<p>artloversplus - yes - you caught that. My impression is that their income is too high for FA, yet they can’t afford the tuition, so they have been charging some of it or depositing the credit card convenience checks. Again, with good intentions of paying it off…</p>
<p>mom2collegekids - I have no idea about her parents or in-laws finances or spending habits. She has not mentioned anything about them. The impulsivity comment is interesting. My impression is that she has been juggling this growing problem for years, using the convenience checks, doing balance transfers from one card to another, and is now running out of juggling options.</p>
<p>Credit score - low 700s in August when she was turned down by her existing lender. She has not wanted me to check it yet. Not bad, but not great. The investors I work with - major lenders such as Suntrust, Wells Fargo and US Bank prefer to see 740 and up, but I’m sure I could find her something if she wanted to refinance. We are getting together this weekend to go over options - sell house now, cash out refi to include all credit card debt, or the Dave Ramsey approach.</p>
<p>RVM, hats off to you. You must be quite a good listener and safe confidante that she chose to open up to you. That you have her trust is just impressive on a human level. Good luck this weekend talking with her.</p>
<p>mom2collegekids - I have no idea about her parents or in-laws finances or spending habits. She has not mentioned anything about them. The impulsivity comment is interesting. My impression is that she has been juggling this growing problem for years, using the convenience checks, doing balance transfers from one card to another, and is now running out of juggling options.</p>
<p>The impulsivity comment comes indirectly from my sister (a therapist) who explained a few of my H’s family’s odd ways to me. She says that they “go to” whatever is quickest/easiest to relieve anxiety and stress, so that they can carry on and not have to spend much/any time thinking about unpleasant things.</p>
<p>My MIL never liked saying “no” to her kids about ANYTHING. They got EVERY item on their Xmas and Bday lists…even if it meant running up large debt.</p>
<p>In some cases, maybe your friend’s, there’s some “we’re supposed to do this” so they’ll resort to credit to pay. She may have thought, “we’re supposed to pay a lot for college.” She may have thought it would be failing to have her child go to a CC and then commute to a local state school. The internal pressure was too much, so reach for a credit check.</p>
<p>Impulsive behavior is not at all the same thing as doing something to reduce anxiety. Her behavior does not sound impulsive to me. It sounds like a cascade of bad financial decisions on top of other bad financial decisions, but OP has not, that I saw, described any impulsive purchases. And using a credit card advance to pay an immediate debt is bad judgement and a stress reliever, and while the long term consequences may not have been carefully assessed, the behavior in and of itself isn’t indicative of poor impulse control.</p>
<p>Then why are we having this conversation. This is a no brainer solution that involves minimal drama.</p>
<p>Do you have a conflict of interest because you’re in the mortgage business. </p>
<p>Have you tried plugging her numbers into <a href=“http://www.amerisave.com%5B/url%5D”>www.amerisave.com</a> - they have much better rates than anybody else I’ve ever found.</p>
<p>Well, I was soliciting other opinions and advice because she is not sure if she wants to refinance. There is a valid argument to make against converting unsecured debt to debt secured by primary residence. I am concerned about them refinancing and then running up a lot of debt again. She is iffy about refinancing as they may sell the house in the next 2 years. I am approaching this as a friend - if she and her husband decide to refinance - I’d be happy to work with them. But I want to help her figure out the best solution for the long run. Talking them into a refi seems self-serving - if they go that route - I want it to be only after we have explored all options. I feel really bad for her and the fact that she has trusted me with this information means I feel a responsibility to give her the best possible advice.</p>
<p>I think she should talk to a credit counselor before she refinances. OP, you know mortgage lending but credit cards are a different product. If they really want to get out of debt, they can but they have to want it. They have a good income and they can make the Dave Ramsey method work, but they have to want it.</p>
<p>A credit counselor will work all their debt, not just the mortgage. A credit counselor may also be able to get the interest stopped on the credit cards Probably not remove interest already accrued but freeze the balance as of today. The price? They’ll close the account. They’ll also probably suggest getting a second job and devoting those funds entirely to debt repayment.</p>
<p>If they want to declare bankruptcy, it certain is easier but then the credit cards are going to be closed anyway and they’ll be on a court mandated repayment plan. It will HURT.</p>
<p>As I am compiling a list of suggestions and questions for my friend, I wanted to mention this CNBC debt counseling show which is similar to the Dave Ramsey approach. I am strongly suggesting to Sally that she and hubby watch this. The couples they profile are in worse financial shape! The general strategy is to stop using credit cards and live on a strict cash budget. Discretionary spending is slashed to the bone - no eating out, no clothing purchases, no gifts, etc. It takes 100% commitment by both spouses, but the couples featured on the show make amazing strides in paying off their debt.</p>
