Hope you're enjoying your Sunday Evening, folks!
Good so far for me - our Chicago Bears are beating the Denver Broncos . . . but it is early in the game! Bear Down!
Confession!
If you happen to be Catholic, as my wife is, likely, at some time in your life, some fellow in a black suit coat with funny collar explained that it's "Good for the Soul."
But, if you're having financial trouble - real financial trouble - is it good for the confessor - the one having trouble struggling with his or her debt?
This week, I found the answer! Likely, it is a resounding . . . NOOOOOOO!
I have a client. A nice young couple. Normally conservative with their money.
But they fell into financial trouble. You might know the story, or one very similar to it.
He had a job - a good one - but lost it in today's Economic Downsizing (in other words, he got canned, for reasons out of his control . . . or perhaps, he just didn't play along).
She works as a nurse. But, in today's economy, even nursing - usually a safe haven - is not safe. Her usually-reliable overtime hours have been cut dramatically.
The couple has a young daughter - now, three. A beautiful little girl!
Another one was on the way - but it has been a tricky ride. Complicated, as it sometimes is for an older mom. And their health insurance was poor.
After the baby was born - a beautiful boy, by the way - they were laden with nearly $40,000 in hospital and doctor bills for the maternity care. I don't know all the specifics.
How did he deal with the problem?
You know those friendly-looking advance checks you get with your credit card statement each month? They don't tell you they may cost several hundred dollars to make a draw. And he didn't see it coming - so, he drew! Thousands, unfortunately - unbeknown to me. None of my business!
He also drew equity against his house, earlier on, when you could still do that, to keep things afloat a year ago or so, when he had vacancy in a rental condo he owned. To cover the vacancy, and several thousand dollars worth of repairs caused by the last tenant.
After this - and several other poor-judgment financial moves - he was near broke!
He found another job - but found himself in a deep hole, and couldn't keep up - even though, for several months, he managed to pay all of his monthly minimum payments.
But, now he is having trouble. He can't anymore!
As a near last resort, he calls one of his credit card companies - Bank of America, I believe. And tries for forbearance. A minimum payment plan - he wants to pay them back, but can't afford the now $800 minimum payments covering interest only.
At first, they say approval of such a plan is likely - he holds off on pulling the trigger, then calls me, as his trusted Real Estate Adviser. He asks me to listen in on the second phone call - likely, I guess, because I am a lot cheaper than a bankruptcy attorney!
I listen, very quietly, from the other phone, as my client, and friend, confesses his problems, and asks for help.
After several transfers, he gets a "Financial Hardship Counselor."
Immediately suspicious and skeptical, she grills my client as to how he got into his problem. He is honest - and she notes every comment.
She asks him those personal financial questions - his income, his debt, his financial and family situation.
And after all is said and done, he is positive - slightly positive - in his income to expense ratio.
"Sorry, can't help you!," she says, smugly. "Just pay your minimums, and call us back IF YOU FALL MORE THAN 3 MONTHS BEHIND."
I'm paraphrasing, of course - but she also mentioned something very curious on the phone -
"Likely, sir, as a result of this call, your credit score will fall somewhat. And, also, we will adjust your available balance downward to respond to your financial hardship."
Willing to help - NO! Ready to pounce, and make things more difficult for this fellow and his family? SEEMS THAT WAY!
Hard for me to keep silent on the other extension - but I did!
Indeed, when he checked back a few days later - his credit score had dropped 31 points. Nothing else he did during that time frame likely would have caused this.
His credit card line with that bank was curtailed. On both his credit card, and on a Home Equity Line of Credit he also had with BOA.
Even worse, three weeks later, another or his credit card lenders, at another bank, said they will need to adjust his line downward, and increase his favorable rate of interest, due to a lower credit score. This despite his previously-strong payment history.
Now, he is having headaches with both banks, and sees little option other than contact that BK attorney we mentioned earlier.
No other way out, in his opinion - with fewer options than before.
Confessing? Asking for help, as many lenders advise publicly?
Did no good here! Actually, hurt the man and his family!
And . . . that is bad! It suggests the only way out is the most desperate way out. And that may not be true!
Any thoughts? Experiences along this line? Please share!
DEAN & DEAN'S TEAM CHICAGO
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