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after lurking in the background, reading the various posts, I've finally decided to take the plunge and ask for some FOOLish advice for an overwhelming debt situation.

i owe over $20,000 worth of debt to five different creditors--and that doesn't even include my huge amount of student loans, which are currently being deferred, since i have one more year of grad school to go. i have been hiding from the situation for months, and now i am dodging constant calls, and avoiding opening my mail to see the late fees, overlimit fees, and interest rate charges.

i know that i need to negotiate with the companies, but how?

what should i ask for?

should i seek consolidation or the "alternative payment plans" offerred by some of the companies? are the effects the same as declaring bankruptcy?

please help! thank you in advance :)
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cambridgegirl,

What would really let us help you is some details. It can be frightening to post such an intimate picture of your financial life on the internet, but I think you would find that with the details, we can help you make a plan that works for you.

The details we would need

Debt (balance to limi) Interest Rate Minimum

We also need to know about your income. How much can you use to pay these debts off? Do you work? Can you get a second job? Can you sell things? You need to get some cash in your hands to pay the debts.

If you want to start before any responses are given, there is a Snowball Calculator over to the left ======>.
You can use it to punch in numbers to see how to handle the debts.

At one point we will suggest a budget. Figure out how much money you have coming in and how much is going out. You should look for ways to trim the budget; Get rid of extras like caller ID or a cell phone. Once you have a better picture of how much money you have, you will be able to start getting out of debt. It proably will not be easy, it probably will not be quick. You probably didn't get into the debt overnight, you probably will not get out of debt overnight.

FWIW, many people have come from where you are. My personal debt low point was $17,000 on cc and a $8,500 car loan. I got sick of being in debt and finally attacked it and have only a mortagage payment now, 4 years later. I haven't paid interest in almost two years(except the mortagage), so I know it can be done.

Good luck, Fool! You've taken the baby steps, you need to work your way up to dancing.

fredinseoul
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You might also check out creditinfocenter.com
It talks about negotiating with creditors and the bankruptcy issue.
The most important thing you can do is take control. Have a game plan and stop using credit cards NOW.

Good luck- you CAN do it.

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after lurking in the background, reading the various posts, I've finally decided to take the plunge and ask for some FOOLish advice for an overwhelming debt situation.

Good for you.

i owe over $20,000 worth of debt to five different creditors--and that doesn't even include my huge amount of student loans, which are currently being deferred, since i have one more year of grad school to go. i have been hiding from the situation for months, and now i am dodging constant calls, and avoiding opening my mail to see the late fees, overlimit fees, and interest rate charges.

i know that i need to negotiate with the companies, but how?

what should i ask for?


Start with your smallest-balance debt (the one that you owe the least on). How much money do you have right now in the bank that you can lay your hands on? If you can pay it off entirely, do it. If you've only got, say, 50% call them up and say "I owe you $x and I have $y. Would you take that right now as a settlement in full of the debt?" If the answer is no, thank them and save up more money. If the answer is yes, then ask for a letter to that effect (do NOT send the money without getting a settlement offer in writing) and send them the money. Then, save up and go to the next smallest debt. Repeat until free.

Leviathan
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<<i owe over $20,000 worth of debt to five different creditors--and that doesn't even include my huge amount of student loans, which are currently being deferred, since i have one more year of grad school to go. i have been hiding from the situation for months, and now i am dodging constant calls, and avoiding opening my mail to see the late fees, overlimit fees, and interest rate charges.

i know that i need to negotiate with the companies, but how?

what should i ask for?
>>


The most important question that occurs to me is how you will be able to function and stay in school to complete your degree. I am hoping you are in a field which will reasonably assure you of a well paying job when you complete your degree. If so, perhaps it's worthwhile to continue in school even if it means trashing your credit history. If you're working on a degree as a Master of Fine Arts, it may be wise to abandon the degree as a luxury you can't afford.

