Financial thoughts

When you lose your job, it’s easy to dig yourself into a financial hole. That’s what happened to Laurie Ferrer and her husband, Carlos.

It was a deep hole: $40,000 in credit card debt, with other bills piling up. When the bill collectors started calling, the couple worried they might lose their home in Fairview Heights.

Now, Laurie has a message for those who find themselves in a similar fix. As easy as it is to fall into a financial mess, it’s possible — with some discipline — to climb out again. And it’s quite a relief when you do.

Laurie and Carlos have four kids. She’s a managing nurse; he’s a technician in a pharmaceutical firm. They live in a nice but not fancy house on a quiet suburban street.
A few years ago, they were earning about $70,000 between them. Like most Americans, they had modest savings and lived paycheck to paycheck. "We were doing OK," Laurie says.

They were a little nonchalant about their finances. They carried balances on their credit cards despite the hefty interest charges. "If the minimum payment was $100, I’d pay $150." They liked take-out food and restaurant meals. But their major extravagance was to send their children to Catholic schools, at $600 per month.

"Back then, we had no budget. If we wanted to do something special, I’d work a couple of shifts of OT. We were not really balancing the checkbook," she says.

Things went fine as long as the paychecks kept coming. Then, in 2004, Carlos lost his job when his employer closed. He went without work for six months.

That began their long slide. Carlos used his severance money to pay off his car loan. "We had his car, but we still owed on the house and a few credit cards. We still had to pay utilities," Laurie says.

Despite their growing troubles, the couple were determined to give their children a Catholic education. "I ended up having to get a loan to pay tuition," Laurie says.

Groceries went on the credit cards, and their balances began building. Laurie and Carlos started making only the minimum payment. Then they began skipping some bills entirely to pay others. "It got to, ‘Which one is going to be the lucky one today?’"

Credit card companies hiked their interest rates as high as 32 percent as they fell farther behind. Carlos got another job, which helped, but he took a pay cut. The bills kept piling up. Relatives offered them money, "and that made us feel horrible." There was a Christmas with no presents.

In 2006, Laurie gave birth to her youngest child. The baby was cleared to leave the hospital, but there was a major power outage that affected their home and the baby needed a special electric light to treat jaundice. The medical staff recommended they go to a hotel, but they couldn’t pay for it.

In 2007, payments on their adjustable mortgage jumped $200 a month, and they began to fall behind.

"I started getting stressed out," Laurie says. "There were lots of arguments about money personal loans for bad credit. I’d say, ‘Why do you need that six-pack of beer?’ He’d say, "Do you need those new panty hose?’"

People like Laurie and Carlos are candidates for a Chapter 13 bankruptcy, says T.J. Mullin, one of the region’s busiest personal bankruptcy lawyers. Chapter 13 is a "wage earner plan," which can allow a family to keep their house and often their cars. Families pay a small part of their credit card and other unsecured debt over time and the rest is simply wiped out.

In the end, Laurie and Carlos went in another direction. Early last year, during one of many sleepless nights, Laurie got up and began cruising the Internet. She found Clearpoint Financial Solutions, a credit counseling agency.

Such groups help families set up a budget. Then they mediate with creditors, often reducing interest rates and penalties. Clients send monthly payments to the counseling service, and the service pays the creditors. Clients usually end up paying their creditors in full.

That seemed a fairer option to Laurie; she’d taken on the debt, and she wanted to pay it back.

Such services aren’t free; Clearpoint charges a maximum of $35 per month for a payment plan, although the agency says it will serve clients who can’t pay.

Consumers have to be careful in picking a credit counselor. There are shady operators in the business who overcharge for bad repayment plans. Suzanne Gellman, a consumer economics specialist at the University of Missouri’s extension service, recommends choosing services that are members of the National Foundation for Credit Counseling (www.nfcc.org), which sets standards for membership. Clearpoint, a national group that bought the old Consumer Credit Counseling Service of St. Louis, is a member.

Laurie Ferrer is a poster person for Clearpoint. She says she wrote a testimonial for the Clearpoint website and the company paid her $3,000 to use her picture in their promotions. You may have seen her face on the side of a bus.

Her credit card companies knocked the interest rates on her debt down to the 7 to 11 percent range, which she can afford. Just as important, the counselor taught her how to budget and cut spending.

"Initially, it was hard. I wasn’t used to having to figure this out," she said. "Now, everything I buy is a necessity. I shop coupons and sales. I have to be very diligent in looking in newspapers ads for food I normally buy. A couple of weeks ago, they had soup on sale, so I got 10 cans. For my kids, eating lunch at school was like $80 a month." So now they brown-bag it.

She pays $1,000 a month on her debts. With what’s left over, she’s building a savings account. Her credit card debt is down to $32,000, and she should be free of it three years from now.

They’ll celebrate that day. But Laurie, 41, says she’s happy now. "Being able to sleep at night is enough," she said.

Source