Case 1:

Susan B teaches math to high school seniors and juniors. Her and her husband Kyle have been using credit cards for years and have never carried balances of over $1000 on each; they have never made a late payment and had reasonable interest rates.
During the recession her husband lost his job but they have been making ends meet on her salary, his unemployment and credit cards.  They have 2 year old twins that they are taking care of and have started relying increasingly on credit cards in hopes her husband will find a job so that they will pay off their rising debt.

After six months, her husband still doesn’t have a job and paying only the minimums on their credit card debt got it from $7000 to $40,000 and they are almost maxed out on their cards. They are looking at not being able to pay the minimum next month.

Solution: In this case, Susan realized that they are in a deep mess but do not want to file bankruptcy. She started negotiating with her creditors and paid out $22,000 over the course of two years, avoided bankruptcy, and is now ready to rebuild her credit.


Case 2:

Robert has had credit cards since he was 17. He has built up a credit score of 790 and has almost $60,000 available in credit but because he knows the game credit cards play he doesn’t have more than $3,000 and all of it is in 0% APR. He’s only 23 years old with a job that pays him $2500 that he uses wisely. Because he’s so young and healthy, Robert forgoes the medical insurance offered to him because that’s an extra $100 in his pocket every month he can use to go out with.

He promises himself to pay off all the credit card debt before the 0% rate expires in 2 months and goes up to 17%.
He then decides to go on a ski trip with his friends as he always does every winter, except this time he slides on an ice patch falls and breaks his leg in several places. He is taken to the emergency room that night and has to undergo surgery.

Robert is now facing $30,000 of medical bills he doesn’t know how he will be able to pay.

Solution: Robert has never been in this situation. Robert paid off his credit cards immediately and started negotiating down his medical bills. He had some tough collection calls but under cool composure was able to negotiate his debt down to only $14,000 over the course of a year and a half.

Case 3:

Jim and Marry have been married for 15 years with Jim making $40,000 a year and Marry only making $20,000 a year. For the past few years they have made some large purchases on credit cards figuring they can afford to pay only 11% interest on them. They have always paid just the minimums on their credit cards. They have accumulated about $20,000 in credit card debt they are managing every month.

On his yearly physical check up Jim finds that unfortunately he has prostate cancer, but it is still treatable. His insurance covers the majority of the costs but he still has to pay $10,000 as part of his insurance package.

That is not the worst part. He now is on disability earning only $16,000 per year as his condition took him away from his job.
Jim and Marry are now looking at defaulting on all their debts as they scrap to make ends meet.

Solution: most bankruptcies arise from medical hardships. Although their expenses are still manageable, the debt isn’t, and they do not want to file for bankruptcy. through their medical hardship, Jim was able to negotiate paying off $6,000 on their credit card debt and $4,000 on medical bills.


Case 4:

Carol and Andrew have everything they could possibly need. Andrew makes $65,000 a year and Carol makes $50,000 a year. They have a home, two nice cars in the garage, 3 kids, and two pets.

Carol has borrowed $30,000 to fix up the home a year ago, and Andrew recently bought a nice big screen TV and surround system for the living room which cost him about $5,000.

They have been living it up and enjoying life racking up about $50,000 in debt over the past 7 years with rates from 6% on new credit cards and 22% on department store cards. So now they are looking at about $85,000 in unsecured debt.

Carol always pays the bills; she sent in a payment by mail like she always does but waited a couple days too long to send it. She was late on her card payment. The credit card company reversed the late fee but now her rate on about $35,000 in debt went from 10% to 25%.
They continued living their lifestyle comfortably for a few more months paying only the minimum payments on their cards. Before they knew it Andrew and Carol were almost maxed out on their cards, and because their credit score has been going down steadily, all their cards are now above 17%.

Carol realizes that all their extra income is going straight towards a credit card balance that just won’t go down and now they are out of credit.

Solutions: Carol decided to stop spinning their wheels. She realizes that at this rate it would take them 40 years or more to pay off the debt and instead decide to negotiate their credit cards and pay off only 50%.