The first thing I'd do is to begin looking closely at how you spend money, and for what purposes. If you acquired your debt because of wasteful spending, now is the time to turn that around. You need to pur together a spending plan for your remaining year in school that will allow you to function but which minimizes the amount of additional cash you will need to borrow. How much additional cash will you need?


Secondly, where will that cash come from? Do you still have access to additional student loans to fund those cash needs? If so, you have a ticket to complete your degree, even if the credit card debt trashes your credit history in the meantime.




Seattle Pioneer
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Hi Cambridgegirl --

I hear you! When I arrived at the Fool my DH and I were carrying $23,000 in credit card debt in addition to about $80,000 in student loans. Scary, huh? Well, we have made a bit of progress since then and are down to $13,000 on the cards. Read here for the gory details: http://boards.fool.com/Message.asp?mid=17908597

It's true that it can be done! You CAN pay off this debt! You need focus, desire, a gameplan and a little (okay, maybe a lot of) patience. I strongly encourage you to enter your debt into the "Snowball" calculator on the right side of the screen. It will help you develop a gameplan. Just get it all down, but don't worry about the student loan debt right now. It's scary to see that big number in black and white, but you need to know where you're starting from in order to get where you're going!

If you're comfortable doing so, consider posting the specifics of your debts here. We love details and have lots of advice to give.

I remember that when I first started - newly married, fresh from graduate school (read: fresh with more debt) my very first goal was simply to have enough cash to pay all of our bills on time and stop accruing late fees. Are you paying on time? How's your cash flow?

There's a lot to think about, but you taken a very important first step in posting here. Post soon with more details!

Good luck!
Daisy4125

PS - Cambridge, Mass? (Me too!)
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Congrats on your progress, and Thanks so much for the encouragement! I am in fact in Cambridge, Mass., attending that infamous H-school... I just took out another student loan to cover my living expenses for this year, but I may have to make some changes.

For instance, I really didn't want to live with roommates again this year, so I put money down on a one-bedroom apartment--but now I don't think I can afford to pay both the high rent and my high credit card bills...

I will try the "snowball" calculator and will be posting my credit details shortly.
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thanks for your help...here are the gory details...

Chase-- $6,150 / 23.99% / min. $252
People's Bank-- $4,475 / 25.99% / min. $998 (as of now)!!!!
AMEX-- $1,350 / 23.99% / min. $80
Bank of America-$7,400 / 23.99% / min. $571 (as of now)!

I don't have to pay back my student loans right now--thank goodness :)

cambridgegirl
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Sorry to triple-post. I'm still getting used to this format.

"even if the credit card debt trashes your credit history in the meantime. "

what i'm worried about is that this isn't just for the meantime--what happens two years from now when i want to buy a car, or get an apartment, or anything else?

also, what if i get a credit card company to agree to a write-off that is less than the balance due--how does that affect my fico rating and how would it appear to future creditors?

thanks again, cambridgegirl
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>For instance, I really didn't want to live with roommates again this year, so I put money down on a one-bedroom apartment--but now I don't think I can afford to pay both the high rent and my high credit card bills...
>
GOOD GRACIOUS my dear! One of the things that you have just learned is that you can't have everything you want in life all at once. Living with a roommate is a fact of life if you have no money. Living in the street is a fact of life if you REALLY don't have any money. Just be thankful you don't have to do the latter.

Your CC debt interest is appalling! You seriously need to work on that. Just look at how much money per month you are spending on interest alone! When I looked at mine (when I was in your CC debt level) it was truly an eye-opener that got me to go 'on the wagon' of CC debt reduction.

