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Digging out of debt from a
foxhole
Dear Debt Adviser,
My wife and I are in debt up to our eyeballs and
beyond. I am deployed in Kuwait with the U.S. Army and have been drawing
two salaries. Since my employer has been so generous, we have been
able to pay off a good deal of debt. However, I just noticed on my
credit report that those closed accounts indicate that we had been
late on our payments prior to closing. We just received a tremendous
windfall gain, which we intend to use to pay off all our debts and
still maintain an emergency fund of roughly 6-8 months. How do we
get our creditors to re-age our accounts or use some other procedure
to give us a clean credit report? I want to use the leverage of paying
them completely off if they will clean our credit report. Should I
hire someone to assist or can I do it myself? Please help!
Sam
Dear Sam,
Thank you for the letter, and thank you for helping to keep
America, and that includes me, safe from terrorists. Your situation
is a bit unique. Most servicemen and women who are activated end
up with half a paycheck, not two!
The last thing you need is to be worrying about finances
back home at a time like this. I will assume that the debt and credit
issues predated your call-up. Even if they didn't, the Soldiers
and Sailors Act might be helpful. Here's my advice.
The Soldiers and Sailors Act offers help to service
personnel on active duty by making you eligible for a 6 percent
interest rate cap on loans and credit cards, and by placing on hold
any civil actions brought against you.
Negotiating
with your creditors is something you should be able to accomplish
yourself. Contact each of your creditors to let them know you plan
to pay off your balance in full and that you are requesting that
your account be listed as current on your credit report. I generally
recommend keeping these negotiations on the lines of what the creditor
will get out of it. However, due to your extenuating circumstances,
I would mention that you are deployed overseas and that you would
like that fact to be taken into account by them to update your payment
history to "paid as agreed." If the creditor agrees, ask
that the agreement be put in writing and mailed to you. If you can
not come to an agreement, get the name and address of a manager
or vice president.
If the creditor is not willing to put the agreement
in writing, keep careful notes of your conversation, to whom you
spoke, the date and the details of the agreement. Put the agreed-upon
actions determined by your conversation in a letter and mail it
certified, return receipt requested, to your creditor.
For creditors that are unwilling to help, you may
want to send on-time payments while at the same time sending a second
request for consideration to a manager. Keep in mind that creditors
are not obligated to do what you are requesting, and you are appealing
to a sense of decency and, to a degree, patriotism. They don't want
to trade places with you anytime soon!
Having said that, creditors are interested in getting
paid and your willingness to pay the accounts in full should be
just the right amount of incentive for your creditors to agree to
help.
Between your employer's generosity of continuing your
salary while you are deployed and your financial windfall, you should
be able to dig yourself out of the "eyeballs and beyond"
debt situation. But what about the future? How are you going to
avoid getting into debt all over again when you come home?
I would suggest that if you do not have one already,
you and your wife create
a spending plan. Write down all your expenses and your income.
If your expenses exceed your income, there are only two options:
increase your income or decrease your expenses. With a spending
plan in place, you are much less likely to end up in debt again.
Good luck and my wishes for your safe return!
The Debt Adviser, Steve Bucci,
is the president of Consumer Credit Counseling Service of Southern
New England. Visit CCCS
for additional debt
advice or click
here to ask a debt question.
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