Economic Crisis

[LaughingWater]

And yes, Lori, I DO inject a lot of emotion in this post because there are days that I am coming home and I just want to hug my kids a little closer after seeing yet another American middle class family's life in shambles.

Understandable, as it is frightening.

It was just an observation on my part. I personally try to remain as objective as possible in discussions just because I don't want emotion clouding things ~ things I may miss, and things I may assume incorrectly. I don't always manage it though. Heh...I remember one (childless!) dude on a yoga forum once brought up American mothers and how incompetent we are ~ I went nuts. All clear-minded objectivity flew right out the window.

 

[SirenSongWoman]

I have heard, and maybe others can confirm or deny, that signing up for credit counselors such as these are almost as rough on your credit as filing for bankruptcy. They do assist in negotiating lower interest rates and eliminating the collection calls, setting budgets and building money management skills, etc... but I have also heard that they don't really do much more than you could do with a few well-rehearsed calls to your creditors. just be careful!

IMHO for the majority of us who have had to rebuild from a financial crisis, there were many other extenuating circumstances that caused us to stumble (divorce, medical bills, etc) other than not being able to balance a checkbook or use credit responsibly.

http://financialplan.about.com/cs/creditdebt/a/CreditCounselor.htm (see last paragraph

My credit counselor was a young, moronic twit who made the mistake of condescending to me in a way that, if I'd had less self-control, would have resulted in a throw-down. In the end he gleefully exclaimed he could save me (drumroll, please) "One Hundred Dollars Per Month" to which I responded, equally gleefully "Bankruptcy it is!" You should have seen the look on Junior's face! Then he persisted in a one-way argument in favor of his Debt Management Plan (later admitting I actually don't qualify for a DMP... I didn't ask why because, by that point, I wouldn't trust that guy in any capacity). He then asked me to wait while he printed up some documents and proceeded to frantically type for about three minutes. I waited and waited, wondering what the Hell he was up to, then I picked up my purse, pulled out my keys, and he excused himself. He practically ran out of the room and I stood up to go. Then he raced back in with documents for me to sign and I asked what the papers were for (since I wasn't going to deal with them at all). He acted like it wasn't anything so when I read "Debt Management Plan" and I asked "I thought I didn't qualify" then Junior got all Papa Bear on me, speaking each word with great emphasis, very slowly, in a fragile attempt to make me feel stupid (an old trick that doesn't work when a kid tries it on an adult, proving his youthful inexperience): "Well...IF. YOU. LOOK. CLOSELY. AT. NUMBER. #3..." I said "I don't know what this is and I'm not signing anything" and I slid the papers back across his desk and turned away, as he slammed files and huffed angrily. Oh yea, just the kind of guy I want messing with my money. Oh, and did I tell you he mentioned "coupon clipping"? Swear to God. I was half-tempted to ask "By the way, what are you? Twelve?" I'm holding on to his name and information in the event my identity is EVER stolen or anything strange ever happens to my finances. That's how much I trust the little twit.

So I'm meeting with a highly recommended bankruptcy attorney next Tuesday. He could have met with me today but, as is still true all over half of central Ohio, their power is still out after the huge hurricane-related windstorm of last Sunday. I just know there's no way I'm giving up my house or my car. I'll let you know.

By the way, thanks for the encouraging words about most bankruptcy's being the result of personal disaster, since that's what ultimately did me in. However, for years, my employer made me work 12-hour days against my will (now I grab any and all overtime whenever it's offered). If I had had better sense back then, I would have paid off all my debts long ago, before the surgeries and the accident. Hindsight is a b*tch.

 

[carres1973]

My credit counselor was a young, moronic twit who made the mistake of condescending to me in a way that, if I'd had less self-control, would have resulted in a throw-down.

By the way, thanks for the encouraging words about most bankruptcy's being the result of personal disaster, since that's what ultimately did me in. However, for years, my employer made me work 12-hour days against my will (now I grab any and all overtime whenever it's offered). If I had had better sense back then, I would have paid off all my debts long ago, before the surgeries and the accident. Hindsight is a b*tch.

I am so sorry you had a bad experience. I am currently enrolled in credit counseling which, if I had to do again, I wouldn't.

