if I'm behind schedule.)

I asked him if they had reported this loan to the credit bureaus, and he said they hadn't because he had kept me from ever going 30 days overdue by this trick with the checking account.

So, I'll write the letter, and keep the account open, and see whether the guys can help me.

I'll tell you, the journey is a lot easier when the voice on the other end of the phone isn't in a snit.

A good day.
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Thursday, September 18, 2008

Barack Obama Takes on Deceptive Credit Card Practices

Obama 2008 Presidential CampaignImage by Barack Obama via Flickr In a campaign speech in Chicago this summer Barack Obama outlined his Credit Card Bill of Rights and rating system to compare credit card companies. The proposal:

1. Ban unilateral changes to credit card agreements.
2. Ban rate changes on past debt.
3. Ban interest on transaction fees.

(Check at about 4:08 for the details).

"Don't get me wrong," he said, "We all have a responsibility to pay what we owe, but we have to ensure that the amount we're paying is fair."


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Wednesday, September 17, 2008

It's the Tax Man, Oh-oh The Tax Ma-an

Seal of the United States Internal Revenue Ser...Image via Wikipedia Or woman as the case may be. I had my conversation with the IRS. The woman I talked to was the model of efficiency and impatience.

It looks like I have bought some time anyway. I need to submit documentation of income and expenses for the past three months. I also need to apply for a loan (presumably to pay for the back taxes) and submit the rejection letter. I only need to do this if I can't come up with the minimum monthly payment the IRS suggests, which has gone up 50% since I talked to them in July. The difference is I have now filed my 2007 return, and owe, well, more.

Sigh. I love paperwork. Wonder what this loan rejection will do to my credit rating?

I guess I'm in good company with New York Congressman Charles Rangel, except that he chairs the U.S. House of Representatives Ways and Means Committee. (Plus he owes less and probably has the money to pay it...)

Money Talks video on what to do if you can't afford to pay your taxes

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Tuesday, September 16, 2008

The Link Between Debt and Depression

I had a bad day.

Too often these days, things seem overwhelming.

But I'm trying to remember that life is big. This present horror is but a blip that will earn me my gray hairs.

Fifty-three year old Carlene Balderrama of Taunton, Massachussetts was so beseiged by debt, and I'm guessing, shame, that she committed suicide a few months ago immediately before the bank was to foreclose on her home.

Her husband didn't know they were about to lose her home. Her neighbors didn't know the family was in trouble.

We have a real taboo against talking about money problems in our society. Secrets and shame combined with stress can contribute to physical and psychological illnesses. People think that setbacks represent a long-term catastrophe. They may avoid getting treatment because they have inadequate or insurance coverage for mental health problems. Marital or family tensions can become worse. Even abuse and neglect may occur.

Polly's Pointers

1. Please, if you're reading this and are having problems that are interfering with your health and wellbeing or that of those around, you, get help.

2. Talk to someone you trust. Find a counselor, social worker, minister, friend, or doctor.

3. If you have thoughts of harming yourself call a suicide hotline. If anyone is in danger, get help now.

It's just a house. It's just a car. It's just stuff. Life is big. You can make it better. Take it one day, one bill, one phone call, one hug at a time.

Be well.


Further Reading

Facing foreclosure, Taunton woman commits suicide from the Boston Globe
Debt and Depression at Debt Prison blog
Severe debt can cause depression and even suicide by Emily Starbuck Gerson

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Money and Neighbors and Friends...Oh My!

The worst part of being in financial trouble for me is the local service providers we know personally, and to whom we owe money.

I play the piano. It's actually really important to me. My kids have been taking lessons for a couple of years too. Their piano teacher is a friend of mine. Her kids are in the same class at school as my kids. She's wonderful, talented, friendly, smart, and a terrific teacher.

And now I'm afraid to talk to her.

Her studio policy is that we prepay by the semester. Last year, I didn't have the money up front, so I paid her a few hundred dollars every time I could until we were caught up. She was wonderfully understanding. In the spring, she asked returning students to make a commitment for the fall and pay a deposit. She waived the deposit for us, because, again, I didn't have the $200.

Over the summer as the unemployment situation dragged on, it became obvious to us that there is no money for piano or any other activities this year. I sent an email to the piano teacher apologizing profusely and explaining that we would have to suspend piano lessons. I didn't hear back from her, but that wasn't surprising, because she spends the summers out of the country.

This week, she left a message on our voice mail, wondering where our daughter was during her lesson time. EEK! She never got the email! And now she's got a hole in her schedule for not one slot but TWO students--because of us. Ugh. I feel rotten. But I just don't have the money.

