How to deal with financial problems

[paland]

Zac, as for the house, there is a homestead exemption but I'm not sure how much that is for.  If you have too much equity then they will expect you to pay down those debts.
I will let the attorneys give you more accurate advice on this one.

[EarthAngel]

Seems we have two discussions going on here, one about how to get out of a bad financial fix, and another about how to live frugally so as to be better positioned for a resource-limited future.  I'll just address the latter.

When I became peak oil aware, I started becoming conscious of vulnerability, and one of those areas of vulnerability was food.  I wanted to grow more of my own food.  However, I didn't eat the kinds of food I could grow.  I ate meat, processed food, pasta, bread, and imported fruits and vegetables.  So I started learning about vegetarianism as a road to understanding efficient nutrition -- just how much protein did I need?  How much fat, how much carbohydrate?  If I was going to someday soon be limited to whatever I could grow or trade for, I wanted the most nutritional bang for my buck.  Something I could do now, while I still have a grocery budget and the stores still have food, was to learn to like and understand post-peak foods.  Potatoes.  Bulk grains.  Squashes.  Sweet potatoes.  Some of the ideas I encountered I agreed with, some I didn't, but I did learn a lot about how to feed myself.  After the initial crazy phase I settled down to eating fish a couple of times a week, vegetarian most of the time, and beef (which i still enjoy) rarely.  Side benefits were a huge drop in my grocery bill and an improvement in overall health and feelings of wellbeing.  One helpful book was "Transition to Vegetarianism" by Rudoph Ballentine.  Oddly enough, the lighter I ate, the more capable I became of hard physical labor in my garden.  Another good book is "One Circle: How to Grow a Complete Diet on Less Than 1000 Square Feet" by David Duhon.  For the nuts-and-bolts nutritional aspects, try "Prescription for Natural Cures" by James F. Balch and Mark Stengler, which is also my go-to medical reference.

[Zac]

Zac, as for the house, there is a homestead exemption but I'm not sure how much that is for.  If you have too much equity then they will expect you to pay down those debts.
I will let the attorneys give you more accurate advice on this one.

The exemption for home equity is 50K for most people (more if elderly or disabled) in california.  But, I think this only applies in bankruptcy.  I'm more interested in trying to determine what happens in case of a judgment without filing for bankruptcy.  I presume a creditor could obtain a judgment and then put a lien on a house, but I wonder what effect that would have if you did not sell the house.  (would they be able to force a sale, etc?)

[Stug]

My wife and I have been living frugally for years now. Not for any high minded ideal, just cause we have had no money to spend. We allowed ourselves some debt while I was out of work for a year waiting for immigration in Canada. The past year I have been in a bit of a savings frenzy.

We rent a tiny 2bdrm basement apartment ($800pm all-in but we pay our phone and internet). We are going to need three bdrms someday but are making do right now (8yr old Daughter and near 1yr old Son). Im in a call center and on about $30kCApa which is do-able by public transit (bus). $72 a month for unlimited local travel and can claim back on tax. I would spend more on just the gas with a car. Wife is on mat leave from working part time on a deli counter at a grocery store. We buy juice crystals at 'Bulk Barn' rather than buying pop or premade juice and I usually have just water chilling too. Fresh veg such as potatoes rather than those bags of frozen fries. We pad out meals with carrots and apple slices and have a good mix of other veg in the fridge at all times. They pad out some good cuts of meat usually. The less work you have to put in for food the more it'll cost. Buy some local 'taters. Cell phones are basic and hardly ever used. I put $10 on both once a month and dont really feel a need to even do that for how much I use it. We are getting by and dont have a lot coming in. Savings have been amazing though for the past year.

Results; We borrowed 5k for RRSPs in March and saw them rise since to about 7k in mutual funds (now changed to Money Market funds, maybe was a little early but it seems a little safer). We put a small amount each into them each month too so it is building nicely. Its a loan but its also an asset. I dont see it as debt but rather forced savings. Savings at big banks suck balls. Had about $1000 in my bank which gave me a couple of cents a month interest. I sent a cheque to ING to start with them and that $50 made more interest. Its still small amounts but its more than I was getting. My work has a matching policy for RRSPs so I am maxing it. Its free money. Think its like 3% limit but thats a 3% payrise. RRSPs can also be used towards a first home purchase which is why we are going this route. The loan is being paid faster than required and when we get the tax refunds we will pay the loans down further. Actually they will be pretty much gone. After a year as savers we still owe about $1800 but have assets of about $9000 before our tax refunds. I may need to update this when I find out what my wifes Visa is at  but thats another tale. . . I owe about $400 on mine. We rarely eat out but order in Pizza occaisionally. I smoke (just the legal stuff) and sometimes have a few beers with freinds. The occasional bottle of wine while watching a movie with the missus etc.

