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How Would You Pay Off $92000 In Credit Card Debt?

September 26, 2011 · 40 comments

in Personal Finance

Don’t worry, I do not have any credit card debt.

However, a pastor and his wife living in Michigan sure did.

The Story Of A Couple That Found Themselves in Massive Debt

According to an article on Yahoo Finance, Jerry and Sue Bailey managed to charge up $92,000 in credit card debt, spreading it across 17 credit cards.  What makes things worse is that the wife had no idea.  See, Jerry was kind and protective.  He didn’t want to upset his wife, so he hid all the debt from her.  I mean, she knew they were spending money, but she didn’t know that debt was piling up.

That is, not until those pesky creditors started calling.

Jerry also admitted to Sue that the cost of their daughter’s wedding would have to go on a credit card.  The evidence started piling up that they really did have money issues, and the couple went through and totaled up their debt.  The grand total of debt was $92,000, which  was nothing short of shocking.

I don’t know everything the Baileys spent their money on, but at least the major expenses that were listed were not totally frivolous. The major expenses were 2 weddings (at $5000 each), home repairs, a new roof, and a new car transmission.  Obviously, there is a lot more baked into that $92k than the major expenditures listed above.  However, unlike many other people with massive debt, at least they had a little something to show for it.

Where The Baileys Went Wrong

I don’t know the whole story behind the family, but I see some real issues with how this couple managed their money.

  1. There was not open communication between the husband and the wife.  I am not saying that the whole family needs to know every detail of how money is spent.  However, debt should never be hidden, and finances should be a discussed frequently between the adults (and sometimes the kids) in the household.
  2. Pastor Jerry, who managed the finances, didn’t even know how much debt they had until it was all added up.  I know the end result may not always be pretty, but people need to keep track of how much they owe and how much they have saved.  That is the only way to handle both today’s expenses, and expenses that are likely to occur in the future.  Spending and then  putting your head in the sand is a recipe for disaster.
  3. The couple had 17 credit cards!  How in the world do you manage 17 credit cards?  There should be a maximum number of credit cards a family can have, 17 is just ridiculous in my opinion.
  4. Jerry and Sue bought things they couldn’t afford.  OK, so when the roof leaks, you have to fix it.  However, you don’t have to pay for a wedding if you don’t have the money.  I am sure many parents would love to pay for their child’s wedding.  However, if you have to pay for it with a credit card, then you need to have a discussion with your kids and set realistic expectations.  In other words, sometimes a parent just has to say ‘no’.
  5. They didn’t have an emergency fund.  Going back to my previous point, roofs will leak and people will get married.  Neither of these expenses are shocking, and they both should have been planned for.  Had the couple experienced huge medical bills or something that couldn’t be anticipated, then that is one thing.  However, there are some things you can pretty much count on in life- homes all eventually need repairs, and kids  grow up and start families of their own.  People need to save for those expected expenses and not just react as they happen.

Where The Baileys Went Right

Now, I am not an expert on all the resources available for getting out of massive debt.  However, the Bailey’s did not go it alone, which was smart.  Jerry and Sue tried contacting their credit union to discuss their debt problem, and the credit union just advised them to file for bankruptcy.  Whereas bankruptcy MAY have been a good financial option for them, I applaud them for not going the bankruptcy route.

Since the couple decided that bankruptcy was not an option for them, the credit union advised them to contact a non-profit credit counseling agency, which they did. What the agency did for the Baileys was manage the payment to all the creditors.  All the Baileys had to do was send one monthly payment to the credit counseling agency, who would disperse the funds to the various creditors.  I imagine that when you have 17 creditors, having just one point of contact must be a huge relief.  (Not only do these agencies handle payment to the creditors, but may also negotiate lower interest rates on behalf of the payee.  Also, I have no idea if there was a fee associated with the credit management service, the article did not specify.)

It took 5.5  years, but the Baileys eventually got their debt paid off, and they definitely learned some hard lessons along the way.