1. Rent a small room in someones house (its real cheap).
2. Learn how to cook (and appreciate) Raman noodles as meals.
3. Pretend you are Ms. Miser with regards to pinching every penny you have to pay off your CC debt.
4. Whine that you have no money to go with friends to Starbucks for Latte's. If you want the companionship just order tap water (free).
5. Develop a new personna of doing cheap things and acting cheap. Sure friends may think your weird but heck, so are a lot of people and they still have friends. You have mission--debt reduction. If you wonder about the satisfaction one gets out of being considered 'strange' talk to guys who wear bow ties. They'll tell you how uncomfortable it was at first to be thought of as 'different' but how they later wear it as a badge of individuality.

I had a grad student friend of mine who was so poor he would go to fast food restaurants with us, get a cup of hot water (then they'd give it out free if you asked) and ketchup packets and make his version of 'tomato soup' out of it for a snack. We never thought bad of him for that.

Good luck!
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Are student loans your only source of income? You need a job. I understand studying, but you've got to get that Peoples bank done. Can you waitress? You can get good tips. Same thing for bartender. A job in your field of study would be a good plan too.

You definately need a roommate. Again, I understand that living alone is preferable and even pleasant, but get this stuff under control first.

Good luck.

fredinseoul
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My wife was in the same boat until I persuaded her (before we got married) to go to a consolidator. Of the 30K we need to pay off (and she's already paid 5K off) something like 30% of her payments is going towards paying the interest off alone! Of the 35 K she originally owed, 18 K of it was interest.

Using a consolidator will drop your interest rates to 6.9-12%, which might be worthwhile, but check that you make additional payments to the cards if you do wish afterwards. Currently its going to be 2008 to pay my wife's debts off, and I'd feel much happier if we could do it in the next couple of years (which may be possible with a bit of belt tightening).

Paul

thanks for your help...here are the gory details...

Chase-- $6,150 / 23.99% / min. $252
People's Bank-- $4,475 / 25.99% / min. $998 (as of now)!!!!
AMEX-- $1,350 / 23.99% / min. $80
Bank of America-$7,400 / 23.99% / min. $571 (as of now)!

I don't have to pay back my student loans right now--thank goodness :)
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cambridgegirl,

I know how you feel! Those interest rates are crazy!

You might want to transfer your major CC debts over to some 0% APR cards you should be getting in the mail quiet often. Then cut up the cards you just transfer from. Wow, your losing a lot of money there.

You might do what some other people have been saying...

1. If you don't have a job. Get one! Waitressing and Bartending are great income makers if you work hard.

2. Sharing a house with other roommates should be significantly cheaper. In the Chicagoland area you can rent rooms out for about $400 - $600. And that usually included utilities. This is not including college town rents. This should be even cheaper!

Good Luck,
Paul
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Depending upon where you live and go to school, local city or county government agencies may be able to help you in debt consolidation. I would recommend checking this route before going to one of the advertised services.
You do not mention your age, but if you are a graduate student then I am going to take the liberty of speculating that you are in your twenties. Even if your situation is stressful right now, you still have your whole life ahead of you and you have plenty of time to turn your life around financially. This will not stop you from being financially secure and successful someday. It's up to you.
Make a long term commitment to take control of your financial life by reading about money and finances, by shopping for investments, and by practicing economic discipline.
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Chase-- $6,150 / 23.99% / min. $252
People's Bank-- $4,475 / 25.99% / min. $998 (as of now)!!!!
AMEX-- $1,350 / 23.99% / min. $80
Bank of America-$7,400 / 23.99% / min. $571 (as of now)!


Not sure if this is what some other posters mean by "consolidators". I presume it is but I'll give you my spiel on it anyway.

I have never been in your situation and I live in Australia, so other advice from people in the US who have been where you are, will probably be more valuable but here goes anyway.

What I would do is get a lower interest rate loan (the lower the better obviously) to cover all existing CC debts and pay them all out. Get this loan over the maximum time frame available but make sure there is no penalty for early repayment. Then put as much as you can afford into this loan above and beyond the required payments.
This on it's own might be enough to tilt the balance back in your favour. (Assuming you have some income already)

Tighten the belt down to "necessary" items as opposed to "wanted" items.
Increase your income but don't run yourself into the ground doing it.

