Years ago my friend Michael lived in Toledo, Ohio and had $53,000 of credit card debt. He was desperately trying to avoid bankruptcy so he contacted a debt consolidation agency that instructed him to stop making payments for 6 months. This was so the credit card companies would abandon all hopes of getting their full sum and acquiesce to the debt consolidation agency’s offer. The plan was to pay 60% of the debt while doing away with the interest. Michael had 5 credit cards to deal with and when the consolidation agency contacted them, all but one immediately agreed to the terms. That holdout bank was Citibank. As a policy, Citibank always waits it out for the full 6 months. Maybe this is so they can let interest accrue so the final amount owed is more.
Anyway, Michael was excited about the new payment plan that would allow him to avoid bankruptcy. But the problem was he was unemployed an taking college classes as a full time student. after much job searching, he was able to find a temp job with Manpower. And the first paycheck would have come in time for the first payment of the new deal. but since Michael was homeless and living out of his car, he decided to use the direct deposit option. Well, the direct deposit payment status was not implemented quickly enough and the check was sent to a relative’s address in another state (How many of you have had problems with the first direct deposit payment? I have had no payment due to slowness 3 times.).
Because Michael didn’t have enough gas to get his check, he was out of luck. In fact, Michael had already sent a check to the debt consolidation agency thinking the money would be in his account and this check ended up bouncing, giving him an even bigger headache. And then… the collection calls started again. The banks became devious and even contacted his relatives. One was a collection person was actually a lawyer in Toledo that promised to sue. These calls continued for another 2 months until Michael finally found a real job offering a very high salary.
On the first day of his employment, Michael called his credit card companies with a strong satisfaction that comes with tackling the problem of debt. Four of the banks told him the final amount owed. But one said that 3 days prior, they had sold the debt to another company. When Michael called this company, he told the man that he finally had a job and could make payment arrangements. But the man at the other end said he had already decided to sue.
What was Michael’s mistake? HE SAID THAT HE HAD A JOB. With this in mind, the devious person who had bought the debt planned to sue and win 6 times the original amount in court. The new amount could then legally be garnished from his paycheck. Well, when Michael heard the refusal, he knew it was time to declare bankruptcy, which he did the next day. We can learn a lot from this true story of a responsible and conscientious person person who fell prey to the dark system of easy money. First of all, he didn’t borrow because of laziness. He just needed money to get through school. Secondly, we can see that accruing debt can blind side you, even if you accept it for the noblest of purposes.