Me My Debt and I
Posted on by Forest in Debt, Saving Money & Finances
Like many frugalists I am in debt…. It kind of throws the idea of being thrifty on it’s head and in many ways may make my frugal website seem less trustworthy…. However admitting my debt to you guys and girls will hopefully give you a glimpse into what drives me to keep living modestly and also what I am doing to ensure my future is not paved with the hell of debt forever.
Why Am I in Debt?
I won’t go into too much detail here but like many I lent a large sum of cash to some close people. This was borrowed in the form of loans and later credit cards I was expecting the payments for these to be made by the other people whom I was helping but the payments never came and I was legally stuck with the debt. During the first year or so of this I ignored the debt and just used credit cards to make the payments, expecting that the people who had borrowed the cash would start payment at any time soon and I could get back on the straight and narrow…… The payments never came and my financial situation meant that I ended up paying payments with CC’s and interest started to accumulate. 5 years or so on and through a spiraling pile of interest the debt has literally doubled. No doubt somewhere along the way I have added some of my own debt but essentially I have been living with the sick feeling that I owe a lot of cash that I never spent.
So what I am doing about my debt?
Late last year I cracked. I decided I would no longer hide behind the fact that I never spent the money and ignore the problem, something had to be done. By admitting to myself that this was now my debt and it’s very likely I will never get paid back it was an admission that this was my issue. My debt is in the UK so I searched around for the UK charity that helps people through debt and gave them a call. National Debtline were absolutely fantastic, they talked me through all my options and gave me example scenarios to help me make the decision about the best path for me to take. As far as I know these paths are pretty much the same for the United States and most parts of Europe. First option is self debt management, their website and helpline provides help along the way and sample letters to help you get every step right when contacting and dealing with creditors. Secondly there is a debt management plan. National Debtline has affiliation with two companies that will manage your debt problem absolutely cost free to you. They do make money but not from you. Thirdly you have IVA. Individual Voluntary Arrangements involve creating settlements and payments with your creditors for less than the debt owed. Lastly there is the dreaded Bankruptcy. However when explained this option is hardly as bad as the stigma attached and may only result in one year of hardship and stringent eyes watching over your accounts. I opted to go for the Debt Management Plan.
More About The Debt Management Plan
For my personal situation the debt management plan seemed like the best place to start. Requirements were basically that I had more than 3 people that i owed cash too, I had more than #100 spare to pay towards debt per month and that I had over £10,000 of debt. Luckily for me all my creditors are unsecured so the process here is slightly simplified. After it was determined that I was eligible I was sent a 14 page application pack. This pack basically asked for details of all debts and a personal budget sheet to determine how much could be paid to each creditor so that everyone was treated fairly. I also created a brand new bank account unaffiliated in any way with any of the people I owe money too. This ensures that extra payments are not taken against my will in the future. Then I wrote to each creditor explaining my situation and that I was seeking professional help. The base letter was supplied by National Debtline and is done to ensure all parties are informed and treated fairly. So now my application has been passed onto one of the affiliated companies. From this stage they will contact all creditors to inform them they are now dealing with my finances and hopefully they will deal with them from here on in. All debts should be frozen of interest and monthly payments will be set up that will be paid to the debt management company and then forwarded onto each creditor. If any of the creditors decide to take the matter to court then the company will help make sure that the judge rule in your favour. Apparently it’s extremely rare that you will lose against an unsecured debt case if you have followed correct procedure. One of the credit card companies has been hassling my my Mother as this is my holding address in the UK, however asides from this the process has been fairly hassle free up until now. Hopefully within the next month the plan will all be officially set up and I will be paying a low monthly payment to slowly pay off my debts, interest free. I will be paying for many years but at least it will not grow and if my financial situation changes I can wipe them out.
How Do I Feel About The Debt And The Resolution That I Am Following?
Unless you can detach from the idea of debt and rationize that it just numbers inside the big corporate machine then debt is an awful feeling. I hate the idea that my debt has come to this but the fact that i am doing something is extremely liberating and I have learned some serious life lessons. Never lend money if you can’t afford to lose it! Don’t ignore debt. Avoid borrowing on credit cards as the contracts are useless. You basically sign to say that they can change your interest (as they have with me) whenever they feel like it.
Life After Debt
I will likely be paying around £110 ($180) per month to the creditors from now on, but it feels very much like I am out of debt, however my life is different now and in some ways the debt has taught me something that will stay with me for my whole life. Living a less impactful and frugal life is a nice feeling. With less expenditure there is less pressure to earn the big bucks so you can kick back and relax a little more. I don’t eat Ramen noodles for breakfast, dinner and tea and I do makes sure I do nice things. In fact as I write this post I am on a train from Cairo to Alexandria…. of course I am riding 2nd class to save cash and will be staying in a very low budget hotel overnight. This trip will cost me very little money compared to how I would have done it 5 years ago but I will likely have a better time and come out of it much less stressed. My frugality and simple living will continue to play a large part in my life, I hope, no matter how well off I become. Debt can really be one of the best things that ever happens to you. Just don’t ignore it like I did and do something about it NOW. if you want me to write about anymore aspects of this in more detail or have any questions then don’t hesitate to leave a comment. I really would like to hear from you and I hope you are all doing very well. Take care, Forest.