Good Luck & stay positive,
Barcoo
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I am in fact in Cambridge, Mass., attending that infamous H-school... I just took out another student loan to cover my living expenses for this year, but I may have to make some changes.

For instance, I really didn't want to live with roommates again this year, so I put money down on a one-bedroom apartment--but now I don't think I can afford to pay both the high rent and my high credit card bills...


Ouch. No room for squeezing in a roommate. Can you get out of the lease and into a roommate situation? Here's the link to the graduate student housing office at Harvard - they may be able to help:

http://www.hpre.harvard.edu/RRE/gradstudent/index.html

Unfortunately, it seems that (while in school) your ability to increase your income is a bit compromised, leaving you with an even greater need to focus on expense reduction. Do you have a list of current monthly expenses, in addition to the debt payments and rent? People on this board, as well as the Budgeting board, are pretty creative in reviewing this type of information and freeing up cash.

Post of you feel comfortable!

Daisy4125
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cambridgegirl,

congratulations on coming here and starting your own very scary and very bold journey out of debt! Others have already given good suggestions as to how to perform the critical tasks of tightening your belt and reducing your expenses, consolidating your existing debts, and generally working toward spending less, and I won't repeat too much of what's already been written. There is a wealth of information, in this thread and others, that can lead you where you need to go. If you're willing to share the precise details of your situation and the actions you took to arrive there, someone here will have a suggestion that will undoubtedly make sense for you.

I would like to add one important thing: take a breath. Now, take another. You can do this. You've come to a good place to find advice and tips on how to get through this process. Some of what gets said around here can be hard to hear and harder to implement, and in your case the best "general" solutions we suggest may not even be possible to achieve for awhile. What's important is that you continue to take steps, small or large, to bring your finances back to a healthy state. Continue to research your options, but don't hide from your situation any longer. Open your bills. Read what they have to say. Keep breathing. Then ACT. These companies can only create fear in your life if you allow them to make you afraid. You got into Harvard with hard work and a little determination. You can get out of debt the same way.

Good luck!

Sarah

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Hey cambridgegirl!

Congrats – I think you have already taken a huge step by facing up to your debt. That can be the hardest part, standing up and doing something about it. This is my 3rd year in grad school, so I know what it's like living on a shoestring!

I agree with what a lot of smart people have already mentioned - now is NOT the time to get a more expensive apartment. Trust me I know how it feels living in a place you don't like, but that's what needs to be done, and you will make it!! My first year of grad school I rented out the basement of a house from a retired lady, who lived upstairs, separate bathrooms but shared kitchen. I hated it. It was freezing in the winter (she refused to turn up the heat), I had spiders in my shower and I got nit-picked for leaving the hall light on at night (in the meantime said landlady is out dining at the sushi place). But, the house was in a safe neighborhood and was walking distance to campus (25 min) and had a place to park my car. I wanted to move so bad after that year, but I sat down and made up a spreadsheet to see if I could afford a better place, and the spreadsheet said I couldn't. (Nothing keeps you honest like a spreadsheet). I almost cried that day, but I knew I didn't have the $ and that was that, I had to wait another year. You will make it, too. If you like move to a place with different roommates that costs about the same price. Even if you can't get your deposit back, it may still be cheaper to go with a less expensive place. The deposit is in the past, think only about your future.

One comment on jobs – I think this is a good idea but be careful. There is no sense getting a job that takes up so much time that you can't get your schoolwork done. See if they have any jobs on campus – there are usually jobs tutoring, filing papers, calling alumni for donations, etc. The hours tend to be pretty manageable, and you have more control over how many hours you work (probably above some minimum commitment), plus little travel time since you're already on campus. Or, look into getting a teaching assistant position next semester, especially in an area you're interested in. Be cautious – for grad students they may just pay a flat sum for say '10' hours of work, but that '10' can grow, especially if the class is poorly organized. But I was a TA as an undergrad and I enjoyed it, test weeks tended to be more than 10 hours, regular weeks were usually less than 10, and end of semester is always busier than the beginning. Or, for a couple extra bucks, see what departments run human-subject experiments – like psychology or business-decision making - sometimes they pay $5 or so.

