MANAGE Your Money, Liberate Your Life

Case studies with real people

Anyone can promise results. These case studies show that the Life Money Center has a track record of helping people get into control of their debts and finances.

For privacy reasons, we've changed the names of our clients — but everything else is accurate and true. There is always something that can be done about your financial situation, regardless of the problems and situations you find yourself in.

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Helping a woman with debts due to family health challenges

by Stephen Daney, Financial Consultant

Nina [not her real name], a woman in her 80's with $51,142 in credit card debt, called late in the afternoon and asked if we could help with her debt situation.  I told her that I would do my best and I asked her to tell me her story.

FAMILY HEALTH EXPENSES & CHALLENGES: Her daughter [in her late 40's] has had 3 heart attacks and 3 major surgeries and requires ongoing care. Her husband is infirm and requires full time care at home. Her  daughter and her husband adopted two special needs children, one a 9 year old girl whose leg  was amputated, the other a 13 year old boy with spina bifida [a birth defect where there is incomplete closing of the backbone and membranes around the spinal cord] who has required 14 major surgeries since he was a small child. Nina’s daughter and son in law have had their own financial difficulties so Nina and her husband have been paying their mortgage and covering child care expenses for the past year or two.  While Nina and her husband have more than sufficient income to support their needs including her husband’s health care cost, they do not have enough to cover all of her family's financial needs and have had to utilize their excellent credit to cover all of these additional costs. Nina has never missed a credit card or loan payment in her life and had fully intended to pay off these debts when her children are more able to take care of themselves. But after taking a good hard look at her situation this seems unlikely.

GETTING ADDITIONAL INFORMATION: I told her she was doing a remarkable job taking care of her family and making the best use of her available resources. I asked how she was handling these challenges, more or less, on her own and how she was taking care of herself. Then I asked what options had she considered. She said she did not know what she could do. I told her I would review all of her available options but first I wanted to get more specific information about her financial situation. She said that sounded like a good approach.

REVIEWING THE OPTIONS: I got a fairly detailed breakdown of her monthly expenses and her monthly income. I also created a free Credit Karma account for her so we could pull her credit reports and see what the credit bureaus are reporting for her debt obligations. So when we finished this process I knew exactly what her monthly financial obligations were, how much income she had to work with and her exact debt totals.  Then I rolled up my sleeves and began to review her options.

BANKRUPTCY WAS NOT ACCEPTABLE: First, the obvious option for a woman in her 80's with over $50,000 dollars in debt with increasing health care costs is bankruptcy. Discharging all of her debts in bankruptcy would resolve all of these financial difficulties in one fell swoop at a cost of less than $2000. I said we would need to discuss with our bankruptcy attorney to review possible impact to her home and other assets. Nina listened respectfully and stated emphatically she not want to file bankruptcy if there was another option. She has a moral objection to filing bankruptcy and wanted to hear if there was another way.

 

CHARTING THE OPTIONS: In the course of my financial analysis I had calculated how long it would take for her to pay back her current financial obligations and presented her with a chart of costs associated with each option.


TAILORING A PLAN SPECIFICALLY FOR NINA:
We are called the Life Money Center for a very specific reason. These challenges are never just about the money. We have to take into consideration our client's current life circumstances, their values and their goals. In Nina’s case, at her age, I was most concerned about getting the debt paid in the shortest time possible with the least negative consequences so that shaped my approach to finding a solution suited for her and her husband.

Her first option was to reduce expenses and increase income so that she could put more money toward the debt, pay it off more quickly, reducing the amount of interest she would pay if she only paid minimum payments. After reviewing her expenses and income, I discovered she was already paying more than the minimum and it was not helping with her concern. She is a remarkably healthy woman for her age, but at the current rate it is likely that she will die before the debt was fully paid.

BORROWING AT A LOWER RATE NOT POSSIBLE: Option number two was to borrow at a lower rate of interest from a family member or friend and pay off the higher interest rate credit card debt and pay it off at a lower rate of interest. This approach with a slightly lower monthly payment would pay off her debt in 5 years and save over $30,000 in interest. The problem with the amount of debt she was carrying is it will be very difficult if not impossible for her to get a lower interest rate loan and she has no family or friend from whom she could borrow. And even if she could secure a loan at 5% with a monthly payment similar to what she is paying it will take her 5 years and she will pay close to $58,000 at a time when she needs access to all of her available resources to care for her family, her husband and her own needs.

DEBT RESOLUTION: Given that she really objected to filing bankruptcy, her final option was to enroll in an aggressive debt resolution program. This program would lower her monthly payments by $500 and pay off the entire debt in 2 to 3 years at a total cost of just under $32,000. Her savings compared to a low interest loan option would be $26,676.40.

I reviewed the challenges associated with this approach including impact to her credit score and collection efforts by the creditors prior to our negotiators securing new terms for her loans. I explained that she was represented by a law firm and therefore has access to legal assistance, should it be required. I also explained that she would be protected from any violations of the Fair Debt Collection Practices Act by her creditors.

AN ACCEPTABLE SOLUTION IS REACHED: Nina considered her options and came to the conclusion that the reduced monthly payment combined with a 2 to 3 year payoff period and over $26,000 in savings overcame her concerns about collectors and a temporary drop in her credit score.

We met with an agent of the law firm on Friday to go over the terms of her agreement, define the legal and service fees and clarify her role in the process. The agent explained that she will have an account Manager assigned to her who she will meet with by phone once a month. She seemed greatly relieved as she was signing her agreements and is confident that she will be able to follow through with this program and pay off all of her debts.

The biggest relief for Nina was having a clear and effective plan of action in place. She is greatly appreciative, and is well on her way to financial control.

 

NOTE: Look for additional case studies to follow soon on this website.

 

 

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MANAGE Your Money, Liberate Your Life