Im not doing this to try and show-off cause beleive me we have been doing without the trappings our 'freinds' seem to hold over us though I have started to see some of their fantasy start to erode recently. We dont even run a car. Most people out in the world cant do this to this kind of extreme. I just wanted to put some of this down and hope some people can sift some helpful nuggets from it. Mentally I am playin Catchup to all the Doomers who have seen this coming for years. It'll be going towards our home.

[Stug]

The main point to consider; If you pay it every month, look at it and ask why you have it.

[Seahorse]

Zac, each state is likely to have different laws on a creditor being able to execute a judgment against your home equity.  In Arkansas, a judgment becomes a "judgment lien" on the home, but the judgment creditor cannot force you to sell the home.  The lien is paid out of a future sale of the home.  If you don't sell it, they don't get paid.  As for your lawsuit, generally, you will get your best settlement the week before the trial, when the other attorney and their client get serious about the case bc they can ignore it no longer.  If they don't give you a good deal, give it your best shot and see what happens.  Interest is what kills people.  Get the interest rate to zero on any settlement if possible.

Emeline, I do believe there is a moral obligation to repay loans from friends and family, for generally they make those loans for the right moral reason. 

[EarthAngel]

Thanks for being willing to discuss your savings strategies in detail, Stug. 

Stug's mention of the few luxuries he and his wife are keeping made me think about how I quit smoking.  Now I am NOT talking to any of you happy smokers out there who are satisfied with the habit and don't want to quit, so don't flame me with your Zippos!     But if a person wants to quit, for financial or health or any other reason, a good website to visit is http://www.whyquit.com/

I would never have been able to quit without this site.  I had tried multiple times and was pretty discouraged.  But I just couldn't seem to get ahead financially while I had this expensive habit.  I did quit successfully and have not smoked for over three years.

Again, the luxuries a person decides to keep when money is tight are very personal choices, this is not an anti-smoking rant.

[metaforge]

Some questions on this point, if anybody would be so kind to give thoughts I'd appreciate:

3.  Quit fearing being sued.  Even if they get a judgment, it's probably unenforceable against you.  The old saying is, one can't get blood from a turnip.  If you are a financial turnip, don't worry about the suit.  The best they can do is try to collect the judgment by garnishing bank accounts or repossessing property.  If you don't have money in the bank, which you shouldn't if creditors are chasing you, then they can't garnish anything.  If you don't have a car or trailer etc for them to reposses, then they can't take anything from you.  Even if you do have a car, if you owe on it, they won't take it bc there will be no equity in it.

If you are employed, can they garnish your wages for any sort of debt?  If so, how much can they have skimmed from your paycheck?

If you are sued for an unsecured debt, such as a credit card, can they take property like a paid off car?  What about stocks or money in a bank account?

If you default on a secured debt, such as a car, can they take the car in question AND other property (maybe another paid off car) or money in a bank account in the event that the car's value is not sufficient to satisfy the debt?

If money in a bank account is garnished, and let's say there is enough to pay the debt, does garnishing mean they can grab it all?  Or can they only get money out at a certain rate, say $x/month until the debt is satisfied?    During that time, is your account frozen so you cannot cash out the money?

If a judgement is awarded, can they get a warrant to search your house for property to potentially seize?

Thanks

[Doomsteader]

It certainly makes no sense to own a car if one makes less than $20,000.  I have a 10 year old car that thankfully still runs well, but once things go wrong with it I have no intention of replacing it. 

At one point I figured that it was actually better to have a minimum wage job within walking distance than a job 20 miles away that paid about twice as much.  Owning a car is that expensive. 

For many of us who net less than $20k a year, owing a car is a *necessesity*, and not a choice.  But owing a car doesn't have to be expensive - you can find a decent beater for $500-1,000 bucks, and just get minimum coverage, liability-only.  Drive it only when necessary, combine trips/errands into 1 trip, and last but not least, drive in a safe and reasonable manner, and keep your license clean by avoiding doing anything that could get you pulled over and ticketed - this keeps your insurance costs at a minimum.