I will call her tomorrow. I will.

We also owe the local dance studio for last semester's fees. The owner, who is our daughter's instructor, is a neighbor of ours. I feel so icky not being able to pay her. For the record, the check that I wrote at the time the payment was due bounced because I wasn't managing my (lack of) cash flow very well. We will pay her, but we need to save the house first.
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Monday, September 15, 2008

One Step Forward, Two Steps Back--Now It's the IRS

Seal of the United States Internal Revenue Ser...Image via Wikipedia The other shoe fell today. I got 4, that's right F-O-U-R, registered letters from the IRS. Something has gone wrong with the payment plan I set up to pay off my back taxes from two years ago. Actually, two somethings have gone wrong:

1. They returned the payment plan application I sent in months ago because I left a blank on the form (at the instruction of the phone rep, I might add).

2. They are threatening to levy my wages (been there done that) because I couldn't afford to pay my 2007 taxes either (which I just filed). I actually got a refund on my 2006 taxes, which, together with my economic stimulus check, were immediately gobbled up by the previous year's outstanding balance. Such is the life of the self employed. Apparently, when you agree to a payment plan, you also agree to pay any current taxes as they become due. But I don't have the money to do that. The back story on all this is below.

I did open the letters right away, and I did call them right away, but nobody's home, so I'll have to try again in the morning. Wish me luck.
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Sunday, September 14, 2008

Sounds Familiar--Business Failure Leads to Personal Finance Problems

The story in this article from ABC news about people having trouble with subprime mortgages reminds me of me. Well, except the subprime part. This is exactly how I got into trouble when my business wasn't generating enough income, I'd rack up the credit card debt. It finally caught up with us.

Saturday, September 13, 2008

Be Wary of Credit Card Tactics

It's too late for me, but do check out this article, The Evil Strategies of Credit Card Companies, which details some of the tactics credit cards companies use that get people into trouble. My problem was the increase in interest rates--not just for a late payment, but also if a problem with a completly different creditor shows up on your credit report. If it looks too good to be true....well, you know.
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Friday, September 12, 2008

Polly's Pledge

I will do one thing a day to improve my financial situation.

Today maybe I will file overdue reimbursements for my volunteer expenses. I think there may be a couple of hundred bucks in it for me.
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Thursday, September 11, 2008

Bravo Bank of America

Photo of Bank of America ATM Machine by Brian ...Image via Wikipedia As I mentioned yesterday, I have an alumni affiliated Bank of America credit card. I used it for business, my business failed, I made some stupid mistakes, and my rate skyrocketed.

Today, for the first time in months I talked to a helpful, competent and compassionate account rep who put me on a 5-year payment plan and reduced my interest rate from almost 30 percent to 10 percent. Woot!

Of course there are pluses and minuses here. This was one of those bait and switch cards: 0% introductory balance transfer rate with stiff interest penalties for late payments or going over your limit. (Please don't ask how I know this). I've learned you have to be a lot more organized than I am to make it worthwhile.

And this payment plan is only available if they close my account, which puts (another) black mark on my credit report. (I'm thinking that at this point it couldn't get much blacker, but that's a thought for another day.) And, if I can come up with and additional $168 sometime over the next 6 months, they won't report it as being "closed by lender". (Doesn't that sound like extortion or something? Is that kosher to ask for payment to preserve your credit?) So I have 6 months to get over my fear of looking into my credit report, which I know can't be good.

Polly's Pointers

1. Persistence pays.

2. Beware of low interest rate teaser offers.
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Wednesday, September 10, 2008

Negotiating with Credit Card Companies

We've got a lot of credit card debt--much of it a holdover from my business--more about that in a later post.

Until my husband's job loss, we were handling it pretty well (I thought)--taking advantage low-rate introductory offers to pay off higher rate debt, and making far more than minimum payments.

BUT, then I mistakenly used the wrong credit card for a purchase and went over my limit by $9. My interest rate skyrocketed. I didn't notice, because I pay my bills by online bill paying through my bank so I don't forget one. My minimum payment shot up, and the scheduled online payment fell short. So, my interest rate went up again!

Now, my interest rate on this credit card is close to 30 percent, and I was no longer able to meet the payments. I missed one or two. When I belatedly discovered the interest rate I was paying, I called customer service to explain the situation and ask for a rate reduction. I had been succesful in the past getting rate reductions if I was occasionally late on a payment. Not this time.

The collection department started calling. I called the company several times to try to negotiate a rate reduction, to no avail. I was told that the only way to get a rate reduction was to contact a Consumer Credit Counseling Service (there are many) and work out a debt management plan. I did, and it wasn't a good solution for me (more on that in a later post).