How very true about hindsight! If only we knew then what we know now...

Carrie

 

[SirenSongWoman]

Carola, I don't think Nicole suggested that any of us invest right now. It was a general statement. You both agree actually ~ if you have money laying around, this may be an opportunity. That's all.

I wouldn't say investors with that extra cash think everything is "hunky dorry" either.

Is it me, or do you inject a lot of emotion into your posts?

Yea, I think you're both in agreement but are seeing it from different angles. I think Nicole is thinking simply that, if you have a retirement account at work that's made up of mutual funds, DON'T PANIC (at least if you're not near retirement). I have at least 20 years 'till retirement so I'm not panicked (yet) about my postal thrift savings account, though I seriously doubt I will EVER be able to retire. But, in my situation I certainly wouldn't be on a stock fund buying spree (I just hope the fund managers know what they're doing). I don't think Nicole was suggesting those of us holding onto our bills until NEXT payday find money and go out and buy stocks. But we're all really touchy right now. You, Carola, are on the frontlines, seeing the pain first hand (the way I'm dealing with it on a personal level) so I know the burden of so many other people's suffering is with you when your head hits the pillow at night. That's a lot of suffering to carry and it results in a lot of anger (believe me, I know). Remember when Americans NEVER discussed our private money woes? Now EVERYBODY's talking. Monday night, a co-worker who lives way far away from central Ohio told me he and his wife can't get anyone to buy his house so he can't move closer. He's an award-winning bass fisherman, on the side and he has to sell his boat because of his own fiscal crisis. This guy makes a lot of money and it's not enough anymore. All I had to do was mention my money woes to a group of women in the locker room and IT ALL CAME OUT. I heard about everyone's credit crises and bankruptcy's. Now, everyone talks about it on the workroom floor. I and all my co-workers have become one big information-sharing community with lots of actual useful information. I work in a politically conservative place and, being in the minority, I have to tread carefully. But I can tell you that there were issues I used to care deeply about that, in light of the much more grievous problems this country is facing, are trivial. All I care about is getting our country and our people (and, in fact, the whole world) out of this huge, fat mess we're in and I'm willing to try ANYTHING and EVERYTHING in any combination that might work. The only thing I fear is staying the course.

 

[1gruntgal]

Remember when Americans NEVER discussed our private money woes? Now EVERYBODY's talking.

This is so true! I have to thank you girls really, although it is a shame that anyone has to go through this, it's a great comfort to feel we're not alone. We just entered a DMP. I'm curious why people are saying that they wish they hadn't? I'm letting them handle the bigger bills & working w/my mortage company (IndyMac *gasp*) on some hardship stuff for our mortage.
I would be interested to hear what they do for you in a bankruptcy case. Not that I am thinking about that in my situation, but it's good information to have.
I hope that we can all continue to share our common experiences here.

BTW: It took me 2 hours last night to shop off my grocrery list w/coupons but I think I did pretty well!

 

[horseshowmom]

I agree that although it's so unfortunate that so many are struggling, it does help to know you aren't alone. Anytime we've had money issues I always believed I must've been doing something terribly wrong or that I was just irresponsible, stupid, whatever. Now it is so clear that although some people have probably made mistakes ~ it just doesn't take much for an economic collapse on a personal level. If the *professionals* can't get it together, what hope does the average American have?

 

[hiitdogs]

Just to clarify, I am not saying pull your money out of your 401ks, mutual funds and investments. 401k are terrific, your 401k may take a hit for now, unless you are retiring this year or next year you are in it for the long haul, over time, provided the manager of your 401ks diversifies and doesn't make solely high risk investments you will be good in 5, 10 or 15 years. Don't touch it!!!

Nicole didn't say don't panic, Nicole said now is a terrific opportunity to buy. I agree with that, provided this is money that you can afford to lose or that you have as "play money" or provided it is a long-term plan with money that you HAVE.

I am contending that the people who are struggling to make their payments on their credit cards or have credit card debt should make those credit card payments and pay it off. Should they take a portion of their income and save, sure they should, in relatively safe investments. Money that they can access if the crap hits the fan for them.

I am contending that people who have $3 to put in their tank to get to work may get the wrong idea with "general" statements of now is a good time to buy.