How I Would Pay Off $92,000 In Credit Card Debt

I found this article interesting, because prior to reading it, I didn’t really know that non-profit organizations existed that would handle the task of disbursing debt payments to all your creditors.  I know a debt consolidation loan would work similarly in that you would pay off the credit card debt with the money taken out from the loan.  However, whatever debt reduction strategy you follow, you must make sure you destroy those credit cards immediately.  Have a card-burning party or something, and vow to not take on new debt while you have a loan balance

Anyway, if I lost my mind and somehow charged up that amount of credit card debt, I would probably refinance my home and pay everything off. I know that is putting my primary residence at risk, but with interest rates so low, that option would probably make the most sense for me.  However, I would also cut up my credit cards and involve everyone I knew in helping me control my spending.  I would tell friends I couldn’t eat out and would go for walks with them instead.  I would totally revamp my life and spending habits to help ensure I never found myself in that horrible situation again.

So how would you pay off $92,000 in credit card debt?

 

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{ 39 comments… read them below or add one }

The Biz of Life September 26, 2011 at 8:10 am

I’d definitely have to lose my mind and all my senses to get into this kind of shape. First, I would destroy all my credit cards, go back to cash for every purchase, and put myself on an incredibly tight beans and rice budget. Then I’d take out a low-cost home equity loan to pay off my high-cost credit card bills, and pray that I have the fortitude to quit the binge buying cold turkey.

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Kris September 27, 2011 at 3:36 pm

My senses would have been gone too Biz. I would probably turn to pea soup instead of rice and beans, but I would behave very similarly.

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Jacq September 26, 2011 at 8:24 am

What I find curious is that if they were applying for new CC’s, shouldn’t they have to report the liabilities owing on the other ones to do that? (And should have been declined when doing that too on the basis of excessive ratios.) It’s been so long since I’ve applied for one that I don’t know if that’s true or not though.

Then I’d do like The Biz above and what they probably did and go cold turkey. To get out of debt entirely years ago, I went cold turkey but also sold my house to do it faster. In hindsight, I didn’t have had to do that. Ah well, lesson learned.

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Kris September 27, 2011 at 3:35 pm

I think Pastor Jerry kept one credit card just for emergency sake and that is it. I really don’t know the criteria for how credit cards are doled out. I know in college companies were more than willing to ply me with credit. I could have gotten into real trouble if I didn’t have a decent head on my shoulders.

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Jacq September 29, 2011 at 1:41 pm

So you’re telling me I didn’t have a decent head on my shoulders? LOL, tell me something I don’t know. 🙂 (Just kidding.)
No, you’re right – a big thing too in the not so distant past was CC companies upping your limit at their discretion, not upon your request. AND they do it when you come close to your limit – AND say such wonderful things like “since you’ve been such a good customer (ie. paying us tons and tons in interest), we’re raising your limit!!!!” Gee. Thanks.

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20's Finances September 26, 2011 at 8:51 am

92K! That is crazy! I guess I would have to go to the extreme. I might sell the house (or try) and see if I could move in with someone to avoid housing costs for a short time. Then, cut all unnecessary costs and start working away at those crazy bills. I would definitely look into consolidation as well.

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Kris September 27, 2011 at 3:34 pm

20s, it looks like they found a good plan that worked for them considering they did get it paid off. Selling the house in this cruddy economy is not always a viable solution unfortunately. Lets just hope they keep their finances in order and learn from this. If nothing else, they have been a living lesson for everyone that knows them. We can at least be grateful they paid their debt instead of walking away.

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Little House September 26, 2011 at 9:53 am

That’s a crazy amount of credit card debt! If it were me, I think I’d also contact my credit union for help, get a night job or find ways to make extra income, cut up those cards, and get serious about finances by starting a budget and finding out how I spent all that money! If I were Sue, I’d get involved in the finances as well.

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Kris September 27, 2011 at 3:33 pm

Sue has to sit at the table with Jerry and go through the bills together each month. If I found out we had that kind of debt all of the sudden, I would go insane. His intentions may have been good, but ‘protecting’ sure didn’t work out well in the long run.

