Signs of a Debt Problem

Belleville 618.236.7000
Granite City 618.656.7941

Radio Segment Transcript

Jim Haller (JH) speaks on The Mindset (TM), on 550 KTRS.

TM: Top ten signs that you may be having some trouble with your debt. I love these kinds of lists because usually people who are facing these kinds of troubles can see themselves in one of these 10, or maybe in more than one of these 10, so let’s start off with some of these numbers. What are some of the reasons why you might be getting into too much debt?

JH: Well, John, this is something I came up with; this is kind of my own personal list of top 10 things I’ve seen when talking with my clients when they come in, or I’ve recommended that they go someplace else for some help.

The Number 10 reason: Are you borrowing from Peter to pay Paul? If you’re are not Paul, you might need some help.

TM: OK, you’re talking about when you have $10,000 on one credit card, so you open another credit card, and you just roll that in?

JH: Or instead of paying one credit card, you’re paying another credit card. Instead of paying for your utility bills, you’re paying for your prescriptions. Instead of paying for rent, you’re paying your utility bills, and you’re constantly behind on payments you need to make. I think those of us who have been through that certainly recognize that it’s completely a juggling act, trying to keep up and not fall behind on the payments as they come due.

Number 9 is basically the balance on your credit cards. Generally what I tell my clients who come in is that if the balance on all their credit cards is more than about half of what they gross in a year, so if you make $30,000 a year, and you have $15,000 in credit card debt, you have to think about how long it’s going to take you to pay that back. If you didn’t have any deductions for taxes or insurance, it would take you six months to pay that back, and that clearly is not realistically going to happen, so you may want to see if you can get some help.

TM: A question about those credit cards. If you’re trying to pay them back, should you just pay the minimum, or if you can pay more, should you pay more?

JH: If you can pay them back more, then pay them more, because if you just pay the minimum you are basically paying mostly interest. And the minimum payments on these credit cards may extend out for 10, 20, 30 years before you’re done paying it off, and people really don’t recognize that when they’re paying the minimum payments. And frankly, the credit card companies, in my opinion, like it when you pay the minimum payments. That’s how they make their money. Twelve credit card companies last year made millions, and some of them made over a billion dollars, just in interest payments. So my advice is, if you can pay the principal down, definitely do it.

TM: You know what, Jim, we just got hung out on one of those, too, and I hate electronic payments because a lot of times you don’t know if it actually got through, and did it get through on time? We just got a notice back from a credit card we’ve had for a long time, and it had a little balance. They said we were a day late. They jacked us up to 25%. We’ve been on time paying off in full for years with these guys.

TM: But you did it online?

TM: It was online, it got there a day late, and they jacked us up to 25%, so we cancelled, just like that. We’re like, “Fine, you want to play that game? Thanks for playing.”

JH: That’s right and the problem is, John, you’ve got to check your other credit cards, because a lot of the credit cards use what’s called a Universal Default Clause, where if you default on one credit card, they notify everybody by credit report, then everybody pumps your rates up.

TM: That’s hard to believe. So again, your bottom line on Number 9 here is your gross pay for 6 months: $40,000 a year job, if you have $20,000 in credit card debt you’re in trouble.

JH: You might want to somebody.

TM: OK, next up: Number 8.

JH: You live paycheck to paycheck. I know a lot of people do, and it doesn’t necessarily mean you’re in deep financial trouble, but it means you’re not able to put money away for savings. You aren’t able to put something away in case something bad happens and you have to spend $1000 to fix your car, or you have a problem with your water heater, or something else dramatic happens that’s going to throw you for a loop. It’s a sign that you’re basically living on the edge, and you may want to come in and talk to somebody about reorganizing your budget, and figuring out how you can start setting some money aside. It’s a danger sign

TM: OK, I see Number 7 here, calls from collection agencies. Doesn’t everybody get those, whether you actually owe or not?

JH: Well, they do, but a lot of times if you’re getting calls every day, or every other day, when they start calling your parents and your neighbors, it’s a sign that they are getting very aggressive and they might be moving toward legal action. A lot of times they bluff legal action. And frankly, they might be violating a federal law called the Fair Debt Collection Practices Act, so if you feel they’ve been rude to you or abusive to you, or done something you think is illegal, you need to contact an attorney, because you may have a claim under that act, and you have to file that lawsuit within a year. But when you start getting a lot of those calls, it’s a sign that they’re tired, and the credit card company has usually farmed the debt out to another agency, and they are going to collect and possibly be relentless. Frankly, one of the biggest things that drives people into my office is collection agencies.

TM: OK, Number 6, I see, is also credit cards once again. What’s with this one?

JH: If you’re using your credit cards to pay necessities, like groceries, prescriptions, gasoline. I see this a lot with my retired clients, they are on fixed incomes but they’re getting lots of credit cards, and the question is, “Am I not going to pay for the medicine I need, or am I going to put it on my credit card?” A lot of people are going to feel that their health is a little more important than their debt, so they’re going to put it on their credit card. But if you find yourself in that kind of a situation, you really ought to come in and talk to somebody, because that’s not a sustainable way to pay for those bills.

TM: OK, let’s go to Number 5. What do you have?

JH: If you’re dipping into your 401(k) or your retirement plan to pay your bills, you know you’re going to have a problem. I usually recommend that people don’t do that, because your 401(k) and your retirement plans are generally protected from collection, so if you’re considering that, you know you have a little bit of a problem.

TM: What about sales? You always hear that’s good to generate a little extra cash, but that could be a warning sign.

JH: Yeah, if you’re considering pawning or selling your belongings, and you’re using it to pay, for example, last month’s utility bills, you know you’re having a problem, and you need to watch out for it. Number 3 is what I call credit card juggling.

TM: That’s what I was talking about earlier – OK, there it is!

JH: Credit card juggling is where you have several credit cards, and you’re paying the credit cards off with other credit cards. My opinion is that people can’t borrow their way out of debt. Unless you happen to be a big national bank, generally that’s not going to work for you.

TM: You’re not going to get a bailout, are you?

JH: You’re not going to get a bailout! Number 2 is: Are you having to go to payday loan lenders to make ends meet? What’s your interest rate? Are you having to renew your payday loan consistently? In the last few years, Missouri and Illinois have put some caps on those things, but in my practice the highest payday interest I’ve seen is over 1,000 percent annual interest. Someone just kept rolling over, and rolling over, and rolling over their loans, so if you go in to get a payday loan, the end is pretty much near, because you’ve pretty much exhausted all of your resources.

And the Number 1 reason why you may want to get in and talk to somebody about your problems is if you’re behind on a payment for something that’s really important to you, like a house or a car, and you just can’t get caught up. If the bank has been calling you about coming out and taking the car or starting a repossession, or most particularly if they’ve started a foreclosure or they have repossessed your vehicle, you immediately need to get in and talk to somebody. In a foreclosure situation in Missouri, from the time they file it until the time they can technically sell your house is a very short period of time, just a little over a month. A lot of times it’s a little bit more than that, but if you want to protect your home, you need to get in and talk to somebody. We practice bankruptcy and a lot of times we can stop those foreclosures, but we have to do it before the sale.

Memberships & Associations


Belleville Location

The Bankruptcy Center
5312 West Main Street
Belleville, IL 62226
Tel: 618.236.7000

Granite City Location

The Bankruptcy Center
2021 Johnson Road, Suite 1
Granite City, IL 62040
Tel: 618.656.7941


The Law Office of Ronald A. Buch is a debt relief agency, helping people file for bankruptcy relief under the Bankruptcy Code.