Ellen May, $57,000 in Credit Card Debt

Ellen May, mother of two, owes $57,000 on five credit cards

between herself and her husband Ben. They got there by making the minimum payments each month. Over the last several years Ben and Ellen have watched their savings account dwindle down to about $250. It was their intent to save enough money and then pay down those credit cards at one time. Then disaster struck.

The one payment that started it wasn’t late, but the creditor mistakenly posted it as being late and because of “universal default”, a software system that allows creditors to share your credit information in real time, all the interest rates on their joint credit accounts jumped to 29%, 22%, 29%, 19% and 31% overnight! Their minimum payments nearly tripled.

They cannot really account for the loss of savings, they just know they don’t buy frivolous things, they might eat out at restaurants once in a while, but for the most part, they watch what they spend. So how could this be happening to them? Theirs is a typical example of how good credit lures unsuspecting, good hard working people into a false sense of security. The good credit they have today is able to do only one thing, get them into more debt. It crept up so slowly for the Mays that they didn’t see it coming until it was too late. Now their personal credit is suffering and limiting their ability to try something even crazier, borrow their way out of their current debt. After discussing the matter with a local attorney, they discovered this was “good fortune” for them.

Their attorney explained that no matter what they do, the same habits of using their employment income to pay their credit card bills would not help them anymore. Their attorney explained how to analyze their situation just like a business would, by asking the question, “What are the risks of paying and what are the risks of not paying?” He helped them to reduce everything down to two separate calculations or balance sheets. They realized instantly that their risk to creditors was far less by NOT paying any more on their credit accounts.

At first they were shocked, then embarrassed. But after their attorney explained how these creditors make money no matter if they receive payments or not, non-payment was easier to accept. He explained how settlement and bankruptcy were nothing more than long term payment plans that would do nothing but further destroy their credit, fail to deal with harassing phone calls and exhaust all their cash and income. And better still, how the Consumer Credit Protection Act imposes civil and criminal penalties on employers who penalize employees for having debt problems. What’s more is that this federal law also prohibits creditors from taking all but a very small amount of money from any debtor, making it even illegal in some states to garnish wages.

Then he gave them a written plan of how to manage their current income, legally avoid paying creditors and re-structure their cash, property and assets so they could legally avoid being attached by creditors. He gave them a short procedure to follow and one phrase to say on the phone in response to any collection calls. This stopped all collection calls.

The plan was something they had never even considered before, but it was a road map to the financial freedom they had only dreamed of before. Within ten months, they were able to have an accountant verify their increased net worth, legally and ethically never having paid another single cent to their creditors; and best of all, learned how to obtain credit with no more personal liability. Now they use credit very much like top rated businesses, to invest and buy assets. They then use the income from their investments to buy the vacations and toys they don’t necessarily need, but that enrich their lives.

Ellen says, “If I’ve learned one thing from all of this, it’s that the same habits that got us into debt, would have never gotten us out of debt. We’re not super rich today, but we have more money than we need every month and our net worth increases quarterly without personal risk.” Ben adds, “We now have more options for our children’s college education and expect to be able to not only take care of ourselves during retirement, but leave our children a sizeable asset base.”