Bringing lunch every day is a big money saver, plus our cafeteria is not that great, and I'm not real tempted by the guy serving food out of the back of the van in the parking lot :) I'm guessing your cafeteria is equally not-tempting, just 'convenient'.

Good luck! you can do it!!
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I just finished paying off over $20,000 in cc debts in 4 years thru one of the non-profit debt management orginizations. Their only charge to me was $4.00 per account per month. They negotiated lower interest rates for me (one was reduced to zero), and they were a buffer zone against incoming collection calls (I was instructed to tell the caller to contact the dept management company) and the calls stopped. They reduced my monthly payments $200 and I even received a letter from one of the banks congratulating me for coming to grips with my debts. My credit has scars that will take awhile to go away, but I can do EVERYTHING by cash since I am absolutely dept free. My next hurdle is to clean things up enough to buy a house...meanwhile, I am salting away about $1,000 per month in various invest vehicles. It takes alot of determination and self-sacrifice of personal pleasures for awhile, but you CAN get out from under that horribly heavy boulder of debt...I know because I did it. Find a debt management company to work for you and then pay attention to the FOOLS in their debt ratio, cash flow, and debt management articles and put their invaluable advice to work for you.
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Chase-- $6,150 / 23.99% / min. $252
People's Bank-- $4,475 / 25.99% / min. $998 (as of now)!!!!
AMEX-- $1,350 / 23.99% / min. $80
Bank of America-$7,400 / 23.99% / min. $571 (as of now)!


Can you answer the following questions?

01. How did your loans get so high?
02. What are the steps you have taken to keep your expenses low in the future?
03. How are you generating the income to pay your bills?
04. What is the out-of-school expected income for the education you are pursuing?

Answering these questions would be far more helpful in pursuing a plan.

- TD
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I've never written into a thread before and I'm still trying to get used to finding my way around. I had written a reply earlier but hit the wrong line. I ended up starting a new thread instead of posting to this one. It was a thank you to all of you for your encouragment to people like me. It's kind of long but if you are interested in reading it, it's under a new thread with the same name.

bluebird110
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cambridgegirl--

CG--i owe over $20,000 worth of debt to five different creditors

MPS--If my math is correct, you owe nearly $1,900.00/month in cc payments, at an average of about 24.5% interest. You are right, you need to get this under control. Congratulations on recognizing this and looking for assistance in doing so.

I see you also are now living alone in a 1-bedroom apt. This needs to end asap. Find a way to get out of the lease and move in with some other people. Or find a room to rent in someone's home. Either way I am sure you will pay less/month in rent than you do now.

Other than rent and cc payments, what other outgoing $$ are you facing? Do you purchase your own food or are you on a school based meal plan? If you buy your own food, what is it? Now is the time to start eating CHEAP. Use coupons, especially coupons for store brand items. Be especially aware of two for one deals and buy one-get one (bogo) deals.

Do you have a car? If so, is it paid for or are you making payments (how much)? If you own your car, how much/month do you pay for car ins? Is it a monthly bill, or do you pay quarterly or semi-anually? Do you really need it? Can you sell it and use the money to pay off a creditor?

Do you have Internet Service you have to pay for? Do you need it?

Do you belong to a gym and pay monthly dues? Do you need to?

Do you have a cell phone? Do you really need it?

Do you have cable TV? Do you really need it?

Othar than incoming student loans, I do not see where you have any incoming cash. Is this true? If not, how much do you have coming in?

CG--i have been hiding from the situation for months, and now i am dodging constant calls, and avoiding opening my mail to see the late fees, overlimit fees, and interest rate charges.