<p>I know it’s easy to criticize people who have gotten over their heads in debt, but I have seen a lot of people struggling financially over the years - at all income levels - and the topic really interests me. And quite frankly, my conversation with Sally and some of the comments here had motivated me to examine my own financial affairs and see if tweaks are needed. I have always been debt-averse and her situation has reinforced this mindset. I think being debt free as one approaches retirement is the goal and I am really going to examine my own spending and make some cuts so as to achieve ths.</p>
<p>If she’s paying for a kid’s college education with her credit card account, she could easily run up the whole $120k including interest without a single impulse purchase.</p>
<p>The OP said that it was done over several years and included paying for college. And they did not live ostentatiously. Maybe they helped moocher or ill relatives or invested poorly. Who knows. But just because your sister may have mentioned that some other people were impulsive doesnt make it so in this case. Again, poor impulse control and anxiety reduction are different concepts. Your sister probably knows this.</p>
<p>Had a good lunch and chat with Sally today and wanted to share a few of her comments and lessons learned. This mountain of debt was 14 years in the making. Sally blames most of it on two periods of unemployment in the past 14 years. While she relished the time as a full-time mom during those periods in time, they did not adjust their budget accordingly. Looking back, it was absurd to cut household income in half without cutting spending. And this is when the debt started to mount and the use of credit card convenience checks began. She always had good intentions to return to work and pay off the debt. But when she was working, the joint income was not enough to pay regular expenses, build an emergency fund and pay off the consumer debt. Without an adequate emergency fund, every “life happens” event ended up on a credit card. So - not frivolous spending - but just poor money management and very unrealistic expectations that future income would allow them to get caught up.</p>
<p>In retrospect, she wishes they had dealt with the issue when it was $20,000. Instead, it just grew and, amazingly, she never added it up! Until very recently, she simply paid a few hundred on each card every month and never added up the total. She thought it was about $70,000 and decided to write down each bill and add them up last week after reading an article about financial resolutions. That’s when she was astounded to arrive at a total of $120,000 and reached out to me. She actually had a full blown panic attack/ anxiety attack and could not believe the total. She now wishes she never had so many credit cards and such high limits and that she had not lived in a state of denial for so many years. She is mortified and very distressed, but also very ready to tackle this issue.</p>
<p>The plan - they will sell their house in the coming year. They are fortunate to have positive equity in the home. After paying off every penny of debt, they will still walk away with a decent amount. Plan to downsize from 4-br house and rent an apartment - with ultimate goal to relocate to a more affordable area of the country. In the meantime, they are ready to cut spending to the bone and start living a frugal cash-based lifestyle. They have just 1 year left of college to pay for and will apply for FA, perhaps Parents Plus loan, perhaps ask parents for some assistance. But no tuition is going on credit cards!</p>
<p>I’m optimistic that they have had their wake-up call and are ready to make some changes. We’ll see.</p>
<p>That is wonderful how you are helping her, rockvillemom. You must be a very trusted friend for her to give you so much information about her financial situation. Most people are just embarrassed about getting so deeply in debt. It sounds like she is open to changing her lifestyle, after being so shocked about the total. I also hope she is on the road to less financial stress. It’s excellent that she seems willing to go about it in a few different ways. I wish her success.</p>
<p>She is really embarrassed - I believe I am the only person she has told. I think the fact that I work in mortgage lending made it easier for her to confide in me - much like when a person asks a friend who is a doctor a personal question. She seems very sincere about making dramatic changes and I hope they really do it.</p>
<p>“Thanks for the update and explanation if how someone, anyone, could find themselves in this situation. It is frightening how this could happen.”</p>
<p>I agree. I know to some it seems unfathomable, but after many years, I see how it could insidiously sneak up on someone.</p>
<p>You would be startled at the amount of debt we have. Though we have the illusion that it’s all under control :D</p>
<p>busdriver - that’s what fascinates me. I think a lot of people - who may present themselves to their friends and family as having a handle on their finances - are actually in trouble. Look at the government shutdown this past October - and how many people were in a panic at the thought of missing one paycheck. It just makes me determined to save more and spend less.</p>