StressMD,CCdebt,min pmts,consldt,bk

Dear Doc,
I started a new thread in order to give you some good financial advice which is backed by the numbers (and we all know numbers don't lie).

Here is the scenario you presented:

Amex: 13,000 @ 24% APR
First USA: 24,000 @ 20% APR
Omaha: 15,000 @ 20% APR
Chase: 8,000 @ 20% APR

You also stated your minimum payments were approximately $1,200 (they're really more like $1,265...(but close enough for guvvie work). You are in training for 4 more years (internship, residency and fellowship, I assume) and you can't get the CC companies to renegotiate. (One of the main reasons why is that they are all anticipating HR 333..the Bk Reform Bill which will pass soon after elections and it is NOT consumer friendly as bk is now.)

Now let's assume Amex is charging you 2.5% on your principal balance to reach your minimum pmt amount. Let us also assume the rest of the pack is charging you 2% (which is the going rate for everybody but Amex...they always charge more). Let's also assume you are willing to pay the minimums each month during your training.

Ok now let's do the math.

Amex @24% paying minimum bal. for 4 years:

Beginning Balance: $13,000
Interest pd 48 mnths: $11,119.91
Principal pd 48 mnths: $2,779.98
Balance remaining: $9,739.19

Combined CCs @ 20% APR paying min/4 years:

Beginning Balance: $47,000
Interest pd 48 mnths: $34,800.68
Principal pd 48 mnths: $6,959.21
Balance remaining: $39,907.00

So if you do nothing and keep paying the minimums here will be the picture after 4 years. You will have paid $45,921 in interest, $9,740 in principal and you would still owe over $50,000 on your balances.

Let me give you another scenario. You keep paying the minimums until the debts are paid:

Amex would take 14 years, 9 months and 2 days to pay off with an interest amount of $50,812.52. The rest of the cards would take you 28 years, 2 months and 7 days to pay off with a whopping interest rate of $233,112.23. That would mean on an original to date balance of $60,000 you would pay $283,924.75 in interest!!! Have I got everybody's attention yet ?

MY TOP 5 REASONS FOR NOT ACCEPTING PRE-APPROVEDS, CONSOLIDATING, BORROWING MORE TO PAY CC DEBT AND TRANSFERRING BALANCES TO ANOTHER CARD

#1. The average consumer has four credit cards, with an average balance per card of $3,900 (that is $15,600 in debt in case you have not done the math!). Sure, there is safety in numbers, but is this the company in which you want to belong? I do not know about you, but I would rather belong to the â??below averageâ? customer group that has less than $1,000 in TOTAL credit card debt. These companies keep offering us new cards every week with higher credit limits and cash advances. (Think of how many you have received in the last year!) Basically, they insult our intelligence. Many customers are flattered when they receive their â??PRE-APPROVED PLATINUM VISA, just fill out the form below, sign and send backâ? letter. We think we are being rewarded for a job well done. The job, of course, is being able to spend money with the best of them, and pay it back better than most. Do not get SUCKED into this mental trap!!

#2. If you make the minimum payment due on your average balance of $3,900 each month, your credit card will be paid off in approximately 39 years. It is called â??amortizationâ? or in the case of credit card repayment, I should say â??lack of amortization.â? In lay peopleâ??s terms, this simply means you have no real term set in order to pay this back. It is open-ended. They will let you pay on the same balance forever if you let them. When you buy an automobile, you may finance it for five years. You know that if you never send an extra dime but your monthly payment to that loan company of bank, you will own that car on the day of your 60th payment. You have none of these guarantees with credit cards. They are revolving accounts. I guess you can say they are like the Energizer Bunny, â??THEY KEEP GOING, AND GOING, AND GOING, AND GOING, AND GOING.â?

#3. Because banks know that credit card usage is at an all time high, most of them are competing for each otherâ??s business. Many offer promotions like transferring balances from other cards to the new card they can offer you. If you transfer balances from other cards, they will charge you a reduced rate of interest on those portions that are transferred. This sounds like a great deal (going from 18% to a promotional rate of say 6 1/2%); however, most of them have a catch. For instance, if you do not charge something new on the new card each and every month, the interest rate goes up to the regular rate of the card (which is often high) or, if you make one late payment, you forego the lower promotional rate, and the rate again goes up to the regular rate of the card.

#4. If you keep making your minimum payment only, your balance will rarely ever get paid off. Have you ever noticed how while your minimum payment due on your credit card is $85, your balance only came down $12? WHY? That is because we pay UN-Godly amounts of interest on credit cards. Even the so-called â??low interest rateâ? credit cards do not show their payments going toward bringing down their balances. All they do is just require a lower minimum payment. Sure, this might help your monthly outgo right now, but what is it doing to get you out of debt faster? NOTHING! That is because the MINIMUM PAYMENTS DUE ON CREDIT CARDS ARE BASICALLY â??INTEREST-ONLYâ? PAYMENTS.