If you have credit card debt at an interest rate of 29 % you will have to invest in some pretty high risk investments to make over and above those credit cards. But people have taken general investment advise and run up their credit cards to invest. That is my problem with "general" statements.

Standing where I am standing I know that those "general" statements have ruined lives. I have no personal issue whatsoever with Nicole, I think she is a lovely lady and a great Catheite. However, I do have an issue with her statement because where I am standing I am trying to put people's life back on track who listened to "general" statements.

So back to me being emotional. Yes, yes, yes!! I have made a choice not to dance with the big wigs anymore. My choice is to help people who are going through hard times. And there is no other place I want to be.

Although if you ask my DH now we are hanging on by a VERY thin thread, and we are!

 

[SirenSongWoman]

Bless you, Carola... but I have another question.

Okay, remember how I said the interest rates on my credit cards jumped from around 9.99% to 28.9% (and yea, there is substantial debt there) and how I'm meeting with a bankruptcy attorney next Tuesday? Some co-workers have suggested I use my matched-fund retirement account (sort of like a 401K) to pay off the credit cards but it wouldn't be for a small debt, which is what most of my co-workers dip in for. I'd have to pay it back, slowly, but I've always heard you should never touch your retirement. BTW, I'm 47 and single. I think I'd be better off going with bankruptcy, if I can keep my house (cheaper than rent) and car (can't get to where I work without it). Input?

BTW, both of my carpal tunnel surgeries last year were on Federal Worker's Comp and I only recently heard I'm supposed to apply for a "Scheduled Award." Do you know what that is?

 

[horseshowmom]

Continue gathering info about all your options. There are so many things you are *never* supposed to do, but most of us don't consider them unless we have NO OTHER option.
My understanding of the 401k type loans are that they are much lower interest rates, deducted automatically from your check, and wouldn't affect your credit.
On the other hand, we can all use new beginnings. And I don't understand how the old FICO scores are going to be used in the future b/c there are going to be hundreds of thousands of people with *bad* credit, foreclosure, bankruptcies....something's going to have to change or the banks won't have anyone who can qualify for loans.
Good luck in whatever decision you reach!
Becky

 

[dbelden1]

Okay, remember how I said the interest rates on my credit cards jumped from around 9.99% to 28.9% (and yea, there is substantial debt there) and how I'm meeting with a bankruptcy attorney next Tuesday? Some co-workers have suggested I use my matched-fund retirement account (sort of like a 401K) to pay off the credit cards but it wouldn't be for a small debt, which is what most of my co-workers dip in for. I'd have to pay it back, slowly, but I've always heard you should never touch your retirement. BTW, I'm 47 and single. I think I'd be better off going with bankruptcy, if I can keep my house (cheaper than rent) and car (can't get to where I work without it). Input?

just my additional 2 cents: Unless things have changed, should you decide to file bankruptcy you should be able to keep what ever you can comfortably afford, but the whole thing about filing bankruptcy is that you can't afford everything. House, car, even bank cards/credit cards that are in good standing and interest rates are not too high. I believe this is at the discretion of the agency that approves the bankruptcy and it's contents (at least where I'm from), but you will find out all that from the atty.

Borrowing from your 401K-type company retirement plan may sound like a good idea, and I admit I have done it for one thing or another long ago... but in doing research on the subject recently the last time I thought about it I did not do it because "experts say" that while you are borrowing your own money, and paying interest to yourself, the potential for lost ROI (return on investment) of what you borrowed might be more than what you are paying yourself back at usually substantially lower interest rates. When you borrow from yourself, your money does not work for you in your investments portfolio. does that make sense?

ALSO, the risk of borrowing money from your 401K is that should (heaven forbid) you ever lose your job your entire balance is due and payable, and they take it from your last check. While it may be an easy repayment plan now, deducted from each paycheck, in these uncertain times with the unemployment rates as high as they have been in many decades, it is another thing to consider before taking the 401K borrowing plunge.

Bankruptcy may seem like a good idea now, but it is definately a stigma (that follows you for 10 years) and every time you will do something in the future, but sometimes it is the only option. You just have to do what is right for you. It can't hurt to meet with the attorney and then weigh your options. I would probably not ask the attorney though... if you don't file bankruptcy he doesn't make any money either...

