First, thanks for doing such a great job for caring for your friend.
Second, I think this guy should get some shock therapy instead of
dealing with him so diplomatically about the fact that he is outright
financially irresponsible.
The major problem is not his income, situation or debt, but his
attitude towards life in general.
You said the guy is neither handicapped nor impaired: what is keeping
him from getting a better job? benefits? 401 k? Let's be real, it's all
an excuse. There ARE jobs out there without educational requirements
offering some benefits paying much more that he is currently earning.
It's a matter of getting his butt of the sofa and starting actively
searching for a job, that simple! Especially when the guy doesn't have
any other responsibilities such as family, etc.
Now, his debt. He has to understand that his situation is neither
normal nor acceptable, wise or logical given his levels of debt at such
an early age. This fact only signifies that he is an irresponsible
individual (maybe he is a great person with a great heart and good
intentions, but all this is not even relevant when talking about
facts!) This guy needs to get a realistic view of life and how to go
about managing his expenses. And if he doesn't cut up his credit cards,
shift to a different lifestyle, move in with relatives and do other
things to minimize his expense, he will continue on his path of an
individual who will not only file for bankruptcy, but also later in
life will wind up in other realities such as divorce, loss of friends,
bad influence, problems with law and etc . Because one has to TAKE
RESPONSIBILITY!

All good points...he should focus his time on getting a better job. If
he can't afford education, perhaps self-education by reading library
books is an option.

Declaring bankruptcy might be a decent choice, but increasing income is
easily the more pressing concern. And it shouldn't be that tough to
increase from that level of income, unless there are some unusual
issues involved.

"bo peep" <cowartmisc1[at]yahoo.com> wrote
- quote -

He appears to make minimum wage+ _and_ has good benefits (health insurance;
401k) and has a job where he gets some technical skill training. He has only
a high school diploma. I don't know what, if anything, he pays for the
health plan. If he pays something, I'm sure he didn't include this in the
$900 a month ("before taxes") approximation he gave me. I thought these days
people did pay for their company health plans explicitly out of their
salaries, albeit at a great rate.

I forgot to add that he has had a raise or two since he started working
there. Point being he seems to watch his income and outcome pretty closely
these days. He sounds very sincere about figuring out a way to avoid
bankruptcy, though I'm convinced from comments here and the net it is an
option at least worth considering.

I realize several of you insist that a person with no experience and only a
high school diploma (and a DWI and checkered list of references?) can easily
get something like a $10 an hour job with benefits, or at least should have
attained this after two years. You could be right; maybe there is more to
this. But I have my doubts. To me, it adds up.

I am not going to probe further anytime soon. Kid's gotta enough to think
about. I talked to him a little a few days ago, urging the second job and
his talking to his creditors about payment plans. But we spoke only briefly.
He hasn't gotten back to me. Now I need to keep some distance; let this sink
in; let him talk to friends who are truly close to him. (And whom I know are
more responsible than he.) I think he is on a better track than, say, a year
or two ago.

If there are any major developments and he says I can share them, I'll post
back.

<<Based on the facts that (1) the guy has held a job at a reputable
company for two years now; (2) I know many of his co-workers, and he is
in good standing with the company; (3) he goes to the gym regularly to
stay fit>
You are describing a good employee. If he is a good employee, why is he
claiming to only be making barely more than minimum wage after 2 years
with the company? It doesn't add up...

John Cowart

"bo peep" <cowartmisc1[at]yahoo.com> wrote
- quote -

I'm re-entering to refute this presumption. Bo, I think dealing in unfounded
speculation is not a constructive way to help counsel someone in financial
distress, or help others do the counseling.

This newsgroup more typically deals with people who _have_ money, and
usually a big pot of it, to invest. Yet I would say these lucky folks are a
small minority of Americans.

The people who most need financial planning help are probably in fact the
poor and not terribly educated, like this guy. Unfortunately, we can't all
give them a laptop, wireless connection and the motivation to come to
resources like this and ask questions. Still, we can get information to them
in other ways. So I posted, simultaneously doing some googling, since the
guy asked for guidance, and I don't have experience with financial ruin. I
hope maybe sometime this thread will help others who are, well, helping
others in dire straits. It's helped arm me with options for this guy and
ways to persuade him along a course of action that will help, not hurt.

