Thursday, July 24, 2008

So You Are In Debt?

The author is not a finance professional, nor does he offer any debt-reduction advice. He is a consumer just like you. The purpose of this blog is to chronicle the history of how he discovered creative ways to assist a friend, in extracting the friend and his family from their debt situation.

In any financial transaction, do consult with trained professionals, and pay their fees.

Finally, your financial situation may not be similar, or even relevant. Caveat Emptor!

So you are in debt?
Who isn't these days?

Statistics reveal the following:

Largest debit card volume in the U.S., 2007
1. Bank of America -- $106.03 billion
2. Wells Fargo -- $54.67 billion
3. JP Morgan Chase -- $37.26 billion
4. Wachovia -- $37.16 billion
5. Washington Mutual -- $35.03 billion
6. US Bank -- $23.03 billion
7. Regions Bank -- $15.29 billion
8. Fifth Third Bank -- $12.19 billion
9. USAA Federal -- $12.03 billion
10. RBS Citizens -- $11.51 billion
(Source: Nilson Report, April 2008)

January 2006 Statistics, Last available:

Total credit card debt in the United States has reached about $665 billion on bank credit cards and about $105 billion on store or gas credit cards. According to the Fed's G19 release, the total is roughly $800 billion.

(Sources: and the Federal Reserve)

Average household or individual debt (or both) is about $9,300 per household holding at least one credit card. (Source:

According to the advocacy group Demos, the average balance among lower- and middle-income households is $8,650.

These figures are increasing daily. With the proliferation of credit cards in the general public, the current mortgage loan and foreclosure crisis, and the unemployment rate at a high level, more and more families are funding their living expenses through credit cards.


A Friend's Debt Picture
My friend is in the same boat. When he was employed, he made over a six-figure yearly income as an Engineer. Now his skills are no longer marketable, he is facing an uncertain employment future. The very nature of the tasks he used to perform have been replaced by software developers and network design engineers.

As he ramps up his risky, but potentially profitable on-line marketing business, with his wife working part-time, and his tiny unemployment checks, they are still short every month to cover their bills. So, out come the credit cards.

They have pulled cash out of their home's equity, in order to remodel the home, so in effect they have extended the payment periods for their home loan, thus adding thousands of dollars in interest payments to their payoff balance and term on the loan.

This situation is reaching critical mass, as they are slowly approaching their credit limits on the credit cards, and the home equity capital is nearly gone. They are facing a huge monthly debt-load payment and possible bankruptcy to keep their home and cars. This is going to require some bold decisions.

If his on-line business is successful, currently a big 'IF', (and he has some of the top marketers in the industry advising him), they may be able to reverse their negative income situation.

The purpose of this blog is to chronicle how they arrived in this credit-crunch situation and the methods they will apply to get out of debt. They do not want to use the option to declare bankruptcy as this would adversely affect their current high credit rating.

They want to honor the credit card issuers, the banks and others, as through no fault of theirs, they have used the credit cards to fund their lifestyle, in one of the most expensive counties in the USA.

As the story unfolds, this blog will detail the previous five years as the debt situation began. The illustrations will no doubt strike a chord with the reader finding themselves in a similar situation?

Thank you for taking the time to read this blog, and please do comment on what you liked or did not like about this post? Respectfully, Nicholas


Nicholas said...

Please leave me a comment!

Eric S. said...

Hello Nicholas. This debt issue is a very large problem in our country. Unfortunately, there are no easy answers. I suppose it will come down to will power, and a few creative methods to lower interest rates, and save money. I'll check back and see how thing come along with your friend.

mary said...

The finance snowball is an effective system in debt relief for the people who have a spending problem that underlies their debt issues. For the people who are in a debt predicament due to their non-affordability of the payments altogether, debt settlement is definitely an effective alternative. The reason why the debt snowball is effective, however, is because it accounts for the fact that debt is as much a psychological problem as it is financial one.