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13 Responses to “Me My Debt and I”
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March 13, 2010
[...] blow it on the weekends and expensive items (By the way this is not how I got in debt, read my post Me My Debt And I for info on this). Now days I really have to think before hitting the town or buying the newest [...]
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May 20, 2010
[...] a countless list of other frugal bloggers I am n debt. You can read the details of why here: Me, My Debt and I, but in short I borrowed money for some other people and they never paid me back. The money was [...]
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August 3, 2010
[...] If you want to know more about why and how I am in debt see the post Me, My Debt and I. [...]
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Joe
21. Jan, 2010
Dude, I know exactly what you are going through. A couple of years ago the church I was going to was in financial trouble. They are very small and very frugal. They held two summer solstice events and went into debt pretty bad. They ended up going the use a CC to pay off another CC, and then somebody messed up and they ended up with a 21% interest rate on the card.
Then I came along on a shiny white horse and found that I had a CC offering me a 6 month 5% special. So I met with them, offered to cover the debt for 6 months with them making minimum payments to cover the monthly costs, which they did. Meanwhile hoping that they could get their credit rating improved, silly me. After the 6 months were up I went back to get them to take the balance back and lo and behold the person who had carried the card previously decided they weren’t taking it back.
So now I have been stuck with a $48K bill that I have added to my own debt, and as you pointed out likely will never see it back again.
So much for being the good Samaritan. I guess this qualifies as part of the learning through the school of hard knocks.
Hope it works out for you.
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dragonsue
21. Jan, 2010
Forest, it is so brave of you to admit all this so openly! And such a help to others in similar situations.
I too have lent money to a family member, my then son-in-law, who very soon after receiving my money, became my ex-son-in-law!
I too have been using the ‘ostrich strategy’, but after reading your story, I am now going to contact the National Debtline, and see what my options are.
Thank you.
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Melvin
22. Jan, 2010
Right now Im not in debt but Im not sure in the future. So I always prepare myself if that happens.
.-= Melvin´s last blog ..Your Guest Post was Rejected, What’s Next? =-.
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Forest
22. Jan, 2010
@Joe, Really sorry to hear that Joe…. Sadly you never graduate from the school of hard knocks… Just have to take the rough with the smooth.
@Sue, That’s excellent news that my post inspired something. I hope they can give you some useful guidance. Keep me informed….
@Melvin, thanks for the comment. If you are young (which I know you are) you NEED to rid that debt asap before commitments get in the way.
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Ruth - Web Career Girl
22. Jan, 2010
This is a great honest post, and the lessons you’ve learned are so important. Thankfully I have never been in that situation and don’t believe I ever will, because I feel as though I’ve also learned those lessons simply because of my partner and the situation some members of his family are in. This has taught him, and subsequently me, how important it is to watch what you spend. I am just trying to pay off my overdraft this year and then stay out of it.
Like you I live a very frugal life and sometimes I can’t believe how little money I need to get by! At times I get annoyed that I can’t go out and buy a new dress whenever I want, but I don’t need it and I always eat tasty food – usually cooked from scratch which isn’t expensive – and do nice things on the cheap. It is very possible!
.-= Ruth – Web Career Girl´s last blog ..Next Time I Won’t Be So Lucky (A Lesson in Backing Up Your Work) =-.
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Forest
22. Jan, 2010
Hey Ruth,
Thanks so much…. We should all be taught these lessons as children but I really feel the ideals of money and how to treat it are not passed down these days…. Money has become a worthless enigma and people don’t realise the evils until they are indebted to the corporations, governments or whoever they owe!! You can go to prison for not paying the government…. even if you have an excuse such as losing your job etc etc…. It’s a sad situation.
I really feel better for living Frugal and find it helps relieve so much pressure in every aspect of life…. Sure I want the latest apple product (they are announcing a new giant iphone / tablet computer it seems this month and I would love one!!) but I can easily live without this stuff and it’s all arbitrary… As the people in Haiti have just experienced, everything you own can disappear in a flash.
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LiveCheap.com
27. Jan, 2010
Forest, like this post for the honesty. I never bothered setting up loan arrangements with family since I always felt they were unlikely to be repaid. One of the downside to having a good job is that family members know it and they start stretching their hands out. Used to kill my wife, but then her family started stretching their hands out too. After a few years of late night bickering, we stopped “lending” and had to start saying no.
If a family dinner picks up dinner now I consider it a huge coup. And believe it or not, they actually do and a bit more.
I think the “coming to terms” aspect of your post is what a lot of people need to do in all aspects of their lives. I am dealing with one of those now and you can hide from it for years but eventually you have to grab the bull by the horns, even if it wasn’t your problem to begin with.
.-= LiveCheap.com´s last blog ..Debit Cards: Wolves in Sheep’s Clothing =-.
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Forest
28. Jan, 2010
@LiveCheap Thank you very much for your comment, it’s much appreciated. It’s interesting to suddenly find out how many others have gone through similar things to me.
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Kidgas
04. Aug, 2010
Forest,
Wow. What a tough situation you are in. It is terrible that there are those who would take such advantage of your kindness and steal from you like that. But, it sounds like you are handling the situation well. I wish you the best of luck.
Kidgas recently posted..Lost the Fire- But I Feel Better Now
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Forest
04. Aug, 2010
Hey Kidgas, thanks for your support…. what doesn’t kill you makes you stronger, right
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