I have a `95 Ford Taurus that I bought last summer for $900.  I have no car payments, and pay my insurance in full (about $300-odd dollars per 6-month policy from Geico) every 6 months. I spend between $5-10 dollars a week for gas, as I only drive it a couple of times per week for errands and shopping. I have a company van for work so I don't use my car to commute, but can't use the company van for personal business, so i need to have a car just for shopping.  The nearest shopping center is 4 miles away, the nearest laundromat is 10 miles, and my PO Box is 20 miles away. I only do laundry and check my mail once or twice a month(and combine those trips when I do), but go to the store about 2-3 times a week, and a single cab-ride, ONE-way, to the store would be $10.  Public transportation here is all but non-existent.  So for me, having a car saves me a ton of money over the alternative(and that's not even counting the comfort and convenience factor, and the not needing to depend on anyone else factor)).

[2handband]

After houses, cars are the biggest money sink there is- period. As long as one is able to get back and forth to work, being car-free is quickest way to get out of debt and stay out of debt, plus avoid a huge amount of stress and headaches. Perhaps most people don't realize how much of a money-sink car ownership really is. Car 'ownership' is practically slavery in my opinion. The car 'owner' is unknowingly the slave, always trying to provide their master (car) with monthly payments, routine maintenance, repairs, insurance, gasoline, car washes, custom upgrades, parking fees, etc. Yes, the cars own their drivers through a never-ending demand of servitude.  Kind of like serfdom.  

It certainly makes no sense to own a car if one makes less than $20,000.  I have a 10 year old car that thankfully still runs well, but once things go wrong with it I have no intention of replacing it. 

At one point I figured that it was actually better to have a minimum wage job within walking distance than a job 20 miles away that paid about twice as much.  Owning a car is that expensive. 

It's not quite that simple. My wife and I don't make anything like $20,000, but living out on the edge of town as we do a car is a necessity. I'll take care of the objections that I know are going to be forthcoming right now:

1) No, moving is not an option. We own our trailer and only pay lot rent; there's no way we could live this cheap any other way.
2) Walking into town is not an option, either. We're far enough out that my wife would have to walk over an hour every day for about three hours of work... and her job is on our side of town. Add to that the fact that we live in Minnesota where winter temps routinely drop well below zero, and the problems become even more obvious.
3) Public transportation? Hah. We live just outside of a town of less than $10,000 people, and public trans is frankly non-existent. Taxis exist, but it would cost my wife more to take a cab to work every day then it does for us to keep a car.

Point is, the way the American infrastructure is set up there are damn few people that can actually get by without a car. There are no stores, no jobs, and really not much of anything else in reasonable walking distance of where we live... and we live in a a very small city. We use bicycles in the summer, but once again we live in Minnesota; we only have a few months of biking weather any given year. Our car is ancient but paid for, and if it died we'd replace it with something similar. Until things change (which won't happen as fast as some posters here expect) we have to have it, income be damned.

[Seahorse]

Some questions on this point, if anybody would be so kind to give thoughts I'd appreciate:

3.  Quit fearing being sued.  Even if they get a judgment, it's probably unenforceable against you.  The old saying is, one can't get blood from a turnip.  If you are a financial turnip, don't worry about the suit.  The best they can do is try to collect the judgment by garnishing bank accounts or repossessing property.  If you don't have money in the bank, which you shouldn't if creditors are chasing you, then they can't garnish anything.  If you don't have a car or trailer etc for them to reposses, then they can't take anything from you.  Even if you do have a car, if you owe on it, they won't take it bc there will be no equity in it.

If you are employed, can they garnish your wages for any sort of debt?  If so, how much can they have skimmed from your paycheck?

If you are sued for an unsecured debt, such as a credit card, can they take property like a paid off car?  What about stocks or money in a bank account?

If you default on a secured debt, such as a car, can they take the car in question AND other property (maybe another paid off car) or money in a bank account in the event that the car's value is not sufficient to satisfy the debt?

If money in a bank account is garnished, and let's say there is enough to pay the debt, does garnishing mean they can grab it all?  Or can they only get money out at a certain rate, say $x/month until the debt is satisfied?    During that time, is your account frozen so you cannot cash out the money?

If a judgement is awarded, can they get a warrant to search your house for property to potentially seize?

Thanks

Again, each state may have different laws, so I will answer generally, bc I think most states will have similar laws.

If you are employed, can they garnish your wages for any sort of debt?  If so, how much can they have skimmed from your paycheck?

