Action 9: Debt cancellation strategies

For many Americans credit card debt can be overwhelming. In fact, consumer debt reached another record high earlier this year.

Let’s face it: Life is expensive and if people aren’t careful, consumer debt can creep up on them.

Brian Hodge of Lake Mary said, “Poor financial decisions on our part when we were younger, having kids, vehicle problems.”

A few years ago, what he described as “every day American problems” landed his family in a financial nightmare.

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“It was probably easily $1000 plus a month in just like decent minimums. And so, you know, principal and interest, it was never going to go down,” Hodge said.

At the time, a financial advisor recommended he and his wife file for bankruptcy.

Hodge told Action 9, “Just scrap it and call it done and start over. But we didn’t want to do that. Maybe it’s a bit of a pride thing. I just didn’t want to have bankruptcy associated with me.”

That’s when he turned to a non-profit credit counseling service called Money Management International-known as MMI to get them on a debt management plan. The plan included working with creditors to lower interest rates and consolidate their unsecured debt to one payment.

Emanuel Rivero, with MMI said, “We first assess folks’ goals, right? What is it that you’re trying to get accomplished? How did you get into the situation that you’re in?”

Rivero said in Florida they’ve seen a 78% increase in the number of people asking for help managing consumer debt compared to last year. The amount of debt his office is seeing is higher, too.

Credit card debt in the U.S. hit a record high in the second quarter of this year with $1.14 trillion according to the Federal Reserve Bank of New York.

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For those trying to manage it themselves, Rivero recommends paying off the highest interest loans first. Although, he realizes some people feel more motivated paying off the smallest debts first to minimize the number of creditors.

“You know what? That $500 one is paid off, and now I’m going to approach the highest interest rate,” he said relaying what he’s heard from some consumers.

In Brian Hodge’s case, he was able to pay off his $26,000 credit card debt in less than four years. He went from the dread of never being able to pay it down to seeing a manageable path to becoming debt free. It’s a lesson that changed his life.

Hodge said, “Don’t spend money you don’t have. Don’t… don’t spend money you don’t have.”

He told Action 9 if he and his wife want to splurge on something, they now make sure they have enough money in the bank to pay it off immediately.

Here’s what to know about getting out of debt from the Federal Trade Commission. Here’s what to know about managing debt from the Federal Trade Commission.

If you want to learn more about how debt management plans work and about Money Management International, click here.

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