MPS--This tells me you are already beyond any hope of consolidating your CCs onto one of those low/0% credit cards. Unfortunately you are now in the high risk bracket for creditors and getting any credit at all is not likely, let alone a low rate card. So let's not even consider that as an alternative.

I would suggest the following. Call each one of your creditors. Ask to speak with the credit department. Make sure you get the name and number of each person with whom you speak. Have a copy of the last bill/statement from each one when you make the call. Explain your situation. Be honest--you are in over your head and you are looking to get the situation rectified. Explain to the person with whom you are speaking you will be utilizing a consumer credit counseling (CCC) service. Ask which ones thy recognize. (I recommend this because when I went this route, two of my five creditors did not accept the service I chose. This was a rude shock to me!)

If you get any that all five of your creditors recognize, call them and get a detailed explanation about how their service works. If not, see if there is one the majority recognize and see if you can get the one to that doesn't to do so.

Please keep in mind this is not a "Credit Repair" serice. No such entity exists. CCCs exist to help folks like you get out of a tough spot (and help you learn how to better manage your credit) without having to resort to bankruptcy.

While you are using the service, you will not be able to get any new credit. This is because as long as your bills are being paid by the CCC Service, a statement will show up on your credit report the account is being managed by a CCC Service. This is a red flag, so be prepared to not be getting any new credit anytime soon.

Once you are in the service, it is your responsibility to manage your credit report. Monitor it closely. As each creditor is paid off find a way to get a copy of your credit report about 2 monrths after the bill has been paid in full. Make sure it is reflected in your credit report and also be sure your CCC Service is no longer listed as making your payments for you. If this is still being shown, get a hold of your CCC Service rep and aks they inform the credit reporting bureau they are no longer making payments on your behalf.

Once you're out of school and in the working world, you will likely start having some incoming $$ higher than you have now. Find out how to send as much of that extra cash as you can to your CCC Service. Instruct them to apply the extra $$ to the one you owe the least to. Once it is paid off, take the money you were paying toward that bill and direct the CCC Service to apply it to the next lowest balance. Continue in that manner until you are all caught up.

I know this sounds like a lot of work. It is. It is far more difficult to get out of debt than get into debt. But, if you scrimp, save, and pinch every penny until it screams, you'll come out ok in a few years.

Good luck.

Marty

PS, feel free to email me with any other qestions.
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thanks to everyone for the amazing advice!

I have already begun looking for a roommate, and have some good leads. with any luck, i will be moving into a cheaper place by sept. 1.

for all who asked about any additional income--i do work as a teaching assistant, which brings in about $6000 per semester (in addition to my student loans). I can't really earn any more than the "student budget" or the school will basically just take the difference and apply it directly to my tuition. and i can't lie about making money on the side, either, since it would be an ethical violation and could put my future acceptance to the bar at risk.

as far as the future, i do have a job offer from a new york law firm, which will bring in a six-figure income (before taxes). however, i won't be joining the firm until next september, so in the meantime, i'm still in this bind.

i will send another update after making calls to the creditors...(scary).

thanks again!
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<<as far as the future, i do have a job offer from a new york law firm, which will bring in a six-figure income (before taxes). however, i won't be joining the firm until next september, so in the meantime, i'm still in this bind.
>>


I'm glad to hear you will be able to begin your career with a generous income. Any idea if the firm you will be joining will be looking at your credit history, and if so whether they consider a good credit history a condition of employment?

Just guessing, but a bankruptcy might result in a job offer being withdrawn, but late payment on credit card or other debts as a student might not be penalized. It might be worthwhile to make some inquiries as to such rules to find out for sure ---that might influence your decision making in how you handle these debts.



Seattle Pioneer
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I have already begun looking for a roommate, and have some good leads. with any luck, i will be moving into a cheaper place by sept. 1.