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Jenna, Adaptu Community Manager September 26, 2011 at 2:48 pm

I don’t think I could ever get to $92,000 in credit card debt even if I tried. But I would probably admit my mistakes and then get help from a support group like Adaptu’s Crush Debt: https://www.adaptu.com/groups/crush-debt

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Kris September 27, 2011 at 3:32 pm

Jenna, Adaptu does have a lot of great tools available to help manage money. Keep getting the word out!

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Ashley @ Everything Finance September 26, 2011 at 3:26 pm

That’s a lot of debt! Good for them for getting it all paid off. Seems like once they put their mind to it they got it done.

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Kris September 27, 2011 at 3:31 pm

Ashley, can you imagine the piece of mind you would have if you paid that amount of debt off! I would definitely go out to a nice dinner. (With a coupon…)

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Lola September 26, 2011 at 3:33 pm

I looked back at the Yahoo article, and it looks like the Baileys got in trouble over a 13 year period of time (1992 -2005). I would guess that a big chunk of the $92K was due to the work of very high interest rates on unpaid balances. And if they were ever late (and with 17 credit cards, you can just about bet they’d forget to get a payment in by the due date, especially back in the days before online payment when you had to mail your credit card bill in) – well, I shudder to think of the amount of other fees that the banks piled on!

In the article, it also said that as part of their work with the debt consolidators, they had to take on extra work. They went on to say that they had to give up a lot of time that they would have liked to have spent with their children and grandchildren, but they faced up to their debt and bit the bullet for 5.5 years to pay off all that they owed.

Your observations are right on target for avoiding this kind of mess, especially putting communication right on top. It’s hard to say how wild they were with spending, but clearly, they weren’t thinking about saving up ahead of time for emergencies, fun events, etc.

They didn’t mention any health expenditures, so I’m assuming that they were able to take on second or third jobs to contribute to debt payment, which is lucky for them. The saddest debt stories, I think, are the ones where folks have been injured in an accident or comes down with a medical condition that knocks them out of work.

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Kris September 27, 2011 at 3:31 pm

I think the only healthy expense was Mama Bailey hurt her foot and was out of work for awhile. I wish the article had gone into more detail, it really only pointed out a few major expenditures. Sounds like Jerry was old school and wanted to just take care of the nest himself. However, it sure didn’t work out very well.

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retirebyforty September 26, 2011 at 4:19 pm

I’m really impressed that they were able to pay it off. Kudos to Pastor Jerry and his wife. I think most people would have just filed bankruptcy and get on with their lives.

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Kris September 27, 2011 at 3:29 pm

I totally agree RB40, most would go into bankruptcy. It would definitely be tempting, 92k is a lot of money to come up with.

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krantcents September 26, 2011 at 8:37 pm

I am glad that paid off the debt, however I hope they learned from their mistakes.

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Kris September 27, 2011 at 3:28 pm

I hope they learned too. According to the article they did, but once the experience is no longer fresh in their minds, who knows.

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Financial Samurai September 26, 2011 at 10:53 pm

Honestly, I would just click the transfer $92,000 button from savings to my linked credit card (s) accounts.

The only way you can get into $92K in CC debt is if you make enough to pay off that debt!

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Kris September 27, 2011 at 3:28 pm

Not so sure Sam. I think a lot of people are extended credit that they can’t really afford…

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Denise @ The Single Saver September 27, 2011 at 9:01 am

Don’t be so sure you COULD refinance your home if you had that much credit card debt! If I had that much debt (and didn’t have the cash to pay it off – which I am guessing they didn’t) I think I would be getting 2nd and 3rd jobs in order to pay down the debt ASAP. It would be a daunting task, that is for sure.

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Kris September 27, 2011 at 3:26 pm

Denise, that is a really good point. I just instantly thought about how the home equity would be tapped but I probably couldn’t get a HELOC with all that debt. Getting multiple jobs and cutting costs to the bone would probably be the answer, outside of bankruptcy.