Based on the facts that (1) the guy has held a job at a reputable company
for two years now; (2) I know many of his co-workers, and he is in good
standing with the company; (3) he goes to the gym regularly to stay fit, and
it shows, I find your claim that he is a serious drinker unfounded. You
didn't know all this, so no big deal, but I did want to suggest that when
your own acquaintances approach you for a little guidance, you not presume
but instead maybe probe your suspicions, at most, so you can give advice
that is effective for the advisee, rather than rejected by him/her. I'm not
saying sugar-coat; I am saying there is an art to persuasion, as a
psychological reality.

He's young. He used to party, like the typical frat boy. I don't approve of
such conduct (frat boy or similar), but you and I surely know it's
commonplace, and these young 'uns are not all alcoholics. They're darned
reckless, but they mature out of it. Since I've known this guy in the last
year or so at social outings with members of this company, he has not
demonstrated any problems with alcohol.

I agree there's no question he's made incredibly irresponsible choices. For
those who are close friends or family to him, he bears watching, if only to
keep him from killing himself, one way or another. For those more distant, I
guess I'll just say for now safety (in finances or wherever) for all is the
first rule, and one should not tarry with the unknown (again, in finances or
wherever) unless one has serious resources to deal with the worst.

Two cents.

<<He's getting *overtime* and only making 10,800 a year before taxes?>
We already know that he is a serious drinker, since he has a DWI. He is
probably making more than he told Elle, and lied about the amount
earned to cover up the amount that he is spending each week on booze.
Typical behavior for an alcoholic.

John Cowart

"Elle" <elle_navorski[at]nospam.earthlink.net> wrote in message
news:PZzye.1408$BK1.1041[at]newsread3.news.pas.earthlink.net...

- quote -

Maybe, but what's the value of benefits to somebody in their 20's? Males in
their 20's aren't running to their doctors on any regular basis, and a 401K
isn't worth much unless you can afford to use it.

More income. Add me to the list.

Mike

"Michael Sullivan" <michael[at]bcect.com> wrote
snip
- quote -

One DWI that I know of. But isn't a question about such convictions usually
on job applications these days? So I think you're onto something.

Like I said, he can't afford car insurance because of this DWI. Which means
no wheels, legally, anyway.

If he has serious psychological problems, I don't think his employer knows
about them. That he lived in an abusive relationship (I'm talking ER visits
with the scars to prove it) for years and let his significant other
accumulate massive debt says he has some distorted view of reality, I
suppose.

I suspect his resume' is so checkered, with hardly any valid references,
that it's not as easy as you claim it is for him to find a job. Minimum wage
jobs still ask for references. I don't know how he got the job he has now.

Still, I'll encourage him to explore what you mention above.

- quote -

He's too close to his (sick) family to be willing to move.

He's in a large city and unemployment does not seem bad.

It's a sad, albeit instructive, case. It will take years for him to re-form
his habits, I suppose. Just imagining him going out and finding a bankruptcy
lawyer is difficult, though I suppose there are not-for-profit legal aid
workers which he could try. I doubt there's more that I can do for him
(without some risk to myself) except try to frame some of the ideas
presented here (with some details on bankruptcy from the web) in a way he
can accept, and maybe talk to the few reputable, college-educated, stable
friends he has so we can all be saying the same thing when he asks.

I will withdraw at this point. Thanks.

Elle <elle_navorski[at]nospam.earthlink.net> wrote:

- quote -

Also, any kind of significant charge-off will hurt you about as much as
a bankruptcy filing and for about as long.

If he really can't do better than $5.50 an hour, so that it takes a
second full time job and paying 25-30% of gross income just to pay it
off in *8* years, I'd probably declare bankruptcy. BK will be off most
records in 7 years.

He still needs the second job -- after he clears bankruptcy court -- so
he doesn't run up bills again.


Michael

Elle <elle_navorski[at]nospam.earthlink.net> wrote:

- quote -

He's getting *overtime* and only making 10,800 a year before taxes?
Minimum wage for 40 hours a week is $10,300, so he can't be getting much
overtime. I don't know where he lives, but most places in the US, it's
very hard to believe he can't do better than this unless he has real
problems with very basic work skills (no effort, can't read or do basic
math, rude to customers, etc.).