Good luck! Last I checked the Harvard Housing office has a pretty good bulletin board for rentals and roommates (ok, it's a database now, but I think of it as a bulletin board.) I hope you find someone you'll like living with, and if you don't it will only be a year. Just don't agree to live with anyone who makes you afraid or otherwise uncomfortable.

Similarly, it's only another year of being a student. Aside from making sure you have decent clothes to show up to work in, you should not make any significant purchases. If the new apartment doesn't have stuff you'd like just do without or find it at goodwill. (Or if you have time around movein go curb shopping. You cannot believe how much stuff will be out on the curb this weekend in Cambridge, Boston and Somerville as such a great percentage of the population has September 1st move dates.)

i can't lie about making money on the side, either, since it would be an ethical violation and could put my future acceptance to the bar at risk.

A certain level of bartering should be acceptable under the radar; doing favors for people and having them take you out to eat and the like. I know your time is tight, but try to figure out this when you can. (For example volunteering as an usher at the ART to get to see shows for free.)

i will send another update after making calls to the creditors...(scary).

Try to put on your "lawyer hat". Imagine that you're calling the creditors to get lower rates because it's your job, not because you screwed up in the past. This might make the process less scary.

Meanwhile good luck with your classes, don't forget to take advantage of the many cheap entertainment options around Harvard, and if you run out of food money email me and I'll have you over for dinner.

- Megan
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as far as the future, i do have a job offer from a new york law firm, which will bring in a six-figure income (before taxes). however, i won't be joining the firm until next september, so in the meantime, i'm still in this bind.

Greetings, cambridgegirl, congratulations on your future prospects. As a former med student and as a newly minted physician, I cannot overemphasize that you must live now within your present means and not live as though you were already earning your higher income! It's great that you are taking serious steps towards the former. Far too many of my classmates banked on that bankroll but were sadly surprised to learn that it didn't necessarily materialize when (or how) expected. Some of the start-up costs for opening a practice did them in, as well as offers that were made that were not binding. And so on, and so forth - nothing you don't already know, but it is all too common for those training for professional careers who have scrimped along the way to become dazzled by what seems like a lottery win of a potential income and to start spending it before they have it, with dire consequences. I agree with Seattle Pioneer's suggestions!

xraymd

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Good Point, Seattle.

Catleen
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Cambridgegirl-

I have a bit more advice specifically on paying off the credit cards.

I agree that you should be concerned about the drawbacks of settling this debt on your future credit rating. More so because if you can get through this year you should be able to pay off the debt within six months of your future employment. So if you can pay the monthly minimums I say you should not try to settle or consolidate your debt, instead you should pay it in full.

Do you have enough income to pay your monthly payments and rent? If not you have a different kettle of fish. So the zeroth step is to figure out your budget. Cheap housing, food, toiletries, and the textbooks you can't take out of the library. How much does that add up to? How much of your monthly expenses does that leave to pay off the cards?

Assuming you can meet the minimums, here's my recommended plan of action.
- STOP USING THE CARDS. Not for a single thing. Not to pay for books. Not to pay for shoes. Not for any reason. Even if you have enough money to pay for the purchase, you can't afford the month of interest on those new charges.

- PAY ON TIME. As long as you have a history of late payment it will be harder for you to get lower rates. Do whatever you have to do to make the payments on time -- write it in your assignment book, pay them as soon as you deposit your paycheck, cover your apartment in sticky notes, write on the milk jug with a sharpie. Whatever system will work for you, use it. You can't afford an extra penny of interest or late fees right now. First pay the cards, then figure out how much you have left to live on that month.

- CALL AND ASK FOR LOWER INTEREST RATES. This is your new job. Every month call each and every one of you creditors. Ask them to lower your rate. If the customer service rep says she can't, ask to speak to a supervisor. If the supervisor says she can't lower your rates ask her what you need to do to change that.