Finally, last week, I got another in a series of phone calls from the credit card company. This time, the representative said that she noticed in my file that I had spoken to a number of individuals and had asked for a rate reduction or a payment plan, and that she was prepared to negotiate one for me. Then her computer went down, and we arranged to talk at a later time (this week.) I'll let you know how it goes.

Polly's Pointers:

1. Open your statements, even if you have automatic payments set up!

2. Keep communicating with your card issuer, even if one person says "no." Credit card companies have collections departments (whose job it is to get all the money now) and loss mitigation departments (whose job it is to get what they can from you).

3. Beware of low-rate credit card offers. They're great if you pay off all your bills on time, but if you get into unexpected trouble, they can be devastating. Read the fine print, and read it again when they send you notice of change in terms.

4. When transferring balances to a lower rate card, close the account of the higher-rate issuer. You don't want to have more open credit than you can afford. Do note, however, that a pattern of opening and closing accounts can make you less attractive to future lenders.

5. When closing a credit card account, make sure that the lender notes that the account was closed by the customer.

Further Reading:
Credit Card Companies Boosting Your Rate by Suze Orman
O% Balance Transfer Card Guide from Blueprint for Financial Security
Canceling a Credit Card by Gary Foreman
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Tuesday, September 9, 2008

Reducing Expenses: TV Unbound

Front view of a Series 2 Tivo unitImage via Wikipedia We don't have cable or satellite anymore. We ended our TiVO subscription, though we watched everything through TiVO for a number of years. These eliminations have saved us $80 a month--money we couldn't afford to spend.

Yet, we were able to watch the Olympics, the conventions, and our favorite TV shows--legally.

How? My husband likes to call it "TV Unbound." We have an extra laptop since I don't need it for business any longer. Through the network websites (ABC, CBS, NBC), premium channel websites (CNN, Discovery, Disney), and aggregator websites, we are able to watch almost any show we used to record on TiVO. The few shows that are not available for free are usually available for purchase through iTunes, and while we aren't spending ANY money on entertainment right now, it would certainly be cheaper to buy a show occasionally than to pay for satellite, cable, or FIOS TV service.

Our most used is Hulu, which is affiliated with NBC, but carries shows from other sources including golden oldies. We're introducing our kids to The Partridge Family!

We've been able to watch what we want, when we want for basically no cost. We can no longer fast forward through commercials, but they are shorter and less frequent then on broadcast TV. We can still pause the program to talk to each other at our convenience, which, in my opinion, turns TV watching from mindless activity to a social event.

After all, the down-trodden and debt-ridden may need to escape more than your average bear.

Polly's Pointers

1. Look at your TV services and call your provider to see if they can lower your rates by packaging with internet or phone service.

2. Consider a Digital Video Recorder (DVR) card for your computer so you don't have to pay monthly service fees for time shifting to TiVO or other DVR services.

3. Eliminate channels you never watch.

4. Consider ditching premium TV altogether!

Since this post was published, we've changed our thinking about saving money on TV service. See how here
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Monday, September 8, 2008

American Express, give me a break!

I was on a business trip last week. I got to my (prepaid) hotel. I tried to check in. My American Express card was declined. Oh, I thought, this must be related to their security policy. I hadn't been travelling much before I took this new job, so a month or so ago, Amex froze my account because they suspected unauthorized activity. When I called and verified the charges, they thawed it.

So, I used a debit card to check in, went up to my room, and called customer service.

Seems that even though my payments on this card are current (actually, I made the last payment before the charges were billed), they have capped my spending at $1000. Unfortunately, I had charged $1000 on the airfare and hotel room and conference registration for this trip.

So I found out painfully what American Express means by "no preset spending limit." It means that they can change the limit at any time. According to Joseph #445i82 (not his real ID), because I had a history of late payments, they will not allow me to charge more than that until I have paid on time for six months. I also found out that "Cardmember since 1984" means nothing, nada, zilch, if you've had payment problems.

How can I argue with that? I was very late on my payments when my husband was out of work. I have caught up. I now use this card (or was planning to) exclusively for reimbursable business travel so I don't end up driving up credit card balances and using the reimbursement money for living expenses. I guess I need a plan B.

Polly's Pointers:

1. Submit expense reports for prepaid business travel as soon as they are charged--don't wait until after the trip. You can do another expense report for cash expenses when you get back.