#5. Example: Your rate of 6.9% is a teaser rate. After 6 months, your rate will be 21%. The teaser, a.k.a., Introductory Rate Credit Card, has made credit card banks BILLIONS of dollars because so few consumers ever read the FINE PRINT. You know, the print that only the eyes of a 12 year old can read without getting a migraine. These credit cards come with stipulations. There are too many â??catchesâ? to name. But, I assure you they are there. Credit card banks do not make any money if they are financing your debt at below Wall Street Prime interest rates. So I leave you with one last thought on this topic, â??IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS.â?

#6. Most credit card payments are due on the last day of the month or the first day of the month. Most of us get paid on one of those two days also. If you pay your bill on the first and send it in the mail, payment is probably posted sometime between the 5th and the 10th of the month. Many credit card banks not only regard that as a late payment, but they charge you a late fee and interest on the entire balance. How are we supposed to ever get ahead???

How Your Credit Cards Interest is Calculated

Example: You have a credit card with a $1,900 Balance, a 2% minimum monthly payment and a 21% APR.

Calculate Your Minimum Payment: You take your balance and multiply it by your minimum monthly payment percent. ($1,900 x .02 = $38.00) Your minimum payment per month is $38.00

Calculate Your Monthly Percentage Rate: You take your APR (Annual Percentage Rate) and you divide it by 12. You do this because the APR is your annual or yearly rate and you divide it by 12 (the number of months per year) to give you the Monthly Percentage Rate. (21% / 12 = .0175). Your monthly percentage rate is .0175.

Calculate Your Monthly Interest Payment: You take your balance and multiply it by your Monthly Percentage Rate ($1,900 x .0175). Your interest due is $33.25.

Putting it all Together:

You make a payment of $38.00
They charge you interest of $33.25
Amount applied to your balance $ 4.75

Out of a $38.00 payment, $4.75 is applied to the balance so your original $1,900 balance is now $1,895.25. At this rate, it will take you 23 years and 7 months to pay off your credit card!

Now Dr. Stress, in the original post I recommended a BK 13 because I thought you were dealing with moral, ethical and humiliating feelings about a bankruptcy. The fact I didn't know at the time was the only asset you owned was a USED car!!! If that is your only asset then read my lips, FILE A BANKRUPTCY 7 AS SOON AS POSSIBLE! Sure it stays on your credit report for 10 years but so what! There are people here who have survived a bk 7 and went on to enjoy being debt free (btw the statistic that 95% of people who filed bk were sorry that they did is a fallacy). Most people get credit again 2-4 years after a bk. I personally have known many people who have bought homes after only 1 year from a bk 7 discharge.

The reason I emphasized the urgency of doing it right now is that soon the BK laws will change and they aren't very pretty. The CC companies and banks have lobbied hard for 7 years and they are salivating because they know their "drown the consumers into debt" days are fast approaching.

To put what I've said above in medical terms: an African American female comes into the ER with blood pressure 300 over 210....now what would you do? Wait to see if it goes down by itself? Send her home with blood pressure meds? Or start an IV stat and make sure the code team is prepared for a resuscitation? Now pretend you are that patient.

Once again I will happily make the offer to answer any questions you might have about filing a bk 7 via private email. I don't think I can prove any more than I already have about your situation. Trust me I am not a newbie at this.

clc

hon1l@aol.com

 

Stress,
Your employer would never know. When I was a NYC banker on Wall Street guess who was the biggest BKer on our records (the amount BKed)? Dr. Michael DeBakey! He got caught in the real estate recession in the early 90s and had to bk all his debts.

Now I know Dr. Debakey personally as he did 20 bypasses on my father over a 25 year span. The BK did nothing to harm his reputation.

BKing is legal, it is against the law for any employer to discriminate against an employee for doing a BK. You are not the only young MD who has done or is contemplating a BK.

clc

 

PS Better if your parents would give you the "use" of a car and keep it titled in their names.

I cannot demonstrate any better than I did above. The numbers speak for themselves. Doc you know and I know you have 4 years of slave salaries until your training is over. Moonlighting to pay CC debt will be a killer. Try moonlighting the night before grand rounds. It doesn't get easier with each passing year especially for 2nd year residents. Then you will probably have to work for an already established practice as a junior member as the malpractice premiums alone along with all the other expenses it takes to open a solo practice are prohibitive. It will be a number of years before you're making the substantial $$s. I know I opened the solo practice for my ex in 1978 and it was expensive then!

