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Christopher
and Sarah Smith (not their real names) were not wasteful or
careless with their finances. In spite of having two children
and a single military paycheck, they were proud of having
excellent credit and very little debt. The military sent them
to Germany, and from there Christopher was sent to Iraq. Sarah
stayed in Germany with the family, receiving a high cost of
living allowance, separation pay, and—due to her husband’s
deployment in a war zone—hazard pay. When Christopher's term
in Iraq ended, the family was able to return to the states
completely debt free.
Initially
the family had few bills, but they had to find a stateside
home on nearly half the pay they had been receiving in Germany.
They also needed a second car as she could not be left at
home day after day with two boys and no transportation. The
mortgage, car payment, insurances, and utilities took nearly
all of their money; they began using a credit card for little
things—a few groceries here and there, clothes, school supplies,
emergency repairs on the second hand car, expenses related
to purchasing an older home. At first, the problem seemed
insignificant. When credit card interest mounted, they simply
consolidated onto a new credit card. They failed, however,
to destroy the old cards, and soon they had multiple cards
with minimum payments they struggled every month to meet.
A
Different Solution
The Smiths are a real family, but their story is unique. Christopher
realized that they were being forced to use the credit cards
for groceries because every penny of his check went to loan
payments and minimum credit card payments. Consolidating again
was not an option. His local banks advised him to seek bankruptcy.
Neither
Sarah nor Christopher was willing to consider bankruptcy.
Since they had not yet actually missed any payments, their
credit was still excellent, and most debt negotiators refused
to talk to them. They were told they had to be in default
before they could get help. Fortunately, the couple refused
to give up and found a solution in Credit Counseling.
Consumer
Credit Counseling
Credit Counseling works in different ways, but it is not bankruptcy,
or consolidation, and the company does not usually give you
a loan. In the Smith’s case, the attorneys contacted the credit
card companies and negotiated for both a lower interest and
a lowering of the principle debt. The Smiths pay the counseling
firm each month; when enough money has accumulated to pay
off one of the credit card companies, a check is issued and
the company receives the agreed upon amount. Christopher does
not pay the credit card companies directly. Instead, all money
is routed through the legal firm which protects the Smiths
against a company that might try to renege on an agreement.
The amount paid to the firm is far less than the total Christopher
was sending to the credit card companies on his own. This
allows the family to eat without using credit cards.
Get
Help Early
The Smith family is different because they did not wait until
they were in default to seek help. Ironically, it is more
difficult to get help if you seek it before completely losing
control, but it isn't impossible. Furthermore, when you seek
credit counseling before the threats begin, you will not only
save your own sanity but will also shorten the time period
that it will take to get out of debt. Use our friendly form
to answer a few questions and let us connect you with a credit
counselor who can help your restore your financial health.
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