2. Late payments have a lasting effect. :(

3. Try to get a company charge card so business travel doesn't affect your personal finances.

4. Always have a backup credit card.
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Sunday, September 7, 2008

The Most Embarassing Day of My Life, Or, Everything You Never Wanted to Know about State Tax Wage Levies

I did the wrong thing. My business wasn't generating enough income. I didn't set aside money to pay my state and federal taxes. I borrowed money from one retirement savings account and took early distribution from another (and paid penalties) and used the money to pay some of the taxes, but it wasn't enough.

I got lots of letters from the Departments of Revenue (DOR). I didn't respond to them, because I didn't have the money to pay the back taxes. I intended to someday, but with dwindling business income and an unemployed husband, I didn't even have the money to cover our mortgage and living expenses, let alone pay the overdue taxes.

I took a new job working at a small, family-owned business. The head of human resources is married to the owner and founder. After I had been there a few months, she called me one day. "Polly, I need to meet with you." That's kind of like hearing from your significant other, "Honey, we need to talk." Nothing good can follow.

In the meeting, she told me of the notice she received from the state DOR that they would be garnishing 25 percent of my wages until the back taxes were paid.

She was almost as embarrassed as I was. She said she'd never seen this in the 25 years the company has been in business. She also said, "This is between you and human resources." I don't know what that meant. I still wonder if the company owner knows about this. (Oy.) She couldn't have been nicer. She had no choice but to follow the law.

I contacted the state DOR collections office and after being misdirected twice, hung up on once and navigating voice mail purgatory, I finally got through to someone who agreed to release the levy and set up a payment plan.

The collections agent at the DOR said she could not set up a payment plan until I filed my 2007 tax return. (I had filed a request for extension, not realizing that the automatic extension is denied if you owe back taxes!) Over the weekend, I got my act together and filed my federal and state returns and sent them to this rep's attention. Unfortunately, the next payroll had already been processed, so I the levy was in effect.

The rep had said she would be sending me forms to set up automatic withdrawal from my bank account. I asked if I could download those from the web, but she clearly said she'd have to send them. This was now about two months ago. I've never received those forms. I've tried to go to the DOR website and their telephone payment system to arrange a paymnent plan, but I get a message that my wages are being levied so I'm not eligible. The good news is that the wage levy has removed. The DOR voice mail system does not allow me to phone the collections department directly. I need to dig out my notes from our conversation to find out if the rep gave me a direct line.

Do you need to know a little more about wage garnishments or levys for overdue tax payments? Start here: Small Business News.

Polly's Pointers:

1. Be careful googling for information. You are likely to find a lawyer or other advisor who will be happy to charge you for removing the levy. You may not need one.

2. Call the number on your last notification letter. See what you can work out. You will pay interest and penaties until you are paid off. Don't do what we did.

3. Don't ignore the letters.

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Saturday, September 6, 2008

Welcome to Economic Crunch

Hi, I'm Polly Poorhouse. You probably know me. You may be my boss, my cubicle mate, my kid's teacher, my neighbor, or my babysitter. Or maybe we sat next to each other on an airplane, on a speaker's panel, or in church choir. You may have bought something from my husband's store, or chatted with me at the dog park. Maybe we've met in an online forum or at an arts or library event. Did we go to grad school, college, or high school together? Maybe you have been in one of the graduate classes I've taught.

But you probably don't know some of my secrets. Like I'm one of more than 700,000 Americans who received a foreclosure notice in the 2nd quarter of this year (or so says RealtyTrac). Like I have a close relative that is homeless. (They are harder to count, but there appear to be close to 700,000 as well according to the 2007 Annual Homeless Assessment Report conducted by National Alliance to End Homelessness).

How did this happen to middle class, intelligent, well-educated people?

Well, we obviously screwed up. I got laid off--three times. My business failed, leaving me sadled with unpaid debt and unpaid taxes. My husband lost his job. My relative has an undiagnosed anxiety disorder. Yes, we are part of Phil Gramm's ("nation of whiners") people who dug ourselves into holes and are having tough time grabbing on to those sliding rocks to get out.

We have told a few loving friends and family members of our situation, but not our neighbors, colleagues, or casual acquaintances.

We are lucky in many ways. Despite the financial stress, my husband and I have turned to each other for comfort and support rather than away from each other in anger. Our wonderful children are adjusting to life without piano lessons, new clothes and school supplies, and toys. We have each found new jobs, although combined they do not pay enough for us to erase our debt in the short term. We will be OK. But the journey is a bear. Just when we think we have dodged one bullet, another zooms towards us.

This blog will document our journey back to economic stability. I'm not looking for advice. But I know we are not alone. Maybe our story can help you.

With frugal fondness,

Polly Poorhouse

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