I think I only caused two to cry this week.
One was this afternoon. She is a divorced mother of one. She makes pretty good money but a year or so ago took out a second on her house in order to pay off credit card debt.
It is generally a very, very bad idea to take out a second mortgage on your home, which in most cases is an exempt asset, or partially exempt, to pay off credit card debt, or unsecured debt. Particularly if you’ve not resolved the problem which has caused you to run up the large credit card debt in the first place.
This woman has one unsecured credit card. Unfortunately there isn’t any money in her budget after her basic living expenses are paid to pay this remaining credit card debt. I ran the numbers for her, and with a bare bones budget only covering the basics, like house payment, food, utilities, gas, etc. she had about $68 left over for the month. And this included her child support payment which will run out in three years when her 15 year old turns 18.
I told her I could put her into a bankruptcy but it wouldn’t help her very much because she had a basic problem of not enough income and/or too much out-go. I pointed our to her that she needed to have a plan for how to deal with what she was going to do when her child support stopped.
Last week I filed a bankruptcy for a woman who didn’t have a plan for when her alimony and child support ran out. She ended up selling her house and only getting a very little bit out of it. We can protect what she did get out of her house from her creditors but she didn’t get enough to put down on another house, even assuming she could get a mortgage soon after her bankruptcy. The day she came in to sign her bankruptcy paperwork she was asking about whether medical bills her daughter (an 18 year old college student) had incurred could be added to her bankruptcy because she was going to have to pay them for her daughter.
The woman today is spending a huge amount, nearly 25 percent of her gross, a month on insurance of different kinds, disability, long and short term, dental, vision, life, major medical and a cafeteria plan which sort of sounded like my health savings account. And, of course, her house payment took up close to 40 percent of her gross. I told her it struck me that those were the two areas she could cut down on but those were decisions she would have to make.
She only cried a little. I explained to her how to file an entry of appearance and an answer in the lawsuit which has been filed against her. It will buy her time to make some decisions and figure out how she is going to deal with, but won’t cure, her problems. I suggested she get Dave Ramsey’s book and read it to see if it couldn’t help her. She didn’t write it down, so I don’t think she was impressed with my recommendation. I doubt she will be back.
My father keeps asking whether working with all these clients is depressing. Not really. I didn’t create these problems for them. I can outline what their solutions are. They may not be good solutions, or ones they like, but I can identify what the solutions are for them. For the most part, my clients are pretty grateful for my help. And those that don’t like what I have to say, don’t have to come back.
Part of the problem I have with my business is regulating the flow. I send letters to people who have been sued for the collection of a debt. When I have a week like this week, I don’t have time to get many letters out. So I suspect next week will be slow. Last week was slow, so I got a lot of letters out thus created the business for this week. I think I only have one or two appointments set for next week so far. The Husband will finish his class within the next couple of weeks and has assured me he’ll have more time to help me. And when his school job finishes, he says he’ll help lots and lots. I certainly hope so. But the Bankruptcy Reform Bill was passed by the House today. That’ll scare people into calling so maybe business will pick up next week.