Where I live, *nobody* makes minimum wage. Basic low skill, no
experience jobs start at around $7 an hour and often go begging (i.e. if
you can fog a mirror and have a GED or can pass an easy test, you're
hired), and anybody who has the least bit of initiative can usually be
making $9-10 within a year or two. Does this guy have criminal
convictions on his record or serious psychological problems? Or does he
live in some are with unusually high unemployment? If the latter,
moving might be a good idea.


Michael

Elle <elle_navorski[at]nospam.earthlink.net> wrote:

- quote -

Where does he live? It matters. Around here, you can walk into most
supermarkets or fast food chains and immediately get hired for
$6.50-$8/hr and you'll get some kind of health plan and some kind of
defined contribution pension plan (probably 401(k) or equivalent, but
maybe no match). Will they be great plans? Doubtful, but they'll be
something. I had basic health insurance and a 401(k) available when I
was a grunt at McDonalds for a while between colleges in the late 80s.
I won't claim they all do this, but surely some do.

Some states, the supermarket folks are unionized and get paid a lot more
(though it may be harder to get jobs there).



Michael

"Tad Borek" <borekfm[at]pacbell.net> wrote
- quote -

Sorry to all that I can't provide more exact information. I am also hesitant
to post too much detail about how this fellow got into so much trouble,
since like you say, Tad, he made his choices. The point is how to live with
them now.

I thought it was usual to negotiate a payment plan with one's creditors,
typically at better (though not great) interest rates. In this vein, he had
an offer from a collection agency to pay off all his debt for around $13k,
if he did so in a lump sum. But he hasn't such money. Nor does he know
anyone who would roll the dice on him and make him a personal loan. I
wouldn't touch him, that's for sure.

So I dunno, say he can negotiate a 10% interest rate and gets a second job
where he can pay $500 a month towards his debt. He pays $6000 a year, around
$2500 of which goes toward interest. He pays off around $3500 a year. He's
done in less than 8 years.

That's still a long time. Also, I don't know how valid my assumptions are.

- quote -

I understand, though at this point I will add that he foolishly took on
(that is, legally agreed to be responsible for) the debt of a drug-addicted
deadbeat with whom he foolishly chose to live in an abusive relationship.
They shared the debt collectively. The creditors came after him, as he had
more money.

Or he's not telling me the whole story.

- quote -

With the great health plan, though, too? Plus ultimately the option to put
money into a 401k?

I have my doubts. He may have made a good move going with this particular
job, with all its bennies and career advancement opportunities. They train
in-house, for example, in skilled but not backbreaking labor intensive jobs.

I know the 401k may be looking too far ahead. Or not. If he got a second
job, a good payment plan, etc. I could see him kicking in $60 a month to a
401k right away.

- quote -

Right. I'll try to reinforce this further. Spoke to him briefly the other
day and he sounded agreeable, but as I've been hinting, this is a guy that
has made bad choices in the past. Change is slow, if it comes at all.

- quote -

Not with benefits, though, right?

Thanks for sharing your thoughts, especially on the timing here of his
choices in the near future. Working eight years like a sonuvagun surely
can't be appealing, and bankruptcy may be the better choice.

Elle wrote:
- quote -

Yes, more income makes paying it off more likely, but the numbers
(income vs debts) here are way off, and I wonder if it's realistic. He'd
need to triple his income and aggressively pay those debts down to beat
out the accruing interest.

Regardless, this guy needs to put to bed the whole bankruptcy-or-not
issue before taking a second job. His current income is going to be
considered as part of the bankruptcy plan. If he's making $10k/yr with
$25k in debts it's pretty clear he has very little hope of paying that
off, especially because - I'm guessing - he's not exactly at 1.9% on the
$25k, probably more like 19%. Even with some aggressive payments this
could take 10-15+ years to pay off, which is quite a penance for
overspending his mid-20s.

This may be one type of individual for whom bankruptcy exists. Let's not
debate the moral/ethical issue of buying stuff you can't afford, that's
his decision. The industry collectively extended $25k of credit to a guy
that makes $10.8k/year. That's crazy too.

NB: new bankruptcy laws are going into effect in October so it may be
good to get the ball rolling before then, if that's the choice he makes.
The new rules might not affect him but it depends on the specifics. He'd
need to meet with a credit counselor or attorney to figure that out.

And of course, bankruptcy is just a reset button. The real problem is
he's making a lousy wage that anyone with even rudimentary job skills
could double. And worse, he isn't spending in accordance with what he's
making. Both of those need to change alongside the bankruptcy else it's
a temporary fix.