 

[icumom]

Carola - I say it again - you are brilliant, articulate and merely screaming that the Emperor - as the SEC, Congress,Sentate and President Over-his-head would like to be, has no clothes! Deregulation to the degree it has been enacted has enabled a FEW evil, greedy leaders of major corporations to swindle our pensions, insurance, futures with their actions.

This is NOT the great Depression - we were a manufacturing nation then and didn't have ourselves naked on the bed of abusing Saudi's or seductive cheap labor Chinese, - we are a world wide, interdependant economy now...

If Trillion dollar AIG folds without a bailout - you think the taxpayer is paying NOW, take a LOOK at what AIG has in their portfolio and the bail out is cheap!!!

 

[LaughingWater]

Nicole didn't say don't panic, Nicole said now is a terrific opportunity to buy. I agree with that, provided this is money that you can afford to lose or that you have as "play money" or provided it is a long-term plan with money that you HAVE.

There ya go. That's how I took her post. If someone didn't totally understand that, a little clarification was all that was needed. My point...no need to get upset to any degree. Life's too short.

*Edited to add: I don't want to seem like I'm beatin' a dead horse. I'm actually a Ruffled-Feather Smoother.
I'll shut up now.

 

[SirenSongWoman]

Continue gathering info about all your options. There are so many things you are *never* supposed to do, but most of us don't consider them unless we have NO OTHER option.
My understanding of the 401k type loans are that they are much lower interest rates, deducted automatically from your check, and wouldn't affect your credit.
On the other hand, we can all use new beginnings. And I don't understand how the old FICO scores are going to be used in the future b/c there are going to be hundreds of thousands of people with *bad* credit, foreclosure, bankruptcies....something's going to have to change or the banks won't have anyone who can qualify for loans.
Good luck in whatever decision you reach!
Becky

What bothers me is that nobody's keeping track of how EXCELLENT some people's credit was BEFORE the sh*t hit the fan. If someone could see my entire credit history they'd see that my credit report was platinum up to an specific point in time: Soon after I had my first (carpal tunnel) surgery. I think that should count for something but I doubt it will. Lord, I'm not even sure why it matters to me anymore. There's actually a kind of sick/funny story about the car accident that happened after my second c.t. surgery: I'd only been back to work about a month-and-a-half when the accident happened. As my car was careening across four freeway lanes, heading driver-side door towards the cement barrier in the middle of the freeway, I had only one thought, and it wasn't 'Oh my God, I'm going to die.' It was 'Oh my God, I'm going to be off work AGAIN!'

When I bought my house I did it counting on this run-down, historic neighborhood turning around, resulting in a great investment. With this economy I wonder if that will ever happen but, at any rate, living here has been educational. Literally 1/3 (probably more like 3/5) of the people here have never held a job and have lived their whole lives on public assistance. I'm still a Democrat but I changed from a liberal to a moderate within three days. The people here live the lives their parents lived, freeloading off the taxpayers, and their children will do likewise because nobody, at the national level, is looking at Welfare and saying "Hey, wait a minute. Nobody in this entire family has ever worked... Time to drop their a**es off The Dole" And if they did, the people would just sell drugs because NOBODY's going to make THEM work, dammit. I have neighbors who sit on their porches all day long (a co-worker calls them "Porch Dwellers"), drinking beer and having big fun... until dark, when the drunken arguments start, resulting in more tax dollars being wasted with visits from cops, EMS, and the fire department. The lady who used to live across the street attempted suicide at least every other week while we, the taxpayers, paid the bill. It bothers me that, once I apply for bankruptcy, I'll be lumped in with the Porch Dwellers who live their lives, leeching off hardworking taxpayers. My stigmata.

 

[mackenzie]

There is a simple solution to this mess. Prayer.

 

[SirenSongWoman]

There is a simple solution to this mess. Prayer.

Trust me, dear, everyone's praying. But the mess this country is in is our own doing and I believe God expects us to get ourselves out of the messes WE create. One way or another, we're doing it to ourselves by the choices we make individually or as a mass, if you really think about it. And I've been thinking about my part in all this a lot. I think about all the signs along the way, the warnings, to take care of business when I had the chance. But I ignored the signs and now I have to live with the mess I've made. The overall economic crisis, on the other hand, I believe was a result of bad choices in the voting booth. The signs are there again but, again, people are ignoring them. How many chances do we get to get it right?

