As you can imagine, if I had a dollar for every time I heard that one, I could pay EVERYONE’S bills. Most of the debt I hear about is credit card debt, and believe it or not, it’s usually an amazing $35,000 to $50,000 or more. The largest amount someone ever told me about during a counseling session was $250,000 in credit card debt. I hope I kept my voice steady and that I did not gasp audibly!

So who are these people calling me with this incredible debt? Did they go on wild spending sprees, order $10,000 bottles of wine (even that’s hard for me, a wine lover, to imagine), remodel their entire home with top interior designers or travel around the world on their credit cards? Nope, I’ve actually never heard these things (or maybe people are just not telling me). I have heard people confess to being young and irresponsible, but that’s usually about $8,000 on cards, not $80,000.

Invariably, when someone comes to me and they have staggering amounts of debt, the first thing that comes out of their mouths is the background story of their debt. Usually I try and steer them off this story. It’s not that I don’t care, but really, me knowing how they got $100,000 in debt is not going to help them get out of their problems, and I charge by the hour. Of the stories I’ve heard, though, credit card debt happened because of one of three reasons:

• Job loss, and living expenses are financed by credit cards
• Business start up that failed and the business was financed by credit cards
• And now the new one: the economic down turn forced a small business out of business, and to pay bills, credit is used to meet expenses, both personal and business.

I also get the occasional medical bill disaster, where the person was not insured medically because they could not afford it or a job loss canceled the medical insurance. The saddest case I heard was a woman whose husband lost his job (economy) and as a result, their medical insurance. He died due to heart problems immediately afterwards. Her form of comfort from the hospital: a $2.5 million medical bill.

So what do you say to someone who has staggering amounts of debt and no money to pay it? Unfortunately, the options are limited:

1. Don’t pay your bills. You’re risking a lawsuit, but you can defend yourself from creditors in court if you know a few tricks. No matter what, though, ruined credit is a certainly.
2. If you have cash, negotiate a settlement. You need lump sum cash - payment plans are not going to cut it unless you can pay the entire settlement in 3-6 months.
3. Earn more money - maybe get a second job? I know this is sometimes easier said than done.
4. Cut down on expenses, use the extra cash to make extra payments on bills. Again, I know this is easier said than done.
5. File bankruptcy. These days most people are not going to qualify for a Chapter 7 bankruptcy. I personally believe this option should not be taken in 99% of the time.

Desperately seeking some good news, many people refuse to accept the fact that you can’t have it all. Forgiving some or all your debt and maintaining good credit is NOT possible. To maintain good credit, you must pay all of your debt back. If you default on your debt or make a settlement, the price is a big hit to your credit. Many times someone will ask me over and over again if there are any more options than the ones I’ve given above. Sadly, they are the people who have no money coming in and none saved.

I’m always looking for creative solutions, though. Have some? Leave a comment!

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