Also: I suspect there's a lot more to the story than you've heard. I
made more money than that sweeping floors at a garage, and painting
houses part-time, and that was 20 years ago. Unless he's in one of those
way-rural pockets of the US with high unemployment he shouldn't be
clearing just 700/mo. Fast-food jobs pay better than that.

-Tad

"Ben" <spamblam[at]hotmail.com> wrote
- quote -

He doesn't have cable. Nor a VCR nor DVD player.

- quote -

Cut the cable.

Get a roommate.

"zxcvbob" <zxcvbob[at]charter.net> wrote
snip but comments noted
- quote -

Good points.

He said (1) he's paid hourly; (2) gets some overtime each month, which pays
a higher hourly rate; (3) and makes a little over $900 a month before taxes,
or about $10,800 a year before taxes. About $2800 of this is taxable at
about 10% at the federal level, IIRC. He also gives up about 7.65% to Social
Security and Medicare, IIRC. So monthly, he should have about
(1-.0765)*900 - 280/12 = $807 / month. He might have some more subtracted
from this for his health plan. Perhaps dental is supplemental. (He recently
had some major dental work done, and the plan paid 3/4s of it, so it
wouldn't surprise me if he pays something for this health plan. Those still
working for large companies can comment further on how their company
"covers" them.)

Also, his paycheck may vary somewhat from one month to the next. We were
having a casual conversation on this, sans any kind of his personal written
records of his finances, so he may have fudged the numbers a bit just to
give me the big picture.

Re his potential: Based on some other things he's said, I am getting the
feeling he's probably not as smart as he thinks he is. I have been taking
him at his word but am coming to realize, as you suggest, things are more
amiss than he is letting on. He's been hanging around with a safer, and so
more sophisticated, smarter, generally wealthier crowd than in the past. I
suspect he hasn't realized how different his background is from these other
folks. He comes from poverty and lived dangerously for a number of years,
and, like I mentioned, is still taking risks, albeit fewer ones. But
meanwhile, he tries to "act like the big kids." Which is probably a good
thing. Now he knows how great a 401k plan can be, for example. He "just"
needs to know when to ask questions.

He may figure his company health insurance plus growth opportunities make up
for the low wages. That's probably a rational choice, along with attaching
to a reputable company that cares about its employees, if only to enrich
itself.

I'm not going to push the issue at this point, beyond telling him to get a
second job, know his personal budget well and live within his means, and
speak to the collection agencies to try to get payment plans going. Also,
I'll reinforce what I think he already knows about the pitfalls of declaring
bankruptcy, per what John and the net say on the subject.

Thanks to John and you for sharing your thoughts.

Elle wrote:
- quote -


The debt is not the problem; cash flow is the problem. The debt is a
secondary problem that will take care of itself eventually if he gets a
positive cash flow. Bankruptcy might wipe out much of the debt, but it
will build right back up again unless he cuts expenses or increases his
income -- preferably both.

So, he's been at the same job for 2 years and the employer says he's a
bright boy with potential... and he's still making minimum wage?
($700_per_month*12/2000 = $4.20, add 10% for social security and a
little state income tax and it's still less than $5 per hour. Federal
income tax should be about $0) Something's not right with this picture.

Best regards,
Bob


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a few lines to add context, the previous post is deleted.

"John A. Weeks III" <john[at]johnweeks.com> wrote
snip for brevity
- quote -

John, the above (and all else you wrote) makes sense and is good to read.

Yesterday the fellow did say, without any prodding on my part, that he
thought he would be better off getting a second job than going into
bankruptcy and was thinking about looking. The fact that he simply cannot
keep up with the recreation (dinners out, etc.) of many of his friends is
starting to sink in.

Hearing this from someone else will help.

- quote -

I want to tell him this. I figure the most persuasive approach is to say,
"George, this is what I would do if I were in your shoes..."

- quote -

I understand and agree.

I think meaningful change does not happen often in people, so I am not
optimistic. Also, the reality is that he continues to take financial and
career risks (like driving an unregistered wreck of a car when he already
has a huge blemish on his driving record). His choices make me so
uncomfortable I think it imprudent to spend any meaningful time around him,
lest I get dragged into his, frankly, sordid affairs. Still, he came to me,
and I said I'd look into his options, so I will follow through.