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Anson Aninao September 27, 2011 at 4:21 pm

Hi Kris, it breaks my heart that individuals have the capability to accumulate so much debt. I do feel however by spreading the word about these credit counseling agencies will help many in the future.

Anson Aninao

http://powerpenny.wordpress.com/

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First Gen American September 27, 2011 at 4:49 pm

I would definitely work as many hours as I had to to get the debt behind me. Hiding almost $100K in debt would have put my marriage at major risk of breakup if it were me. I don’t know how I’d be able to trust my spouse after keeping something so big from me especially if I could have done something about it sooner before things got out of hand.

I think I’d probably go the debt consolidation route or credit counseling route too. It’s too overwhelming to have to deal with 17 bills plus all their normal utilities, etc. What a mess that must have been to manage.

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101 Centavos October 1, 2011 at 9:53 pm

I agree with previous commenters, 17 credit cards would drive me bonkers. How in the world could lenders iSsue so many?

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Molly October 2, 2011 at 1:38 pm

We were in $70,000 in debt. As much as our eyes were open (we both knew how far in debt we were and what our monthly expenses were) it wasn’t until we changed our style of living did we get rid of it. The first 1/2 took us over 3 years to pay off. The second 1/2 we did in 7 months. Our income had increased but it was coupled with huge cuts in our spending.

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Kris October 3, 2011 at 8:19 am

Congrats on knocking out that huge amount of debt Molly. I bet you guys still managed to have a lot of fun along the way though. As a matter of fact, I bet you have just as much fun spending nothing as you did when you overspent!

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phlebotomy salaries October 3, 2011 at 12:53 pm

I’d definitely have to lose my mind and all my senses to get into this kind of shape.I agree with previous commenters, 17 credit cards would drive me bonkers. How in the world could lenders iSsue so many? great article sounds inspiring ..

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Kris October 3, 2011 at 11:46 pm

I don’t know how anyone gets issued so many cards either. Shame on the industry!

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air conditioner problems October 6, 2011 at 5:39 am

Tips and Thoughts… are very awesome ,I think a lot of people are extended credit that they can’t really afford…

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Travis @debtchronicles October 9, 2011 at 2:22 pm

This story hit home to me….because it’s almost exactly the same as my story – except my wife and I are fighting our way out of $109,000 of CC debt. Lack of communication was also a HUGE part of our relationship over the first 14 years of our marriage. During the days of fast and free credit, you’d be amazed at how easy it was to get another credit card to keep the number growing….

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Travis @debtchronicles October 9, 2011 at 2:27 pm

I should also mention that we are using a similar Debt Management Plan to pay off our debt. In December we’ll be half way there…

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Kris October 10, 2011 at 11:26 pm

Travis, how long have you been paying it off? You should do a little something to celebrate your accomplishment in December of being halfway done. That is a big milestone.

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Travis @DebtChronicles October 11, 2011 at 5:48 am

We started a 60 month program in July of 2009…so in December we’ll have been paying on it for 2.5 years. We may celebrate a little (maybe I’ll cook my wife her favorite at home) – but it’ll be low key. 🙂

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Kris October 11, 2011 at 11:37 pm

Low key is often the best way to celebrate. A homecooked dinner, maybe a trip to the dairy queen and a movie from Netflix sounds real nice to me.

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Kris October 10, 2011 at 11:27 pm

I give you credit for working through these issues together instead of just blaming each other and ending up divorced. Did you cut up your cards? Congratulations on facing a difficult situation and tackling that debt!

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Travis @DebtChronicles October 11, 2011 at 5:50 am

Thanks Kris, appreciate it. We had no choice but to cut up our cards. Part of the process of a debt management program is that in exchange for lowering your interest rate and negotiating a monthly payment, your creditors close your account. Suddenly not having any lines of credit to rely on (and to continue to feed our mountain of debt) was quite a shock. It’s still a struggle, but we’re making it work.

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Kris October 11, 2011 at 11:36 pm

I totally give you credit Travis for going through and respecting the process. I am sure it will alter your spending and saving habits for life, which is a good thing.

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