- PLAY THE BALANCE TRANSFER GAME. Go scavenging for low interest rate offers. They may be hard to find if you have a lot of late payments, but keep looking. When you find one, read the fine print. You eventually want to be a lawyer, right? You should be able to figure out the terms of the cc offer. Once you don't need balance transfers they fall in your lap, so try to get to the point as quickly as possible.


Next is normally the step where people recommend snowballing. I think that it is more important for you to get through this year living below your means than trying to pay off the entire $20,000. If you get the habit now of only spending the money you have you will be well set up to pay off the cards and save next year. But you can't start buying more stuff just because you'll have a job. Hold off on job purchases until you've already started work.

This is going to be a hard transition. You've gotten used to spending money first instead of figuring out how much you have to spend. Changing those habits is not going to be fun. But imagine yourself in five years with enough downpayment to buy the house of your choice and a good start on your retirement funds. That will be fun.

If you can't meet the minimums, you have more hard decisions. You can try to sell some of the stuff you bought with all of that credit, but that probably won't help enough. You can ask your family for two year "cash-flow-problem" loan. Or you can enter credit consolidation or settle with your creditors yourself, which will be a black mark on your report for a few years.

But you've already made a great start. You've realized that you can't keep ignoring the bills. You know that you need to fix this problem. Whatever method you choose your future self will benefit from your work now.

Good luck!
- Megan
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cambridgegirl,

I was amazed to read, i will send another update after making calls to the creditors...(scary).

Amazing. An aspiring lawyer that's scared to call a few creditors.

Personally, I don't think that's as tough as standing up before a judge and jury and trying to defend (or prosecute) someone, even if it is just a civil trial. Good grief, your client, the jury and the entire judicial system will be depending on you then. Right now, the only one counting on you is you.

Calling a creditor is nothing. Get used to it; it probably won't be the last time you'll need to make such a call.

- Joel
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Amazing. An aspiring lawyer that's scared to call a few creditors.

Personally, I don't think that's as tough as standing up before a judge and jury and trying to defend (or prosecute) someone, even if it is just a civil trial.

******

Don't be too harsh.

I can speak from experience- it's hard calling creditors. Personally, when I was mired in debt, I felt like they had the upper hand. I was getting rejected for balance transfers I received in the mail. That's not something that'll give you the courage to call and convince people to give you a lower rate. I was so maxed out for my income that I couldn't even threaten to transfer my balance anywhere else.

I didn't have any negotiating power until I started getting my debt down a couple thousand dollars (giving me a little wiggle room).

In my experience, creditors aren't that accommodating when you have no where else to go.
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Calling a creditor is nothing. Get used to it; it probably won't be the last time you'll need to make such a call.


If someone has a bit of nervousness about doing something for the first time, a doctor can prescribe some Inderal (or other beta blocker) for a one or two time thing. It's a safe, cheap drug and it can help you get past "stage fright."

Once you see how easy it is for the first and second times, you'll itch to call people and talk. I know some people who can make a person on the other side of the phone do or say almost anything. And this is someone who was once shy.
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In my experience, creditors aren't that accommodating when you have no where else to go.



And they generally know it.

Catleen
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Calling a creditor is nothing. Get used to it; it probably won't be the last time you'll need to make such a call.


I don't know cambridgegirl's reasonings, but I can tell you why I would be more intimidated by calling the CCC than by doing things that seemed much harder at work.

The reason I have to call the CCC is because I screwed up. So I have to deal with the emotions of being angry at myself. At work I'm coming from a position of power. At home I'm weak.

- Megan
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cambridgegirl can sublet the living room, a friend of mine rented the living room in a one-bedroom apartment for $600 a month (the total rent on the apartment was $1800 a month). This was in the Back Bay, not Cambridge, but I'm sure you could find a suitable person to live in your living room, and it helps a lot with the rent (though not as much as, say, splitting a two-bedroom with a roommate in Somerville or some such place).


--Booa (my friend lived in the living room, BTW. :-)
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