BEFORE YOU GRAB THAT LIFESAVER...
The second of three articles on how to avoid personal bankruptcy, showing how my thinking changed from that of a man who was drowning to that of a man willing to trust God
Just to recap, I've got a one-man business called Creative Sharks that designs advertising and marketing materials for businesses of various sizes. In January of 2003, it all but dried up because of the recession. At that time, I owed about $80,000 in credit card debt, and around $20,000 on my car. I had been making a decent living; but it was a lot easier using credit cards to run my business than depending on God. Trusting Him meant having to stop trying to figure things out for myself.
The year before that, I had realized I was making very little progress on my debt, and was, in fact, falling further behind, regardless of how much I made. Realizing I needed help, I had gotten involved with Consumer Credit Counseling Service. But a year later, I still wasn't progressing because of the interest the credit card companies were charging. So, when the bottom fell out of my business, I could no longer make the payments and had to terminate my relationship with CCCS.
I also had to call my credit card companies to explain what had happened. At first they seemed somewhat understanding. But as time progressed, and I still hadn't sent them any money, they became belligerent. Over the course of the next year (2003), I made no credit card payments at all. And during that time, they became more and more impatient and aggressive in their language. Of course, they all differed in their attitude, but the worst was American Express. They were also the only company who hadn't joined my CCCS payment plan. I got the impression they felt they were too good for that.
I was very honest with my creditors. (I had nine credit cards starting out, two of which were American Express). I continued to express my desire to pay them, and my inability to do so. I had nothing to sell and no one to turn to for help. Usually, they acted like they understood and would call back the next month, hoping to receive something then. But American Express continually tried to get me to do things that were not in my best interest, like going even deeper into debt in order to pay them off. They were, in my opinion, a company without scruples.
Sometimes, I lost my temper with the companies, especially American Express; but I tried not to. I tried to be courteous, and always let them know that I was sincere about paying them back. As the year progressed, they moved my accounts from normal status, to collection agencies, and then to law firms. Most of the companies had a final, hardship program for people who couldn't pay or were struggling financially. They finally moved me into one of those. Even American Express had such a program, but they only mentioned it as a last resort. All of that took about a year.
The good thing about this final stage was that all the companies stopped charging interest at that point. They all set me up on a payback program in which everything I paid went toward the principal. And the best part was, they all wanted to negotiate the totals, most offering at least half off, with a couple offering two thirds off - but only if I could pay the balance in one-to-several payments.
The bad part about going into a hardship program was that it would affect my credit rating, but nothing like going through bankruptcy; which I had considered, but talked myself out of because, every time I went to this one bankruptcy law firm to discuss my options, they gave me a different story, depending on the person with whom I talked. I finally decided it wasn't the bed of roses they had originally led me to believe, and that, if I could just ride this thing out, I would be better off by far.
Since then, I've paid off all but $30,000 of my original debt of $80,000. My business got back on track in 2004, enabling me to make the payments. But the big key - the BIG key - was that I finally started trusting God instead of my credit cards to take care of me. I only have four of the original nine cards left. Two of them are still American Express; but even they eventually became agreeable. As a matter of fact, all the companies are agreeable now, and even allow me some grace if I have to decrease or miss a payment now and then.
Credit card companies act like they assume that if you don’t pay them, it's because you don't want to, not because you can’t; so they use whatever technique they think will intimidate you. After they've been through all their tricks and you still haven't paid them - or declared bankruptcy - they realize that you really can't pay. That’s when they start working with you. They really don't want you to apply for bankruptcy, and they don't want to take you to court. What they want is their money, even if that means having to cut a deal and only getting a portion of what you owe. But they will put you through the ringer to get it.
Here are some keys to keep in mind while waiting to get to that final stage of cooperation:
1- Let them know by your tone and words that you really do want to pay them, and that you are doing your best to find a way.
2- Let them know you're a hardship case. You might even ask them if they have a special program for hardship cases.
3- You may want to let them know you’re considering bankruptcy, just to buy time. If you do, they'll ask for the name of your lawyer. If you've already talked with one, give them that name.
4- Credit card companies (or any creditor) are only allowed to call you between certain hours. (I think it's 9 am to 7 pm, but I'm not sure. I was surprised at how narrow the window was.) Make sure they're adhering to that.
5- There's a certain phrase you can say to a creditor, after which they are not allowed to call you again. I forget what it is, but you can look it up on Clark Howard's web site. If you need the link, I can find out and send it to you.
The idea is that you're buying time until you can get into a position to start making payments - without interest - and that they start offering you deals. I don't know how long that will take for you, but it took a year for me. But, no matter how long it takes, don't make any payments until you're at that point - even nominal ones - because you want them to move you into that final, favorable stage. Don't declare bankruptcy; don't let them "write you off" (which means they don't expect you ever to pay, and hurts your credit even more); and don't make them mad so that they WANT to sue you, because they really don't want to unless you give them a reason.
As far as car payments, I went to the company financing my car and explained my situation, asking if they would renegotiate my contract. To my surprise, they cut my payments in half and reduced the interest from 10% to around 6.5%. But I had to let them know I was a hardship case. They, too, had a special program for that.
I think most companies want to work with their creditors as long as they realize they're not just trying to yank their chain.
Remember that there is a light at the end of the tunnel, and that God is allowing this to happen to you so you will learn to trust Him and get rid of the idols in your life.
I've learned a lot about myself, and God, during this experience; but I've also learned a lot about finances, credit card companies, human nature and communication.
God wants us to be faithful in the little things so we'll be faithful in the big. I wasn't being faithful, so He worked things out so I would learn to be. I'm grateful for that, because I really do want to be faithful in the things he has entrusted me with, as I'll bet you do.
It's a great university of life you're in right now. I know this may seem facetious, but enjoy it! One day, after you've thought about how far you've come, you'll consider this a very special time in your life.
If you ever need to talk, please feel free to call me. I appreciate the position you're in and am praying for you. I know God loves you and wouldn't have allowed this to happen if you couldn't handle it. Trust His wisdom, His strength and His love, and you'll come out on top.
Waitsel Smith, May 10, 2005
From an e-mail to a friend’s cousin who was struggling with debt and considering bankruptcy
Text and image © 2005 Waitsel Smith. All Rights Reserved.
For the next article in the series, "Learning to Swim...and Even Fly," click the link in the bottom right.
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