This experience with this acquaintance sure makes me hope that some
financial planners do pro bono work for the internet-illiterate (or just
very unsophisticated in many ways) poor, teaching them how to budget.

In article <kHkxe.2790$8f7.1405[at]newsread1.news.pas.earthlink.net> ,
"Elle" <elle_navorski[at]nospam.earthlink.net> wrote:

- quote -

$25-K of debt is not really that much. The real problem here is a
lack of income. This guy has two choices, make an immediate tactical
change in his life, or make a long term strategic change.

The short term change would be to pick up two more jobs. He
is working one job for $700 a month. That hardly covers the
basics. He should take a 2nd full time job. A young guy like
that should have no problem doing 2 full time jobs, one during
the day, and one in the evening, such as pizza or security work.
Then, he needs to pick up part-time weekend work. Yes, he is
going to be busy, but keep in mind that he was busy running up
bills that he cannot pay before, so now it is time to pay the
piper.

In addition to this work like a mad man strategy, he should
minimize expenses. Beans and rice one day, and mac and cheese
the next is going to be his diet for a while. And he should
see if he can down-grade the housing to renting a bedroom
somewhere or moving back in with mom and dad for a while.

The strategic plan would be getting some education to raise
not only his income (which he can do by working more hours),
but by raising his value to society. This is the work smarter,
not harder option, except that it takes a lot of working harder
to get smarter. He may choose a technical field or take the
university path. I did engineering school at 27, so I know
he can do it, too.

- quote -

Bankruptcy will discharge certain kinds of debts. It will leave
his credit report damaged for 10 years, and he will have to report
this bankruptcy for the rest of his life. That last one is the
kicker since credit damage means little given his current credit
situation. He will likely see 3 to 5 years without being able to
get any credit, which is where he is at now.

- quote -

Bankruptcy was designed more for folks who take some chance like
starting a business, and it fails. Or someone who is an everyday
normal person, but they get his with a catestrophic illness or
accident. But more and more folks are seeing it as the quick way
out of bankruptcy. The problem is that bankruptcy only works once
every 7 years, but the bad decisions that get a person that far
in debt continue every day. The only cure for the problem is to
change behavior. If he does do bankruptcy, and doen't make those
changes, he will likely run up new debts and get right back into
trouble.

The real problem here is income. If this person doesn't address
income, then he will be in this lifestyle bracket for the rest of
his life. He really needs to figure out what he wants to do when
he grows up, and then do it. The time clock is running, and it
gets harder and harder to change as each year goes past.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

I am posting on behalf of a 27-year-old acquaintance. He is in bad financial
shape and seeking guidance. Particulars:

-- $25k of debt, due to failure to pay credit card bills and apparently a
home mortgage. He no longer owns the home. About three collection agencies
(so far) are after him for this money.

-- He says he cannot get a bank account because of his debt problems. He
pays everything with cash.

-- He's living on about $700 a month after tax take home pay. $400 of this
goes to rent. About $150 goes to utilities. The other $150 goes to food and
obviously very light entertainment. There is a possibility of advancement in
the coming years that will bring in more income, but it will be slow. He has
no college degree.

-- in good health and health insured, including dental, thanks to his
holding a job at a reputable company for almost two years now.

-- has the option of joining his company's 401k plan, which matches at least
6% of what he contributes. He's aware of the advantages of such a plan.

-- He hates the idea of declaring bankruptcy. He claims it's too much of a
blow to his pride and feels it's somewhat unethical. We discussed the
alternative: Trying to pay off his loans at maybe $100 at the very most a
month. But obviously it's unlikely this is unlikely to even touch the
principal he owes.

-- He is not disabled in any way and is a bright fellow (lately, anyway)
with some potential, according to his employer.

-- He doesn't really have transportation beyond a bicycle and public
transit, due to extremely high auto insurance rates thanks to being stupid
and achieving a DWI.


1. What do people here recommend to do to get this young man out of debt?
2. What are the long- and short-term implications of declaring bankruptcy?
3. Were bankruptcy laws designed for 'people like him'? If so, I can work
this angle to get him to declare bankruptcy. I'm not the only one of his
acquaintances suggesting this at the moment.

Thank you for your suggestions. I will google on the bankruptcy topic but
hope someone can quickly digest this, based granted on limited information,
and give me some ideas to pass along to him.