The Witch of Debt hits the street to ask people about their money nightmares and other tales of financial woe.
[Zombie] A debt horror story? Ha!
[Michelle] We have a tale of financial infidelity. Tell us your horror story.
[Respondent 1] Well, I got married and after about five years of marriage, I found out that I was getting calls from credit card institutions to collect debt. And when I confronted him about it, he was a fast food addict.
[Michelle talking to wax zombie] Oh those interest rates… Yeah, they’re killing you, right?
[Respondent 2] I did not want to do my taxes when I was younger. I owed the IRS a whole bunch of money, got a lot of letters in the mail.
[Zombie] Do I look like I’m well connected?
[Respondent 3] I graduated from culinary school in 1998 and signed up for $19,000 to go into the program. They decided to put me somewhere that didn’t pay enough for my monthly costs for the student loan repayment. But, it just kept building up and the amount I owe now is like $30,000.
[Zombie] No credit. They don’t give me credit for anything! You’re asking money questions to me?
[Respondent 4] Now I’m going through a financial horror story. I got regular health insurance, but my plan dropped me because so many people were going to Obamacare in the area I live in. Now, I am just working while I’m not feeling good just to pay those medical bills. It’s awful.
[On-screen text] Horror stories such as these can be life changing. But not all hope is lost.
[Respondent 2] I decided that one day, I was like you know what they told me three months I was going to be fine and sued, and everything like that. So, I decided to make $100 payments and officially here I am debt free.
[Zombie] Retirement. They should definitely plan for that, just in case they actually get there.
[Michelle] Make sure to subscribe to Debt.com’s YouTube channel. And for more information and tips on managing debt and credit, sign up for Debt.com’s newsletter. When life happens, visit Debt.com.
Haunted by a fast food addiction
The first story was about a husband who ran up credit card debt to feed his fast food addiction. Now, you might wonder just how fast food that only costs a few dollars leads to a debt problem. However, it’s a common trap with discretionary spending that falls outside your normal budget. A few dollars here and there adds up; over time it can turn into a bigger problem than you ever thought possible. So, the nightmare is real. Luckily the solutions are really pretty easy.
- According to statistics, the average household spends 30 percent of their income on food.
- This includes groceries and eating out. For a healthy budget, you want dining in to hold the majority because you get more food for your money. Statistics show the average family spends about 57 percent of their budget dining in and 43 percent eating out.
- If you want to see if you’re overspending on food, just total up your costs from last month.
- If you spend more than 30 percent of the income you bring home on food, that’s too high.
The remedy for a runaway food budget is to actively work to rein in costs. If you’re a foodie, that can be tough because you may have expensive tastes. But for a fast food addict, it’s easier. Just set a limit on the number of drive thru runs you should take each week. This lets you feed the fast food addition without breaking the bank.
As for the financial infidelity, we already talked about that in our last segment. If the women can get past it, they can work together to address their budget challenges. If not and they head for divorce court, she can make a good case that the credit card debt was his and not hers.
Tales of tax debt
This case is interesting, because we wonder if the woman was actually dealing with the IRS or just a collector. Here’s why: The IRS is one of the few debt collectors that doesn’t have to take you to court to claim the money you owe. Without a court order, they can place liens on your property, levy bank accounts and even garnish your wages. So, the IRS will never threaten to “see you in court” because they don’t need to do that.
In fact, the IRS won’t usually call you to say anything at all. They send letters. So, the fact that she said she was getting calls and that the threat was a lawsuit sounds highly suspicious. Most likely, this woman was dealing with a debt collector and not the IRS. So, they threatened, it scared her, and she paid. They go what they wanted.
For the record, if a debt collector impersonates a government agent like an IRS agent, they break federal law. They mispresent themselves, which violates the Fair Debt Collections Practices Act. If you catch a collector doing this, you can sue them.
Living a student loan payment paradox
This nightmare is one of the most common you hear these days. A student goes to school, graduates with a mountain of debt, and their entry level salary won’t pay the bills. This happens more often that it should, particularly with vocational colleges like culinary school or nursing degree programs.
Most of these institutions are for-profit, unlike traditional 4-year schools that are nonprofit. According to federal regulations, these institutions must be able to show placement of graduates in gainful employment to keep their federal loan funding going. But they only have to show a certain percentage of success. Which leaves many borrowers S.O.L. if you happen to be one of the ones who was not properly placed.
Now, if the school can’t show that their programs legitimately work for graduates, the Department of Education may grant loan forgiveness to students who went through that program. However, just this year Betsy DeVos challenged forgiveness for students of DeVry. Then she named the dean of DeVry to lead the Student Aid Enforcement Unit. The translation? The fox is now in charge of the henhouse. So, if you think your college scammed you, don’t hold your breath while you wait for forgiveness.
The silver lining is that there are programs that can make it easier to pay off your loans. A government study found that about 50% of student loan borrowers overpay. So, there are student loan relief programs out there that could help you lock down monstrous student loan debt.
The Obamacare nightmare
This is probably the worst nightmare of the ones we heard. The reason is that there is no clear solution to it. In fact, healthcare is more confusing and uncertain now that it ever has been, even in the Obama years.
So, here’s the real horror story: Obamacare was supposed to make healthcare affordable for everyone. But, that was all based on the assumption that the federal government would offer states subsidies so they could cover more, lower-income Americans. Republicans hated the plan and fought back, leading many states not to take up the Medicare subsidies offered. As a result, there were millions of people left in healthcare limbo; they were too rich to qualify for Medicare, but not rich enough to cover their own costs because premiums on individual and employer plans actually went up.
If you fall into this grey zone, you probably either don’t have healthcare or you pay an exorbitant amount for it. You’re not alone – one of Debt.com’s own writers faces this challenge. And those costs only seem to keep getting worse.
The bad news is that Republicans haven’t repealed and replaced, so there’s no light on the horizon yet. The even worse news is that in an effort to force the repeal, President Trump is attacking any components of Obamacare that he can target through executive orders. His most recent efforts will drive everyone’s premiums even higher, whether you’re in the marketplace, pay individually or go through your employer. Frankly, we’re all ready to wake up now, because this really is like a bad dream.
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Article last modified on October 27, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Money on the Street Interviews: What are Your Debt Horror Stories? - AMP.