 

[hiitdogs]

There is a simple solution to this mess. Prayer.

Not sure praying is going to do the trick. After all our current president prays daily and on major decisions. I am not sure that got us anywhere good

SirenSongWoman, I think you have gotten pretty good advice. Just a few thoughts I wanted to add.

I am assuming that you are contemplating to file for bankruptcy based on your credit card debt. Keep in mind, congress passed an amendment to the bankruptcy law in 2005 which allows the credit card company to challenge the discharge of debt in certain circumstances. The liklihood of your credit card company to file an adversary proceeding increases if any of the following applies:

• Increase in credit card usage shortly before filing
• Newly issued card
• Large cash advances in months before filing
• Use of the card for recent travel or vacations
• Pattern of borrowing on one card to make payments on others
• Exceeding credit limit
• Using card when unemployed or without reasonable belief that the debt can be repaid
• Large balance at filing
• Charges were made after consulting a bankruptcy lawyer

There are drawbacks on borrowing out of your retirement account and I understand what the experts are saying that you are taking out money that could earn you significant interest over the years. That being said, I think there are circumstances where it is a good choice, if the numbers make sense.

If you are paying 29 % in interest on your cards and the interest for the loan out of your retirement account is significantly lower (I think we paid 8 % on the loan out of DH's 401k) it may be worth it. There is a calculator on smartmoney.com that may help you http://www.smartmoney.com/debt/calculator/index.cfm?story=borrow401k

The other thing to keep in mind, if you are filing for bankruptcy, it will effect your credit score and your ability to get a loan or mortgage in the future. Even if you will be able to get a loan after a couple of years you will be charged a higher interest rate. I would factor this into your decision of borrowing funds from your retirement fund.

I would however consider your work situation, is there any chance that you will lose your job or want to leave your job anytime soon? My DH took a loan out of his 401k and 3 months later he was laid off If you leave the company for whatever reason the money that you borrowed becomes due within 30 days. If you can't pay the money back, it is considered an advance/early withdrawl and usually carries a penalty (ours was 10 %) and you have to pay income tax on it and it is money that you no longer have in your retirement fund.

If you ask my personal opinion, if I were you I would avoid bankruptcy. However, this is only based on what you have shared here, there may be other circumstances that I am not aware of.

Hope this helps! Good luck!

 

[mackenzie]

I'll make a contribution to bail these companies out. Will $5.00 do it?

 

[mackenzie]

Seriously, I don't mean to make light of this. I worked for a Savings & Loan in 1989 when they crashed. It's not fun. I found out about it on the evening news. Went to work the next day to be greeted by a government official and got fingerprinted and bonded. The teller lines were very long for several days because customers were closing out their accounts. It was very scary and something I will never forget.

 

[baylian]

A question

is Carola in real estate or social work? I seriously have not grasped which? I really mean that question. I did not understand the helping middle class families.

I would take her postings with a much more open mind if she would not hammer crap so hard down your throat and be so caustic - like the comment on prayer.

Dow closed up 410 everyone.

Any thoughts to Bidens comment about how the wealthy should be more patriotic and pay more taxes? WTH?

 

[hiitdogs]

is Carola in real estate or social work? I seriously have not grasped which? I really mean that question. I did not understand the helping middle class families.

I would take her postings with a much more open mind if she would not hammer crap so hard down your throat and be so caustic - like the comment on prayer.

Dow closed up 410 everyone.

Any thoughts to Bidens comment about how the wealthy should be more patriotic and pay more taxes? WTH?

I'll explain it just for you, Baylian. I am in real estate and I volunteer to help people who are on the brink of losing their homes or are going through rough times financially. I realize that may be an unfamiliar concept for you, to volunteer time to help people.

Hammer crap down your throat? Taken a look at yourself lately? I am not the one calling people opportunistic pigs.

The prayer comment was a joke, just as I thought Mackenzie joked. If you didn't joke Mackenzie, and I offended you I apologize.