In Arkansas, a creditor has to havea judgment before wages or accounts can be garnished.  Then, after proper forms filed, they send it to the employer.  In Arkansas, a maximum of 25% can be garnished out of each check.  Banks are different.  When a bank receives a garnishment order, it freezes the account and the judgment creditor is entitled to the funds in the account, but only up to the maximum amount of the judgment.

If you are sued for an unsecured debt, such as a credit card, can they take property like a paid off car?  What about stocks or money in a bank account?

  Yes.  How far a judgment creditor is willing to go usually depends on how much the debt is and how much money they are willing to sink into collection proceedings.

If you default on a secured debt, such as a car, can they take the car in question AND other property (maybe another paid off car) or money in a bank account in the event that the car's value is not sufficient to satisfy the debt?

  Yes.  If you default on a car debt, the car is repossessed and then sold.  If it doesn't sell for enough to pay off the debt, then they are allowed to try and collect the balance via garnishment etc.  Again, how far they are willing to go depends on how much is owed.  If enough is owed and you want to stop this nonsense, then you can try to work out a settlement or simply file bankruptcy.

If money in a bank account is garnished, and let's say there is enough to pay the debt, does garnishing mean they can grab it all?  Or can they only get money out at a certain rate, say $x/month until the debt is satisfied?    During that time, is your account frozen so you cannot cash out the money?

See answer above.  They can garnish the entire account, but only up to the amount of the judgment.

If a judgement is awarded, can they get a warrant to search your house for property to potentially seize?

  Not a warrant, but they could get an order allowing them to inspect a home.  I have never seen anyone do this.  After a judgment is received, if the debts are large enough, some creditors may take "discovery" to find out if you have any assets worth collecting.  Usually, they will take the persons's deposition (statement under oath) and ask them to bring tax returns, business records, pay records, financial statements etc to see what, if anything, there may be worth trying to collect.  Because depositions require attorney time and a court reporter (cost substantial money) I've only seen creditors do this on debts about $100k or more.

[EarthAngel]

Given that so many bankruptcies and financial difficulties are caused by medical problems, I think it's worth mentioning some things we can be doing to reduce our chances of getting sick.

1. Floss your teeth.  Now.  You do own some floss, don't you? 
2. Take care of your eyes.  Make sure to include sources of Vitamin A in your diet, foods like dark leafy greens, bell peppers, yellow squash, carrots, oranges and tomatoes.  Red, blue and purple fruits and vegetables are also good sources of Vitamin C and bioflavinoids that strengthen the tissues and capillaries of the eye.  Bilberry is an herbal supplement some people take which was used to improve the night vision of fighter pilots in World War II.
3. Make sure the -- ahem -- lower part of the digestive tract is functioning well.  An apple a day keeps the doctor away.
4. Read the labels on the foods you commonly eat.  Then compare what is in these foods to recommendations from various health organizations like the American Heart Association and the American Diabetes Association. 
5. Know your medical history.  If diabetes is in your family, for instance, be proactive before you get it.
6. Reduce your calorie intake.  Slight underfeeding is associated with longer life in both people and animals.  I know, I have trouble with this one too.
7. Get fresh air into your lungs.  Make sure to breathe deeply several times a day. 
8. Get some sunshine.  Vitamin D is needed to ward off osteoporosis later in life.
9. Take care of your mind.  Work crossword puzzles, be curious, try weird things and fail gloriously.  The dietary steps you take to protect your heart and eyes will also protect the circulation in the brain.
10. Look for funny things everywhere.  People are hilarious.  So are animals.  And kids say the darndest things.
11.  Seahorse already made this point.  Sit down to eat.  With somebody you love.  And talk about their day.

[kmaine2]

Seahorse,

What about a a debt incurred from another State gov who has hired a lawyer from a third state to collect the debt. And this lawyer does not have permission to collect debt in the state in which the debtor lives?

[Seahorse]

Seahorse,

What about a a debt incurred from another State gov who has hired a lawyer from a third state to collect the debt. And this lawyer does not have permission to collect debt in the state in which the debtor lives?

Debt collectors have to be licensed to collect in your state.  If they are not licensed, the first thing you do is ignore harrassing phone calls and letters (lawsuits are different).  Second, you may try reporting an unlicensed debt collector to the correct person in your state, either their licensing board or your attorney general.

[dc62]

If you're considering Bankruptcy, the best course of action is to seek the advice of a qualified BK attorney.  There are all sorts of remedy for creditors, both secured and unsecured, depending on where you live.  A good attorney can counsel you on where your exposure lies and what your options are.  Most BK attorneys provide free initial consultation.