If you want me to do the numbers using lower APRs I can do that easily but your minimum pmt interest rates will not change.

I rest my case.

clc

 

Stress,
If you were able to borrow the money or consolidate the balances the nationwide interest avg on unsecured loans as of today is 13.38%. This is a variable rate that could fluctuate over T-Bills or Libor rates.

Ok you get the loan to pay off your CC debt or you consolidate your debt here is the math (I calculated the loan over 5 years instead of four and you will see immediately why):

$60,000 @ 13.38% payable in 60 equal payments:

Monthly pmt: $1,377
Interest paid over 5 years: $22,613
Total paid: $82,613

Let's pretend you could get that 6% fictional rate on unsecured debt:

$60,000 @ 6% payable in 48 equal payments:

Monthly payment: 1409.10
Interest paid over 4 years: $7,636.88
Total paid: $67,636.88

On the other thread a poster (Mongrol) mentioned cesi.careoncredit.com

This caring organization is a CONSUMER CREDIT COUNSELING SERVICE

Even on their own site in the FAQ section they say:

How will a debt management program affect my credit?

If your credit report already reflects any late or missed payments, then the debt management plan (DMP) will likely improve your record by facilitating consistent, on-time monthly payments. Also, if you were late in the past, many creditors will report you as "current" as long as you make all of your monthly DMP payments on time. If you have never missed a payment, then sending reduced payments to creditors or getting interest concessions through the DMP could put a blemish on your credit report. A creditor may report a reduced payment as "late" or reflect that payments are being administered by a credit counseling agency. Since the plan objective is to help you get out of debt, lenders may avoid issuing new credit cards until you have completed or withdrawn from the plan.

This "blemish on your credit report will be worse than a bk 7 by far! You would be ill advised to ruin your credit for 7 years even though you made on time credit counseling payments. Ask the experts here...ask Butch...he is an expert on consumer laws.

I hope you assimilated medical knowledge more easily than you're acknowledging financial advice that is grounded in mathematical facts!

100% of the people who used CREDIT COUNSELING SERVICES were sorry they did!It will totally f**k up your credit for a long, long time. Do a search on "credit counseling services" and you will see the majority response by people who actually used these services.

60 Grand is a hell of a lot of debt. No matter how you try to figure it your payments will not be reduced and subsequently keep your credit in good shape. I did a bk 7 for a young guy who never had more than a $30,000/yr income and he had over $100,000 in credit card debt. Now here is where we address the morality issue...why would credit card companies issue somebody they know can't pay their balances with 19% interest rates...BECAUSE it is the CC companies and banks that are immoral. It seems to me they did the same thing to you...a med student with no income gets $60,000 line of credit.

Think carefully about your next move. Make people who are giving you advice against a bk 7 prove as I have what the different scenarios are and why they are better. There is absolutely no way to reduce your payments, keep good credit and have money left over even if you did go to a CC companies' best friends Consumer Counseling Services.

Everyone thinks because you're an MD you will be rolling into a lot of cash in 5-6 years. This is also a fallacy. The older doctors don't talk to young ones about the business side of their profession...but you WILL NOT be rolling in 4-6 years. I'm sure you have heard of HMOs, PPOs etc.. Docs today don't make the money like they did in the good ole days. What if you get married? What if you want a house???

A BK 7 might stay on your credit report for 10 years but the older it gets the less impact it has. It is far easier to repair your credit with a BK 7 than with a CCS who puts all your accounts in "lates", "closed by credit grantor" or "paying through a credit counseling service." These type of tradelines are more than just mere "blemishes" they are black holes that take a lot of work to repair.

clc

 

H-
Now after doing all the math on Doc's debt with more than one scenario all you can do is comment on two people who were happy with working with a CCS????

We are talking about 60 THOUSAND DOLLARS OF DEBT. I defy you to name ONE person on any of the credit boards who CCS'ed this amount of debt. Name me ONE person who had a 20% and/or 24% interest rate reduced to 6%!!!!

I am not pushing him/her to a BK. I am giving Doc the facts that are specific to his/her case.

If you can do the math better than I...have at it. If he goes to a CCS thinking his monthly payments on $60,000 worth of debt will be lower please back it up with facts other than 2 people happily used a CCS.

clc

 

Re: Re: StressMD,CCdebt,min pmts,consldt,bk

The "moral high ground" repeated over and over. The moral high ground is why we lost 55,000 young servicement in Vietnam. The moral high ground is why we have lost over 600 service people in Iraq.

The "moral high ground" in this country is screwing the elderly with an unjust prescription plan that will do nothing but up their Part B premiums. The "moral high ground" is to cut over 3,000 beds for the psychiatrially ill and send them to the streets. The moral "high ground" is to tax the middle class into two income families just so they can have shelter and eat while rewarding the rich. The "moral high gound" is to execute people some who were proved innocent after their death at the hands of the state. The moral "high ground" is to throw money at the public school system which everybody knows is broken in the inner cities. The "moral high ground" is to pay toll collectors more than teachers. The "moral high ground" is to rank 3rd in the world in neo-natal deaths due to no health insurance for the pregnant mother. The "moral high ground" is to have our justice system be grounded in whomever has the most money. "The "moral high ground" is to pay all of your debts that are mostly interest pmts to the rich when you have children in your communities that don't have enough to eat.

Geesh I HATE the "moral high ground".

 

Re: Re: StressMD,CCdebt,min pmts,consldt,bk

Struggler,

It seems like you can't make an intelligent argument so you personally attack.

"I paid all my debts and I'm breaking my arm patting myself on the back" is exactly the "moral high ground" of debt management that I'm referring to. It seems like the only calculator you know how to use is the five digits that are hanging on your two hands.

Stress, take their advice...go get more loans, have your parents co-sign...hell why don't you just have them borrow against their home to pay your CC debt. Let the balances go...don't pay them...go to a CCS...get two or three more jobs. These are phenomenally great ideas backed by experts who know nothing about medical training, know very litle about finances and have a hard time absorbing simple math.

As I pointed out very articulately on the other thread when your student loan payments kick in you will be sailing on the Titanic. Hedwig and Struggler are insisting you are financially unsinkable. I am telling you that you are headed right for an iceberg. Your financial house of cards will topple so quickly you will be scrambling in the North Sea of debt.

Despite the fact you and many others don't like the message...don't shoot the messenger. If my critics backed up their pearls of financial wisdom with a viable solution then I would think differently. But even you have not liked their ideas. Have they pointed you to a lender they know for sure will lower your rates. Do they know for sure that the CCs will crumble when you don't pay them (roflmao). You are in no position to negotiate anything. The one site you were pointed to distinctly said that dealing with them could cause "blemishes" on your credit report. Those "blemishes" would be on your reports long after a bk 7 even though you worked 3 jobs to make payments.

What would you think of a doctor who in the ER diagnosed or treated patients without looking at them, without asking for a medical history, without running any tests and then told the LPN to write the orders? I would say that doc is a quack (or a kook).

So take the credit quacks' advice. I could give a s**t if you bk or don't. At least MY kookie advice is backed up with provable numbers, research, knowledge of your particular situation (I lived through medical training with my ex and he trained in NYC) and legal standing.

As an ex-banker take this pithy pearl of financial wisdom, "If you owe the bank $200,000 they own you. If you owe the bank multi-millions you own them." If you don't believe that I can try and find Donald Trump's phone number and you can ask him.

Have a great day!

clc aka "bankruptcy kook" hahahahaha

 

Re: Re: StressMD,CCdebt,min pmts,consldt,bk

Struggler,
Truce accepted. If his parents co-sign an unsecured loan and he couldn't make the payments guess who the bank goes after. They wouldn't risk their home in this scenario but they wouldn't be able to pay their living expenses. There is no difference.

He has tried to negotiate with his creditors and they aren't budging. They know he is a doctor. They have him backed up against the proverbial wall.

He isn't a little pregnant here...he is in his ninth month. BK reform is looming and the clock is ticking. If he waits too long to do what you have suggested he won't have a choice but to bk. After BK reform it will be a whole new ballgame and guess who will be George Steinbrenner...CC companies and banks.

I am not chicken little hollering "the sky is falling" but HR 333 (aka BK Reform Act) has been passed in the House and the Senate has amended it to make everyone happy. It is ready and set to go to the floor. George "W" has already said he would sign it and he would waive the 180 day requirement and put it into law immediately. CCSs are salivating because the new law will require a person to go to credit counseling before they BK. They are now competing heavily for position as the BK trustees will choose the companies that BK'ers will have to use. People will have to avail themselves to counseling at least 6 months before they can get an "automatic stay". BK 7s will only be available for cases of "undue hardship" which is going to be a stringent standard. So anyone who files a bk will be forced to do a BK 13. BK 13s will have a longer minimum than 3 years...they will be able to extend a 13 to 10 years. Do you get the picture here?

I wish Stress had the time to try out all your suggestions but he doesn't. If he BK'ed 7 all this debt he could get on with his life. He will still be paying a huge amount on his student loans. Much like childbirth...(which I know you can't relate to personally) a BK would be like labor and delivery. When the baby gets home the pain of labor and delivery is forgotten.

So enough of my analogies. I have made my points. There is no more I can add to this situation so why bother.

Thanks for the truce. Wish everyone well and may the wind be at your backs.

clc